Property Sales Tax May Be Applied Based on Ownership Duration
The Ministry of Finance has proposed applying personal income tax on real estate transactions based on ownership duration to curb speculation, similar to policies in some countries.
This information was included in the proposal to develop a revised Personal Income Tax Law.
Currently, Vietnam’s personal income tax policy does not differentiate based on how long a property is held before resale. Taxable income from property transactions is determined by the transfer price on each transaction, with a flat 2% tax rate.
However, according to the Ministry of Finance, several countries have used tax measures to increase the cost of speculative activities and reduce their appeal, including personal income tax. Some countries impose taxes based on profits from real estate transactions, factoring in transaction frequency and holding period. Specifically, the shorter the ownership period, the higher the tax rate.
For example, in Singapore, properties bought and resold within the first year are taxed 100% on the price difference. After two years, the tax rate drops to 50%, and after three years, it decreases to 25%. In Taiwan, real estate transactions within the first two years are subject to a 45% tax, between 2-5 years the rate is 35%, between 5-10 years it is 20%, and after 10 years it is 15%.
The Ministry of Finance has suggested applying personal income tax on real estate transfers based on the holding period, similar to some other countries. According to the Ministry, this approach would institutionalize the Party and State’s policies on efficient land use and impose higher taxes on those who own multiple properties. Additionally, taxing transactions based on ownership duration could help reduce speculation and prevent real estate bubbles.
"The specific tax rate should be carefully studied to accurately reflect the reality of the real estate market," the Ministry of Finance stated. Furthermore, this tax policy needs to align with other regulations related to land, housing, and IT infrastructure.
Recently, in the context of continuously rising housing prices, the Ministry of Construction has also proposed taxing multiple property ownership and underutilized land to curb speculation and short-term trading for profit. The Ministry of Finance has been tasked with researching and advising on taxation policies for second homes or abandoned properties.
Similarly, the Vietnam Association of Real Estate Brokers (VARS) has proposed a real estate tax policy targeting two groups: buyers of second or additional homes and owners of abandoned projects. The tax rate would increase for transactions where the seller has a short ownership period.
At the end of last month, a parliamentary supervision team recommended the early implementation of a tax policy for owners of multiple or abandoned properties. Currently, many localities have an oversupply of shophouses and vacant villas. Meanwhile, affordable housing is becoming increasingly scarce, especially in Hanoi and Ho Chi Minh City, causing severe imbalances in the real estate market.