As a result, a proposed 20 percent tax imposed on the difference between purchase and sale price is seen as unreasonable for taxpayers.

The Ministry of Finance (MOF) is seeking opinions on a draft of the new PIT (personal income tax) Law. Under the draft, PIT on income from real estate transfers by resident individuals would be calculated as taxable income multiplied by a 20 percent tax rate for each transfer.

If the purchase price and related transfer costs cannot be determined, the tax would be calculated based on the holding period, starting from the date the individual gains ownership or use rights (from the effective date of the new Personal Income Tax Law) until the transfer date.

Taxation must target the right subjects

Nguyen Ngoc Tu, a lecturer at Hanoi University of Business and Technology, said that taxing 20 percent on income from real estate transfer aligns with the essence of PIT, which taxes income rather than revenue.

The 20 percent tax rate is temporarily acceptable as it must come in line with corporate income tax. However, Tu emphasized that reasonable expenses with valid invoices, such as brokerage fees, bank loan interest, and renovation costs, should be deductible.

Real estate purchased 20 years or more had very low prices, while current selling prices are very high because of inflation. Taxing 20 percent on the difference between purchase and selling prices is unreasonable, and brings disadvantages to taxpayers.

For such cases, Tu proposed a flexible tax mechanism, allowing taxpayers to choose between two options: paying 20 percent on profits or a fixed 2 percent on the sale price, as is currently applied.

Tu stressed that PIT should target business activities, not individuals selling property for personal needs, such as funding children’s education abroad, covering medical expenses, relocating from Vung Tau to HCM City, upgrading to a larger home, or dividing assets for descendants in old age.

“Such cases shouldn’t be considered generated income for taxation, as they don’t align with the essence of personal income tax. This needs clear regulation in the law,” Tu argued.

Under the draft, in cases where purchase price and transfer costs cannot be determined, taxation will be based on the holding period (for example, taxing 10 percent on the sale price for properties held under two years). But the expert said this is a solution that "does more harm than good" and is "inconsistent" with the principles of the law.

“The principle is to tax 20 percent on profits. All calculations must adhere to this. Why is a quite different tax rate on the sale price for those without invoices? A person with invoices pays 20 percent on profits, while another without invoices has to pay 10 percent on the entire sale price. This is unfair and illogical,” Tu said.

Moreover, he warned that this measure may not curb speculation and could drive up prices, making housing less accessible for young people and salaried workers.

“PIT only applies to generated income. To effectively address real estate speculation, another tax law, levied on real estate, is needed,” he said.

20 percent tax and market “purification”

Nguyen Quoc Anh, Deputy CEO of Batdongsan.com.vn, said that taxing 20 percent on real estate transfer profits is a global trend, and its implementation in Vietnam is only a matter of time.

“Other countries have applied it. Japan taxes up to 39 percent of profits for properties sold within five years. Vietnam’s proposal is reasonable, but its implementation requires extreme caution,” Quoc Anh said.

He identified the biggest challenges as timing and data. “To apply this, we need a transparent database on purchase prices, sale prices, and costs. Without it, the policy will be unclear and risky,” he said. 

“In a market where supply and demand are imbalanced, this tax could be passed on to end buyers,” he added.

Quoc Anh predicted that if implemented, this policy would trigger a major “purification” of the market. Real estate investment would become a true financial investment.

“Investors will need to calculate cash flow and profits, comparing them with other channels. This means that speculative investors without expertise will be eliminated.”

Manh Ha