The Ministry of Finance (MOF) stated that it is considering applying two options, either taxing 2 percent on the profits from property sales, or 20 percent on total revenue. Which tax calculation method to be applied will depend on the ability to verify information about real estate transfer transactions.

With a clear database to determine the purchase price and related costs of the transferred property, the PIT will be calculated as follows: tax rate (proposed at 20 percent) multiplied by taxable income, where taxable income is the sale price minus total legitimate costs (e.g., brokerage, notarization, renovation).

If the purchase price and related costs cannot be determined, PIT will be calculated at 2 percent of the total transfer value, as per the current method.

Pros and cons 

Nguyen Quang Huy, a respected expert from Nguyen Trai University, told VietNamNet that the 20 percent tax on net profit ensures fairness: those with high profits pay more, while those with low profits or losses may pay nothing.

This method also aligns with the corporate income tax (CIT) law, avoiding disparities between organizations and individuals.

However, a major obstacle is that Vietnam’s property market lacks a comprehensive, connected, and verified database for transaction input costs. It is impossible to trace the transactions conducted decades ago, especially for inherited properties, gifts, or handwritten agreements. This poses risks of disputes and complaints over legitimate costs and the timing of taxable income.

Meanwhile, the 2 percent tax on revenue is simple, easy to manage, reduces fraudulent declarations, and stabilizes budget revenue.

However, its limitation is unfairness, as those selling at a loss or low profit still have to pay 2 percent. This doesn’t reflect the true nature of income, taxing revenue rather than profit.

Huy noted that, given the lack of synchronized data infrastructure, applying the net profit tax method could lead to management risks and disputes. Meanwhile, the 2 percent revenue tax is simple but effective for management, especially in a less transparent market.

Thus, proposing both methods based on available data is a reasonable, practical step that avoids major market disruptions.

“Encouraging the 20 percent net income tax with sufficient documentation will promote transaction transparency. This will gradually build a database on purchase-sale prices, renovation costs, and bank payment records. The shift won’t happen overnight, but this ‘dual-option’ policy creates positive pressure to standardize behavior,” Huy said.

In the short term, the policy may cause hesitation or concern for those planning property transfers, especially if the 20 percent method is implicitly applied when only a part of the cost is determined, but there is not enough basis to significantly reduce tax obligations.

In the long term, it will distinguish investor groups: those with proper records, targeting real profits and honest declarations, versus speculators using cash for off-the-books deals, thus reducing speculation and preventing property market bubbles.

Transparent data system needed

Tran Thi Cam Tu, CEO of EximRS, said the 20 percent tax benefits investors with low profits or losses, as they may pay minimal or no tax.

Tu gave an example: a property sold for VND5 billion, bought before at VND4 billion, with VND800 million in related costs. The new tax method yields (5 - 4.8) x 20 percent = VND40 million, while the old method is 5 x 2 percent = VND100 million. This encourages long-term investment, reduces short-term speculation, and enhances market transparency.

However, for high profits, the 20 percent tax regime can be much higher than 2 percent. For instance, a property sold for VND10 billion, bought before at VND4 billion, incurs (10 - 4) x 20 percent = VND1.2 billion under the new method, versus VND200 million under the old one. Proving legitimate costs (e.g., loans, inheritance, brokerage) is a challenge, likely leading to disputes.

Thus, Tu emphasized the need for a roadmap to build a transparent and comprehensive data system, along with specific regulations to ensure accurate tax determination.

Huy suggested that, during the transition, a standardized mechanism for determining original prices should be implemented, such as applying a CPI-based inflation indicator, historical land price tables, or reasonable area-specific prices. This would encourage accurate declarations, even without complete documentation.

Additionally, a national property and transaction database should be developed, integrating data from banks, tax authorities, land registries, and notaries. This is the foundation for widely applying the net income tax method in the future.

Nguyen Le