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| A new tax regime is expected to help reduce the number of abandoned buildings and ease real estate prices__Photo: VNA |
In the latest draft of the revised Personal Income Tax Law, the Ministry of Finance has proposed a new framework for taxing real estate transfers made by resident individuals.
Under this proposal, personal income tax would be calculated on a per-transaction basis, applying a flat rate of 20 percent to the taxable income.
Taxable income is defined as the sale price minus the original purchase price and any legitimate expenses related to acquiring, improving, or transferring the property.
If the original purchase price and related costs cannot be verified, the tax would instead be levied on the gross sale price. In such cases, the applicable tax rate would depend on how long the property has been held.
For properties held for less than two years, the rate would be 10 percent. If held for two to under five years, the rate would be 6 percent. Properties held for five to under ten years would be taxed at 4 percent, and those held for ten years or more would be subject to a 2 percent rate. The 2 percent rate would also apply to inherited properties, regardless of the holding period.
The holding period is calculated from the date the individual obtains legal ownership or usage rights over the property, starting from the effective date of the revised law.
In the case of inherited real estate, the Ministry proposes maintaining the current 2 percent rate irrespective of how long the property has been held. This approach aligns with the Civil Code, which distinguishes inheritance, gifting and donation by defining them as the transfer of assets from the deceased to the living. Since personal income tax is currently waived at the time of inheritance, as stipulated in Article 4, Clause 1 of the existing law, the introduction of a tax at the point of resale is intended to ensure fairness between inherited and regularly purchased properties.
However, if an individual who inherits a property uses it for speculative or investment purposes, the resulting income would be classified as business income and taxed accordingly under business regulations.
The Ministry of Finance is currently consulting with relevant agencies and finalizing the details of the proposal. Once complete, the draft law and accompanying implementation guidelines will be submitted to the Government for further review and approval.- (VNS/VLLF)
