Real Estate Tax: Necessary!

The draft Law and Ordinance Development Program for 2024, adjusted in 2023, which is being consulted by the Ministry of Justice, has a notable content, which is the proposal to promulgate the Law on Real Estate Tax, to be submitted to the National Assembly for comments at the session in October 2024 for approval in May 2025.

High tax luxury apartments

According to the Ministry of Justice, housing is considered an investment. Taxation should be studied based on the principle of not applying to low-investment houses such as temporary houses, non-permanent houses, semi-permanent houses, houses in rural and mountainous areas. In addition, it is necessary to tax encroached houses and land; houses and land not yet put into use at a rate 5 times higher than that of built real estate. Notably, the Ministry of Justice proposed tax exemption for social housing and workers' housing while taxing high-end apartments priced over 50 million VND/m2.

Lawyer Luong Van Trung, arbitrator at the Vietnam International Arbitration Center (VIAC), assessed that the Ministry of Justice's proposal to impose a high tax on apartments priced over VND50 million/m2 is in line with international practice, helping to limit speculation, encourage the use of housing economically and effectively, and contribute to increasing state budget revenue.

"However, it should be noted that the land area for building an apartment building has been divided into thousands of apartments, so each apartment occupies a negligible area of ​​land. Meanwhile, the investor must invest a large amount of money to build, partly solve jobs, thereby contributing to socio-economic development. Therefore, the tax rate on luxury apartments needs to be calculated appropriately" - lawyer Trung analyzed.

The Ministry of Justice's proposal to collect housing tax has received many favorable opinions because it is consistent with international practices as well as the socio-economic development situation in the country. Photo: TAN THANH

According to a leader in charge of the real estate sector of the Ho Chi Minh City Tax Department, imposing high taxes on apartments priced over VND50 million/m2 can lead to unfairness. "An apartment in the city center with an area of ​​70 m2, priced over VND50 million/m2, equivalent to a value of VND3.5 billion, will have to pay high taxes. Another apartment in the suburbs with an area of ​​only VND30 million/m2 but an area of ​​up to 150 m2, equivalent to a value of VND4.5 billion, will pay low taxes" - this person cited.

According to the leader, one of the goals of high taxes is to limit the situation of house surfing that causes chaos in the real estate market. He suggested that the government only impose high taxes on people who own a second house or more, with the tax rate increasing for subsequent houses. Tax collection should be carried out as soon as the owner transfers the property to another person. At the same time, it is possible to consider increasing the tax on non-agricultural land to supplement the state budget.

Refer to foreign practices

The Ministry of Justice proposes a plan to calculate housing tax based on the formula of house area multiplied by the price of each square meter of land. The tax rate will increase according to a progressive scale.

Economist - Dr. Vu Dinh Anh said that the world has applied property tax to housing for a long time. In Vietnam, in 1991, the state used to tax houses and land at a rate of 0.3% - 0.4% of the value, but in 1992, it stopped applying the tax to housing. According to Dr. Vu Dinh Anh, it is necessary to develop a Law on Real Estate Tax because this is consistent with international practice as well as the current socio-economic development situation. The remaining issue is how to calculate the housing property tax, which unit will value the property to calculate the tax, what is the implementation roadmap...?

According to Mr. Pham Anh Khoi, General Director of FINA Investment Consulting Company, the law on real estate tax abroad is designed to be very simple and easy to apply. The nature of real estate tax is personal income tax based on existing assets. Therefore, some countries only apply one tax rate and reduce tax by up to 50% for houses used as permanent and long-term residences to create fairness as well as create conditions for those who do not have assets to be able to buy houses and land.

"Calculating taxes in a simple way helps the government manage easily, avoids causing trouble for taxpayers and is also fair to second, third... real estate assets if exploited well" - Mr. Khoi commented.

Mr. Khoi also suggested that tax refunds should be allowed for taxpayers after deducting expenses. For example, during the COVID-19 pandemic outbreak, some real estates had high investment costs but could not be rented out, causing many difficulties for homeowners and landowners. Tax refunds should be given to these cases to create the best conditions for people to participate in business, while avoiding homeowners and landowners who are afraid of paying taxes and will declare falsely, causing loss of revenue.

Mr. Ta Trung Kien, Deputy General Director of the Big Land Fund Company, agrees with the proposal to apply real estate tax to avoid speculation and contribute to market transparency. However, this also puts pressure on real estate owners if the policy and tax calculation are unclear. Regarding the long-term effect, the market will have a slowing down adjustment when receiving information about the state collecting real estate tax. Investors will have to recalculate to balance revenue and expenses, and will adjust prices accordingly.

Worry about the impact on rental prices

Mr. Pham Van Tuan (residing in District 1, Ho Chi Minh City) - who owns many real estate properties such as apartments and factories for rent - believes that taxing housing is a suitable and necessary policy but can reduce the heat of the real estate market. Mr. Tuan is also concerned that having to pay real estate tax may affect rental prices, making it difficult for tenants to accept in the context of current difficulties in production and business activities.

Source: https://nld.com.vn/kinh-te/danh-thue-bat-dong-san-can-thiet-20230208211419248.htm