What is the method of calculating CIT on real estate transfer in Vietnam?

What does income from real estate transfer subject to CIT in Vietnam include?

According to the provisions of Clause 2, Article 16 of Circular 78/2014/TT-BTC, the income from real estate transfer includes:

- Income from the transfer of land use rights, or land lease right (including also the transfer of projects associated with the transfer of land use rights or land lease right in accordance with law);

- Income from the sublease of land of real estate enterprises in accordance with the land law regardless of whether there is an infrastructure facility or architectural work attached to land;

- Income from the transfer of houses or construction works attached to land, including their appurtenances, in case the value of such appurtenances is inseparable upon the transfer, regardless of whether land use rights or land lease right are/is transferred; and i

- Income from the transfer of house ownership or use right.

Real estate enterprises that have income from the sublease of land do not include those that only lease houses, infrastructure facilities or architectural works on land.

What is the method of calculating CIT on real estate transfer in Vietnam? (Image from the Internet)

What is the method of calculating CIT on real estate transfer in Vietnam?

Under Article 17 of Circular 78/2014/TT-BTC amended by Article 9 of Circular 96/2015/TT-BTC, the method of calculating CIT on real estate transfer is as follows:

Tax bases

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2. The CIT rate for real estate transfer is 22% (or 20% from January 1, 2016).

3. Determination of CIT payable:

CIT on real estate transfer in the period equals (=) assessable income from real estate transfer multiplied by (x) 22%.

Income from real estate transfer must be declared separately and is not eligible for CIT incentives.

Tax declaration and receipts of payment of CIT from real estate transfer in the administrative division where the transferred real estate is located are the basis for settling tax in the headquarter’s administrative division where

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Thus, the calculation of CIT on real estate transfer is as follows:

What are the deductible expenses when calculating CIT on real estate transfer in Vietnam?

Under point b.2, Clause 1, Article 17 of Circular 78/2014/TT-BTC, deductible expenses when calculating CIT on real estate transfer include:

Deductible expenses for real estate transfer include:

- The cost of the transferred land, determined according to the land use right origin, specifically as follows:

+ For land allocated or leased by the State with collection of land use levy or land rental, its cost is the land use levy or land rental actually remitted into the state budget;

+ For land with use rights transferred from another organization or individual, its cost shall be determined based on the contract and lawful payment document upon receiving its lease right or use rights; if the contract and payment document are unavailable, such cost shall be calculated based on the price set by the provincial-level People’s Committee at the time the enterprise receives the real estate transferred;

+ For land contributed as capital, its cost is the value of its lease right or use rights indicated in the asset valuation record upon capital contribution;

+ If the enterprise has exchanged a construction work for state land, the cost of such land is determined based on the value of the exchanged work, unless competent state agencies’ separate regulations are applied;

+ The auction-winning price, in case of auction of land use or lease rights;

+ For land inherited under the civil law or donated land with unidentifiable cost, its cost shall be determined based on the land price decided by the provincial-level People’s Committee on the basis of the land price bracket prescribed by the Government at the time of inheritance or donation.

For land inherited or donated before 1994, its cost shall be determined based on the land price decided by the provincial-level People’s Committee in 1994 on the basis of the land price brackets for different land categories specified in the Government’s Decree No. 87/CP of August 17, 1994.

+ For land mortgaged to secure loans or land distrained to secure judgment enforcement, its cost shall be determined on a case-by-case basis under the above guidance.

- Expense for land damage compensation.

- Expense for crop damage compensation.

- Compensation, support and resettlement expenses and expenses for organization of compensation, support and resettlement in accordance with law.

If the above compensation, support and resettlement expenses and expenses for organization of compensation, support and resettlement have no supporting invoice, a list shall be made, specifying the names and addresses of recipients; compensation or support amounts; signatures of recipients. This list shall be certified by the administrations of the wards or communes where are located land areas eligible for compensation or support in accordance with the law on compensation, support and resettlement when the State recovers land.

- Charges and fees related to the grant of land use rights as provided by law.

- Expense for soil improvement and ground leveling.

- Expense for the construction of infrastructure, such as roads, power lines, water supply and drainage systems, post and telecommunications facilities, etc.

- The value of infrastructure facilities and architectural works on land.

- Other expenses related to the transferred real estate.

An enterprise that conducts different business lines shall separately account expenses for each business line. If separate accounting cannot be conducted, general expenses shall be allocated based on the ratio of turnover from real estate transfer to the total turnover of the enterprise.

Expenses already paid by the State or from other capital sources must not be included in real estate transfer expenses.