In its latest draft proposal submitted to the government, the Ministry of Finance has suggested a new personal income tax framework for real estate transfers, linking tax rates to the duration of property ownership. This approach aims to discourage speculative transactions and stabilize the housing market.

Will this curb real estate speculation?

Currently, Vietnam’s personal income tax (PIT) policy does not differentiate tax rates based on how long a property has been held before being sold. In contrast, several countries have implemented tax mechanisms that increase transaction costs for short-term speculators, thereby reducing speculative activity in the real estate market.

Some countries apply tax rates based on transaction frequency and the duration between purchase and resale. The faster a property is resold, the higher the tax rate imposed.

For example, in Singapore, properties sold within the first year of purchase are taxed at 100% of the capital gain. After two years, the tax rate drops to 50%, and after three years, it decreases further to 25%.

In Taiwan, properties resold within the first two years are taxed at 45%. The rate is reduced to 35% for sales occurring between two to five years, 20% for transactions between five to ten years, and 15% for those sold after ten years.

Infrastructure readiness for taxation reform

Resolution No. 06/NQ-TW issued by the Politburo on January 24, 2022, outlines policies for urban planning, management, and development in Vietnam until 2030, with a vision for 2045. It calls for the development of real estate-related tax policies to encourage efficient land and housing use.

Similarly, Resolution No. 18/NQ-TW issued on June 16, 2022, by the 13th Central Committee of the Communist Party of Vietnam, states that higher taxes should be imposed on individuals who own multiple properties, extensive land holdings, or engage in speculative real estate practices.

Additionally, Resolution No. 62/2022/QH15 from the National Assembly mandates a review of tax regulations related to real estate transactions. It emphasizes strengthening tax management to prevent revenue loss while ensuring the policies do not hinder businesses or violate property rights.

To align with these policy directions, the Ministry of Finance is exploring the implementation of a tiered tax structure for personal income tax on real estate transactions based on holding duration. The ministry suggests that specific tax rates should be carefully studied to accurately reflect market conditions while discouraging speculative practices.

However, the ministry also emphasizes that any changes in taxation must be synchronized with broader land and housing policies, as well as the technological infrastructure for land registration and real estate data management. Establishing a comprehensive digital framework will be essential for tax authorities to track property ownership duration accurately.

Legal framework for real estate taxation

The revised Land Law of 2024 includes amendments to the Personal Income Tax Law, specifically Article 247, which clarifies taxable income from real estate transfers. The law states that taxable income will be determined based on each individual transaction, and for land-use rights transfers, taxation will follow the official land pricing framework.

The Ministry of Finance suggests that these updates should be incorporated into the revised Personal Income Tax Law to maintain legal consistency.

Under the current Personal Income Tax Law, taxable real estate transactions include:

The transfer of land-use rights and assets attached to land

The transfer of ownership or usage rights of residential properties

The transfer of land lease or water surface lease rights

At present, personal income tax on real estate transactions is set at a flat rate of 2% of the transfer price. The proposed revision aims to introduce a progressive tax system that adjusts rates based on the duration of ownership before resale.

Binh Minh