Is income from transfer of real estate subject to personal income tax in Vietnam? How to detemine the time for tax calculation on income from transfer of real estate?

Is income from transfer of real estate subject to personal income tax in Vietnam?

Based on Clause 5, Article 2 of Circular 111/2013/ND-CP, there are provisions on cases subject to personal income tax for income from the transfer of real estate:

Taxable Incomes

Income from the transfer of real estate is the income received from transferring real estate, including:

a) Income from the transfer of land use rights.

b) Income from the transfer of land use rights and assets attached to the land. Assets attached to the land include:

b.1) Residential housing, including future-formed housing.

b.2) Infrastructure and construction works attached to the land, including constructions forming in the future.

b.3) Other assets attached to the land, including agricultural, forestry, aquaculture products (such as crops, livestock).

c) Income from the transfer of ownership of residential housing, including future-formed housing.

d) Income from the transfer of lease rights to land, water surface.

dd) Income when contributing capital with real estate to establish a business or increase the business production capital of a company as per legal regulations.

e) Income from the authorization of real estate management wherein the authorized person has the right to transfer real estate or has rights equivalent to that of a real estate owner as stipulated by law.

g) Other incomes received from the transfer of real estate in any form.

The regulations on residential housing, construction works forming in the future as stated in Clause 5 of this Article are implemented according to the law on real estate business.

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Moreover, based on Points a and b, Clause 1, Article 3 of Circular 111/2013/ND-CP (amended and supplemented by Clause 1, Article 12 of Circular 95/2015/ND-CP), there are regulations regarding tax exemptions as follows:

Tax-Exempt Income Categories

1. Based on the provisions of Article 4 of the Personal Income Tax Law and Article 4 of Decree No. 65/2013/ND-CP, tax-exempt income includes:

a) Income from real estate transfer (including future-formed housing, future-formed construction works as per real estate business law) between: spouses; biological parents and their biological children; adoptive parents and their adopted children; father-in-law, mother-in-law and daughter-in-law; father-in-law, mother-in-law and son-in-law; paternal grandparents and grandchildren; maternal grandparents and grandchildren; siblings.

In cases where real estate (including future-formed housing, future-formed construction works as per real estate business law) is created by either spouse during marriage and is deemed to be joint marital property, when divided upon divorce per agreement or court ruling, such division is subject to tax exemption.

b) Income from the transfer of residence, residential land use rights, and assets attached to the residential land by individuals in cases where the transferor has only a single house, residential land use right in Vietnam.

b.1) An individual transferring residence, residential land use rights is exempt from tax as guided in point b, Clause 1 of this Article if the following conditions are simultaneously met:

b.1.1) Possession of the sole ownership of one house or one parcel of land (including cases of having residential housing or construction works attached to such parcel) at the time of transfer. Specifically:

b.1.1.1) Determination of house ownership, residential land use rights is based on the Certificate of land use rights, house ownership, and other assets affixed to the land.

b.1.1.2) In case of transferring jointly owned residential housing, residential land use rights, only individuals without ownership rights elsewhere get tax exemption; individuals with co-ownership having other house ownership or land rights do not get tax exemption.

b.1.1.3) Where spouses jointly own a house, a residential land use right, and it is their sole joint property, but either spouse has separate property elsewhere, when transferring, the spouse without separate property gets tax exemption; the one with separate property does not get tax exemption.

b.1.2) Ownership of the house, residential land use right must be at least 183 days at the time of transfer.

The time of determining house ownership, residential land use right is the date of issuing the Certificate of land use rights, house ownership, and other assets attached to the land. In cases of reissuance or exchange per land law, the time is reckoned from the original date of issuance prior to the reissuance/exchange.

b.1.3) Full transfer of the house, residential land.

In case an individual with sole rights or shared rights in a house, a residential land parcel only transfers part, that portion transferred is not tax-exempt.

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Thus, income from the transfer of ownership of residential housing, including future-formed housing, is subject to personal income tax. Therefore, when selling a house, personal income tax must be paid.

However, there are 02 cases where personal income tax is exempt when selling houses, land:

– Transactions between individuals with marital, blood, or adoptive relationships. For example: between spouse; biological parent and child; adoptive parent and child; father-in-law, mother-in-law and daughter-in-law; father-in-law, mother-in-law and son-in-law; grandparents and grandchildren; siblings.

– The transferor only possesses a single house, a land parcel. In this case, to be tax-exempt, 03 conditions must be met:

+ Sole ownership of one house or land use right for one parcel

+ Holding ownership of the house, residential land use rights for at least 6 months

+ Complete transfer of the house, residential land

Is income from transfer of real estate subject to personal income tax in Vietnam? (Image from Internet)

What is the tax rate for income from transfer of real estate in Vietnam?

Pursuant to Clause 2, Article 12 of Circular 111/2013/TT-BTC (amended and supplemented by Article 17 of Circular 92/2015/TT-BTC)

Tax Basis for Income from Real Estate Transfer

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2. Tax Rate

The tax rate for real estate transfer is 2% of the transfer price or sublease price.

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Therefore, the tax rate for income from transfer of real estate is 2%.

How to detemine the time for tax calculation on income from transfer of real estate in Vietnam?

Based on Clause 3, Article 12 of Circular 111/2013/TT-BTC (amended and supplemented by Article 17 of Circular 92/2015/TT-BTC), the regulations concerning the calculated tax period for income from transfer of real estate for a resident individual are as follows:

The time the tax is calculated for real estate transfer is determined as follows:

- For transfer contracts without an agreement that the buyer pays tax instead of the seller, the tax time is when the transfer contract takes effect as per law;

- For transfer contracts with the agreement that the buyer pays tax instead of the seller, the tax time is when registering ownership or use rights of the real estate.

For individuals transferring future-formed residential housing or land use rights connected to future constructions, the tax declaration time is when an individual submits a tax declaration to the tax authority.

Furthermore, based on Clause 3, Article 21 of Circular 111/2013/TT-BTC, the regulations on tax calculation for income from transfer of real estate for a non-resident individual are as follows:

The time of determining income from real estate transfer is when the non-resident individual processes the real estate transfer as per legal regulations.