MoF considering easing tax burden on individual landlords

MoF considering easing tax burden on individual landlords

This is a part of the programme on amending the Value-added Tax (VAT) Law that the General Department is consulting with experts, said Ta Thi Phuong Lan, deputy head of the Tax Administration Department of Small, Medium Enterprises, Business Households and Individuals under the General Department of Taxation.

According to experts, the threshold of rental property tax for individual owners does not suit the actual situation as the current tax rate is quite high and the threshold too low.

Individuals renting houses or apartments must pay the highest tax rate at 10 per cent compared to many other types of service businesses (from 4.5 per cent to 7 per cent).

Besides that, the threshold of this tax at more than VND100 million (US$4,255) per year or about VND8.3 million per month is also not suitable with market performance. Especially in big cities like Ha Noi and HCM City, with this threshold, most house/apartment owners must pay this tax.

For example, if an individual renting out a house gains a turnover of VND200 million per year or about VND16.7 million per month, they must pay a tax of VND20 million including VND10 million value-added tax and VND10 million personal income tax, reported chinhphu.vn.

Some experts suggest that the tax payment threshold needs to be adjusted to increase from 30 per cent to 40 per cent to match the inflation rate that has increased above 20 per cent.

Nguyen Thi Cuc, chairwoman of the Vietnam Tax Advisory Association, told Thoi bao Tai chinh Viet Nam (Viet Nam Financial Times) newspaper that for personal income tax, it is reasonable to study and adjust the taxable revenue threshold.

This adjustment of taxable revenue threshold applies not only to rental property activities but also other business activities of individuals can be adjusted to increase, such as commercial activities (including e-commerce), manufacturing, construction and other services.

The taxable revenue threshold can be increased to about VND150 million per year or more to be more reasonable than keeping the current level, Cuc said.

For nearly half a year, Nguyen Thi Lan Huong, an owner of an apartment in Ha Noi, has been unable to find tenants even though she has slashed rent by nearly 50 per cent due to the COVID-19 pandemic.

According to Huong, the taxable revenue threshold from VND100 million per year is low and needs to be raised to a higher level together due to the impact of additional expenses such as maintenance and insurance fees and depreciation of fixed assets.

"If the tax rate is high, the rental price will also be pushed up, making leasing more difficult. I hope there is a reasonable tax rate to harmonise the lessor and the lessee," Huong told VTV.

As for tenants like Nguyen Thanh Hien in Ha Noi, she also wants the tax to be reduced so rent can be lower because the tax is still included in the rent and ultimately, the tenant has to pay this tax.

Lan from the General Department of Taxation said the existing regulations did not account for additional expenses relating to real estate leasing activities such as maintenance, installation costs and interior equipment.

Therefore, the tax policy has a lower tax rate for individuals than corporate. Specifically, the value-added tax is 5 per cent for individuals while 10 per cent for firms. The personal income tax is 5 per cent for the individual and 20 per cent for firms.

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