Discouraging speculation: Residential buildings shrouded by heavy air pollution in Hanoi. The Finance Ministry said the proposed new tax regime would require a gradual and coordinated rollout, aligned with reforms to land, housing and digital infrastructure. — AFP
HANOI: Vietnam’s Finance Ministry has proposed a sweeping new tax regime that would impose a 10% to 20% levy on profits from real estate transactions, raising concerns among investors and experts who warn it could erode earnings, freeze the secondary market, and slow the sector’s fragile recovery.
Stipulated in a draft amendment to the Law on Personal Income Tax, the proposal seeks to replace the current flat 2% tax on property sale prices with a 20% tax on actual profits, which is defined as the difference between the selling price and the original purchase price, minus related expenses.
If the purchase price or associated costs cannot be verified, the tax would instead be calculated based on the sale price and duration of ownership, with progressive rates ranging from 2% to 10%.
The tariff aims to discourage speculation and bring more fairness to the tax system. However, critics say it may create unintended consequences, especially in a market still recovering from a prolonged slump.
Pham Danh Tieng, an investor in Ho Chi Minh City, said he purchased a land plot in An Phu Dong Ward for nearly three billion Vietnamese dong in early 2023, and now he is going to sell it for 3.6 billion Vietnamese dong. After costs, his profit is about 500 million Vietnamese dong.
“If the 20% capital gains tax takes effect, I’ll lose another 100 million Vietnamese dong, which is nearly equivalent to a year’s interest payments on my bank loan,” he said, calling the tax “too harsh” for individual investors.
Many investors say that real estate is a legitimate and risky investment channel, and excessive taxation could deter participation, especially among smaller players.
Tax experts agree that taxing actual profits is more equitable than the current method, but warn that implementation could be complex due to Vietnam’s limited real estate data and common use of under-declared transaction values.
Batdongsan.com.vn Southern Region director Dinh Minh Tuan said costs like brokerage fees, home upgrades, and loan interest often lack valid documentation, disqualifying them from tax deductions.
“Without clear guidelines, many taxpayers could be overcharged,” he said.
Lawyer Nguyen Minh Trung in Ho Chi Minh City said that while progressive rates were reasonable, the process must be simple and transparent to avoid disputes or tax evasion. Trung urged authorities to accept a variety of expense documents, not just official value added tax invoices, to reflect actual costs.
Real estate brokers also raised concerns about liquidity. A major brokerage in Ho Chi Minh City said individual investors made up 70% of secondary market activity and that higher taxes could prompt many to pause or cancel deals.
Vietnam Association of Realtors chairman Nguyen Van Dinh warned that a high capital gains tax would discourage resales, slowing capital turnover and impacting both the secondary and primary markets.
“If secondary transactions stall, the primary market will suffer too, because investors can’t sell existing assets to reinvest,” he said.
Experts also warn of broader economic impacts, including potential ripple effects on banks, developers, and the financial system, especially if small investors exit the market en masse.
In response to the backlash, the Finance Ministry said the proposed new tax regime would require a gradual and coordinated rollout, aligned with reforms to land, housing, and digital infrastructure.
The ministry emphasised the need for a transparent, integrated property database and digital platforms that streamline tax declarations and support proper valuation.
It argued that taxing profits would better reflect economic fairness and, in some cases, might reduce the tax burden, especially where profit margins are thin or losses occur. — Viet Nam News/ANN
