Reasonable roadmap needed for personal income tax on real estate transactions

Reasonable roadmap needed for personal income tax on real estate transactions

Given its potential impact on the Vietnamese real estate market, this policy requires a carefully planned and reasonable implementation roadmap to ensure its effectiveness.

Nguyễn Văn Đính, chairman of the Vietnam Real Estate Brokers Association

The Ministry of Finance has proposed a 20 per cent personal income tax on real estate transactions. Given its potential impact on the Vietnamese real estate market, this policy requires a carefully planned and reasonable implementation roadmap to ensure its effectiveness.

Experts in the real estate sector talk to a Việt Nam News reporter about this issue.

Nguyễn Văn Đính, chairman of the Vietnam Real Estate Brokers Association:

Proposing this tax policy is necessary and aligned with current market realities. Taxation should serve as a tool to regulate the market, rather than merely a means of increasing budget revenues.

However, the proposed amendments to the Law on Personal Income Tax have a broad scope and will directly affect individuals and various socio-economic sectors. These changes must therefore be implemented cautiously, based on comprehensive research, objective impact assessments and widespread consultations with experts, industry associations, the business community and the general public.

A clear and practical implementation roadmap is essential. The timeline for enforcement should align with current socio-economic conditions and the market’s capacity to adapt. 

Rapid changes, especially in tax calculation methods or tax rates, could lead to major disruptions, adversely affecting taxpayer sentiment and the stability of several sectors, particularly the real estate market. 

The drafting agency must carefully consider both the timing and method of implementation to ensure the policy is feasible and widely accepted when it comes into effect.

Việt Nam's real estate market has just emerged from a prolonged period of difficulty and is now entering a new growth cycle. Any related policy changes should be carefully evaluated to avoid putting additional pressure on the market, which could hinder its medium- and long-term recovery and development.

In the long run, if the tax policy is implemented with a suitable roadmap and supported by a comprehensive, consistent and synchronised system of guidance documents, it will enhance transparency in real estate transactions. 

This, in turn, will help build a reliable real estate price database, aiding Government agencies in effectively regulating the market towards greater stability, sustainability and fairness.

A well-structured tax policy can contribute to increased State budget revenues. These funds can be reinvested in essential social welfare programmes, such as the national housing development fund, affordable housing projects and policies to support low-income groups in accessing appropriate housing.

Currently, most real estate offerings on the market are priced well above what the majority of people with genuine housing needs can afford. These high-priced properties mainly target short-, medium- and long-term investment, rather than end users.

During the early phase of the new tax policy, investment demand is expected to decline as investors re-evaluate the profitability of real estate compared to other asset classes. 

As investment demand weakens, developers will be forced to reassess and adjust their sales strategies. This will likely result in more cautious supply releases and a slower pace of distribution to the market.

In the long term, instead of focusing primarily on near-premium, high-end and luxury segments, developers may shift toward a more balanced approach, including more affordable and mid-range products to maintain liquidity. This trend would help reduce the mismatch between supply and demand, an encouraging sign for the market.

As for pricing, in areas with high genuine demand, property prices may continue to rise as sellers factor the new tax obligation into the selling price to maintain profit margins. However, in regions where speculative bubbles have been common, the new legal regulations could help curb speculation, adjust inflated prices and bring property values closer to their actual worth.

Nguyễn Văn Đính, chairman of the Vietnam Real Estate Brokers Association

Giang Huỳnh, Director of Research Services & S22M at Savills Vietnam's HCM City branch

To effectively implement personal income tax on real estate transactions, two essential elements are required: a robust infrastructure and a clearly defined roadmap.

For infrastructure, a complete and continuously updated database is crucial. This includes data on purchase prices (actual transaction values), investment costs and related financial metrics. Equally important is a transparent, accurate and consistent system for collecting, verifying and processing data across the market.

One key challenge is ensuring public consensus. Disputes are likely to arise when determining taxable profits, as each party may calculate costs differently.

Currently, the data system remains fragmented. The transaction value reported for tax purposes is often based on the declared amount in the sale contract, which is typically lower than the actual transaction price. This discrepancy makes it difficult to implement a tax policy based on actual profit, potentially resulting in budget shortfalls or taxpayer disputes.

To ensure successful implementation, the tax policy should be piloted in regions with strong, reliable data systems. After a trial period of 2–6 months, the policy’s effectiveness can be evaluated, and any loopholes can be addressed. This phased approach will allow for process refinement before nationwide rollout and must be carefully planned by the authorities.

Comparing the current 2 per cent tax on declared transfer value with the proposed 20 per cent tax on actual profit, it’s clear the latter could increase State budget revenues in most cases, while also more accurately reflecting the true gains from transactions.

Three primary goals of this policy include increasing Government revenue, ensuring tax fairness (those earning more pay more) and using taxation as a tool to regulate the market by curbing speculation and promoting transparency. These are all positive objectives that could benefit the market in the long term.

However, the practicality of implementation remains a significant concern. Accurate assessment of profits requires a reliable pricing database, something that currently does not exist. Applying this policy under current conditions is therefore challenging.

If implemented prematurely, without supporting infrastructure, two main consequences may arise.

Slower transaction processing, bottlenecks in tax collection and increased disputes could hinder the market.

Additionally, sellers may pass the tax burden onto buyers in order to maintain profit margins, pushing housing prices higher and making access more difficult for genuine homebuyers.

Nguyễn Văn Đính, chairman of the Vietnam Real Estate Brokers Association

Nguyễn Quốc Anh, Deputy General Director at Batdongsan.com.vn

Batdongsan.com.vn often comments on the issue of registration taxes on second or third property purchases. However, personal income tax on real estate gains is another key topic.

For example, in Japan, real estate sold within five years is subject to a personal income tax of up to 39 per cent. This rate drops to around 20 per cent for properties held longer than five years. Globally, personal income tax policies are typically structured around holding periods to discourage speculation.

According to a survey by Batdongsan.com.vn, over 80 per cent of respondents in Việt Nam said they purchased real estate for speculative purposes, markedly different from other countries, where 80–90 per cent of buyers hold property for 3–5 years or more.

The Ministry of Finance’s proposed tax thus aligns with international practices.

However, the timing of implementation is critical. Policymakers must assess market data readiness and market conditions.

Accurate, comprehensive data is essential for understanding the policy’s potential impact.

Meanwhile, the real estate sector is only beginning to recover. Immediate enforcement may hinder recovery compared to maintaining the current tax model.

In the long term, this policy can be beneficial. Every real estate market has some level of speculation, but Việt Nam's is currently too high. A tax on profits will make speculation more difficult and transform real estate into a more serious form of financial investment. Investors will need to ensure their returns exceed the tax rate, meaning the asset must increase significantly in value.

To justify a 20 per cent tax, investors would need to see potential profits of 20–30 per cent. This will force a shift in focus to the real value of the property, including its liveability, utility and long-term appreciation potential.

The real estate game is changing. It will become more sophisticated, favouring investors who are knowledgeable, well-informed and committed. As the market evolves, platforms like Batdongsan.com.vn will play a critical role in helping investors understand trends and make informed decisions.

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