Reasonable rent tax rate and threshold is important: Experts

Careful consideration must be given to the imposition of a rent tax on people who own apartments for lease, experts said, adding that it was essential to introduce a reasonable tax rate and threshold.

 

This was in response to a recent plan of the HCM City Department of Tax to collect tax on apartment owners who sublet their properties. The tax collection will be trialled at five locations in District 11, including Res 11 Apartment Building, Thuan Viet Commercial and Residential Tower, Bao Gia Building, 70 Lu Gia Apartment Building, and Khai Hoan Serviced Apartment.

According to Nguyen Hoang, R&D director of DKRA Vietnam, collecting rent tax would not be easy and a number of questions needed to be answered such as amount of tax compared to rent charged and would the tax affect the amount of investment in properties for the rental market?

It was also necessary to clarify the cooperation between tax agencies and the building management boards to ensure the efficient collection of the rent tax, Hoang said,

Dinh Trong Thinh from the Academy of Finance said that the General Department of Taxation should review the rent tax rate and threshold to make sure they were appropriate.

Thinh said that the current tax rate was quite high when the threshold was too low. He pointed out that the owners of apartments for lease now must pay an individual income tax at five per cent and value added tax at five per cent, a total of 10 per cent of the rental fee. He said that the rate was too high and should be cut by half.

Regarding tax threshold of VND100 million (US$4,300) per year, Thinh said that this should be increased to VND120 million because the tax would often be calculated in the rental fee.

Thinh stressed that the tax increase should not be passed on to those renting the apartments.

Coming from Gia Lai to HCM City for work, Nguyen Thi My Trinh who rented a 50 sq.m apartment at the price of VND12 million per month said she was worried that when the tax was imposed, the apartment owner would increase the rental fee.

From another viewpoint, Ngo Quang Tuan who lived in Thu Duc City said that he must borrow from the bank to buy an apartment which was now leased out. Each month, he had to pay around VND12 million to the bank, nearly equal to the fee he collected from renting the apartment while his family was still living in a motel room at VND4 million per month.

The tax rate of 10 per cent of the rental fee was too high, Tuan said, urging more consideration must be taken to introduce a more reasonable tax rate and threshold to encourage apartment owners to pay the tax.

According to Le Ngo Trung, director of Trung Le & Partner Law Firm, it was important to introduce a reasonable tax rate and threshold to prevent apartment owners from seeking ways to avoid the tax.

He agreed the threshold of VND100 million per year was too low, adding that VND150 million was more reasonable.

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