Experts suggest only taxing real estate sales that generate profit, applying a 20% tax on the price difference between purchase and sale to curb tax evasion, instead of the current 2% tax on total transaction value, even in cases of loss.

Proposed tax reform for real estate transactions

According to Associate Professor Dr. Phan Huu Nghi, Deputy Director of the Banking and Finance Institute at National Economics University, real estate transfer income is a key source of personal income tax revenue, but the current tax calculation method has limitations.

Currently, Vietnam imposes a 2% tax on the total transaction value recorded in the transfer contract, regardless of whether the seller makes a profit or a loss.

Dr. Nghi proposes a 20% tax on the difference between the purchase and sale price, ensuring taxes are only collected on actual profits while discouraging underreporting of sale prices to evade taxes.

Challenges in implementing a profit-based tax

While the current 2% flat tax is simple and easy to collect, it creates a loophole where sellers declare lower sale prices to reduce their tax obligations. This results in significant revenue loss for the state and distorts real estate market transparency.

A 20% tax on profit would be a fairer system, reflecting actual income rather than an arbitrary percentage. However, accurately determining the original purchase price - especially for properties acquired years ago when pricing records were less transparent - remains a challenge.

To enforce tax fairness and prevent loopholes, Dr. Nghi suggests implementing this profit-based tax in a manner similar to corporate income tax calculations.

Should Vietnam introduce a property tax on second homes?

Dr. Nguyen Tri Hieu, Director of the Institute for Global Financial and Real Estate Market Research, argues that Vietnam's real estate tax system remains underdeveloped compared to other countries.

In the U.S., Canada, Japan, and South Korea, annual property taxes based on property value ensure fair asset distribution and create a stable government revenue stream.

"The lack of effective real estate taxation in Vietnam has led to speculation and property hoarding, reducing housing supply for actual residents and inflating real estate prices," Dr. Hieu said.

In the U.S., for example:

All homeowners pay property tax on their first home based on its purchase price, with periodic reassessments.

The tax rate ranges from 1% to 3% of the land and building value.

Mortgage interest payments on the first home are tax-deductible, but second homes and additional properties receive no tax exemptions.

Dr. Hieu suggests that Vietnam should tax second homes to curb speculation and stabilize the market.

Opposition to taxing second homes

However, Nguyen Thi Cuc, Chairwoman of the Vietnam Tax Consulting Association (VTCA), disagrees with taxing second homes.

"A house could be just a few dozen square meters or thousands of square meters - so why tax ownership based purely on quantity rather than value?" she questioned.

Instead, she recommends a property tax system based on asset value, similar to luxury taxes on high-value assets like yachts and aircraft. She also advocates tax exemptions for depreciated fixed assets and suggests taxes be calculated as a percentage of revenue rather than arbitrary ownership rules.

Nguyen Le