What is the formula for calculating personal income tax from real estate transfers in Vietnam?

What is the formula for calculating personal income tax from real estate transfers in Vietnam?

Based on Clause 4, Article 12 of Circular 111/2013/TT-BTC as amended by Article 17 of Circular 92/2015/TT-BTC which prescribes the method for calculating personal income tax for income from real estate transfers as follows:

Tax basis for income from real estate transfer

The basis for calculating tax on income from real estate transfer is the transfer price per transaction and the tax rate.

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4. Tax calculation method

a) Personal income tax on income from real estate transfer is determined as follows:

Personal income tax payable = Transfer price x Tax rate 2%

b) In cases of joint ownership real estate transfer, the tax obligation is determined separately for each taxpayer based on the real estate ownership ratio. The basis for determining the ownership ratio includes legal documents such as: original capital contribution agreement, will, or court's division decision, etc. In the absence of legal documents, the tax obligation for each taxpayer is determined based on the average ratio.

Thus, the formula for calculating personal income tax on income from real estate transfer is:

Personal income tax payable = Transfer price x Tax rate 2%

Formula for calculating personal income tax from real estate transfer in Vietnam (Image from the Internet)

What types of income are subject to personal income tax from real estate transfer in Vietnam?

Based on Clause 5, Article 2 of Circular 111/2013/TT-BTC, taxable income from real estate transfer includes:

- Income from the transfer of land use rights.

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

+ Houses, including future housing.

+ Infrastructure and construction works attached to the land, including future construction works.

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

- Income from the transfer of house ownership rights, including future housing.

- Income from the transfer of land lease rights, water surface lease rights.

- Income from contributing capital with real estate to establish enterprises or increase production and business capital of enterprises in accordance with the law.

- Income from authorizing the management of real estate where the authorized person has the right to transfer real estate or has rights similar to the real estate owner as prescribed by law.

- Other income received from real estate transfer, in any form.

How to declare taxes for income from real estate transfer in Vietnam?

Based on Clause 3, Article 26 of Circular 111/2013/TT-BTC, tax declaration for income from real estate transfer is as follows:

- Individuals with income from real estate transfer shall declare tax for each transaction, even if they are exempt from tax. Specific cases of tax declaration include:

+ In cases where individuals with land use rights, house ownership mortgage or pledge to secure loans at credit institutions or foreign bank branches; upon the expiration of the repayment period, individuals are unable to repay, credit institutions or foreign bank branches shall handle the sale of the pledged real estate and declare and pay personal income tax on behalf of the individual before settling the individual's debt.

+ In cases where individuals with land use rights, house ownership mortgage to secure loans or payments with other organizations or individuals, and now transferring the entire (or part of) the real estate to settle debts, the land use right holder or house owner must declare and pay personal income tax or the organization/individual completing the transfer on their behalf must declare and pay personal income tax on behalf of the individual before settling the debts.

+ In cases where real estate is transferred by individuals to other organizations or individuals as per the Court's enforcement decision, the transferring individual must declare and pay tax or the organization/individual organizing the auction must declare and pay personal income tax on behalf of the transferring individual. For real estate of individuals confiscated and auctioned by competent State authorities and paid into the State Budget as per the law, tax declaration and payment are not required.

+ In cases of exchanging houses or land between individuals, not falling within the personal income tax exemption for agricultural land exchange for production as guided in point dd, Clause 1, Article 3 of Circular 111/2013/TT-BTC, each individual involved in the exchange must declare and pay personal income tax.

+ In cases of declaring personal income tax returns for real estate transfer on behalf of others, the organization/individual declaring must add "Declaring on behalf of" before the phrase "Taxpayer or Legal representative of the taxpayer" and the declarer must sign and clearly state their full name; if it is an organization declaring on behalf, the organization’s seal after signing must be affixed. Tax calculation records and tax receipts still need to reflect the individual transferring the real estate as the taxpayer.

- Real estate management agencies shall only complete the procedures for transferring ownership or usage rights of real estate upon receipt of the personal income tax payment receipt or certification from the tax authority indicating that the income from the real estate transfer is exempt from tax or temporarily not subject to tax.