Will real estate speculation be limited?

According to the Ministry of Finance, our country's current personal income tax (PIT) policy does not differentiate according to the transferor's real estate holding period.

In order to limit real estate speculation, some countries in the world have used tax tools to increase the cost of speculative behavior and reduce the attractiveness of real estate speculation in the economy, including personal income tax.

In addition, some countries also apply taxes on profits from real estate transactions in accordance with the frequency of transactions and the time of purchase and resale of real estate. The faster this time occurs, the higher the tax rate, the slower the transaction, the lower the tax rate.

For example, in Singapore, land bought and sold in the first year is taxed 100% on the difference in value of purchase and sale; after 2 years the tax rate is 50%; after 3 years it is 25%.

In Taiwan (China), real estate transactions conducted within the first 2 years after purchase apply a tax rate of 45%; conducted within 2-5 years the tax rate is 35%; within 5-10 years the tax rate is 20% and conducted after 10 years the tax rate is 15%.

Land information infrastructure needs to be ready and synchronized.

Resolution No. 06/NQ-TW dated January 24, 2022 of the Politburo on planning, construction, management and development of urban areas in Vietnam to 2030, with a vision to 2045, states: "Research and perfect tax and fee policies related to real estate to encourage effective use of houses and land".

Resolution No. 18/NQ-TW dated June 16, 2022 of the 5th Conference of the 13th Party Central Committee on "Continuing to innovate and perfect institutions and policies, improving the effectiveness and efficiency of land management and use, creating momentum to turn our country into a high-income developed country" stated: "Prescribe higher tax rates for people using large areas of land, many houses, land speculation...".

Resolution No. 62/2022/QH15 dated June 16, 2022 of the National Assembly on questioning activities at the 3rd session of the 15th National Assembly requires: "Review and complete legal regulations on taxes related to business and real estate transfer, strengthen management, prevent tax losses, ensure budget revenue but do not affect business operations, legitimate rights of people and the development of the real estate market".

Accordingly, in order to institutionalize the above policies and orientations, to have a reasonable level of regulation, to avoid speculation and real estate bubbles, the Ministry of Finance proposed that "it is possible to study to collect tax on personal income from real estate transfers according to the holding period as experienced by some countries. The specific tax rate needs to be studied and determined appropriately, reflecting the actual operation of the real estate market".

The Ministry of Finance noted that the application of personal income tax policy on real estate transfers based on holding time also needs to be synchronized with the process of perfecting policies related to land and housing as well as the synchronization and readiness of information technology infrastructure for land and real estate registration. Thereby, it can create conditions for tax authorities to have sufficient information and legal basis to obtain information related to real estate holding time.

Article 247 of the 2024 Land Law also amended and supplemented Clause 1, Article 14 of the Personal Income Tax Law, specifically stipulating: "Taxable income from real estate transfer is determined as the transfer price each time; in case of transferring land use rights, taxable income is calculated according to the land price in the land price list".

The Ministry of Finance believes that it is necessary to update this provision in the draft Law on Personal Income Tax (replacement) to ensure consistency of the legal system.

Clause 5, Article 3, Article 14, Clause 2, Article 21, Article 23 of the current Law on Personal Income Tax stipulates: Income from real estate transfer, including: income from transfer of land use rights and assets attached to land; income from transfer of ownership or use rights of houses; income from transfer of land lease rights, water surface lease rights; other income received from real estate transfer.

Taxable income from real estate transfer is determined as the transfer price each time, the applicable tax rate is 2%.