What is the second home tax? When is income from real estate transfer subject to personal income tax in Vietnam?

What is the second home tax?

Vietnamese law currently does not have specific regulations regarding the second home tax. However, it can be understood as a type of tax applied when a buyer purchases their second real estate property or beyond, which will be taxed at a higher rate.

Presently, several countries around the world use the second home tax as a tool to curb real estate speculation. In Singapore, any citizen purchasing a house must pay a fee of 20% of the property's value for the second house and 30% for the third. For foreign nationals buying personal property, regardless of any house, the payable tax rate will double to 60% from the previous rate of 30%.

In Vietnam, on October 10, 2024, the Ministry of Natural Resources and Environment issued Report 245/BC-BTNMT 2024 on the situation of implementing the Land Law 2024, in which, in sub-section 3, Section 6 of Report 245/BC-BTNMT 2024, it was proposed that the Ministry of Finance research and issue regulations on taxing the second real estate. Simultaneously, in Official Dispatch 5333/BXD-QLN, the Ministry of Construction also proposed taxing individuals owning multiple properties.

Note: The information about "What is the second home tax?" is for reference purposes only.

What is the second home tax? When is income from real estate transfer subject to personal income tax in Vietnam? (Image from the Internet)

When is income from real estate transfer subject to personal income tax in Vietnam?

Based on Clause 5, Article 3 of the Law on Personal Income Tax 2007, amended by Clause 1, Article 1 of the Law on Amendments to Law on Personal Income Tax 2012, it stipulates taxable income from real estate transfer as follows:

Taxable Income

...

5. Income from real estate transfer, including:

a) Income from the transfer of land use rights and assets attached to the land;

b) Income from the transfer of ownership or use of residential housing;

c) Income from the transfer of land lease rights, water surface lease rights;

d) Other income received from real estate transfer in any form.

...

Additionally, based on Clause 1 and Clause 2, Article 4 of the Law on Personal Income Tax 2007, which stipulates tax-exempt income for certain cases of real estate transfer, as follows:

Tax-Exempt Income

1. Income from real estate transfer between husband and wife; biological father, mother and biological child; adoptive father, mother and adopted child; 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 to each other.

2. Income from the transfer of residential housing, rights to use homestead land, and assets attached to the homestead land by an individual in cases where the individual only has one residential house, homestead land.

...

Thus, income from real estate transfer is subject to personal income tax in the following cases:

- Income from the transfer of land use rights and assets attached to the land;

- Income from the transfer of ownership or use of residential housing;

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

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

However, the income from real estate transfer mentioned above does not fall under any of the following cases:

- Income from real estate transfer between husband and wife; biological father, mother and biological child; adoptive father, mother and adopted child; 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 to each other.

- Income from the transfer of residential housing, rights to use homestead land, and assets attached to the homestead land by an individual in cases where the individual only has one residential house, homestead land.

How to determine taxable income from real estate transfer in Vietnam?

Based on Article 18 of Decree 65/2013/ND-CP, amended by Clause 11, Article 2 of Decree 12/2015/ND-CP, it regulates taxable income from real estate transfer as follows:

- Taxable income is determined as the transfer price per transaction.

- The real estate transfer price is the price recorded in the transfer contract at the time of transfer.

+ In cases where the transfer contract does not record the land price or the land price in the transfer contract is lower than the price prescribed by the provincial People's Committee, the land transfer price shall be the price prescribed by the provincial People's Committee at the time of transfer in accordance with the provisions of the land law.

+ In cases of transferring houses attached to land, the value of the house, infrastructure, and architectural works attached to the land shall be determined based on the property registration fee price set by the provincial People's Committee. If the provincial People's Committee does not have regulations on the property registration fee price, then it shall rely on the Ministry of Construction's regulations on housing classification, on basic construction standards, and on the actual remaining value of the construction on the land.

For future-formed buildings, the determination is based on the contribution ratio in the total contract value multiplied by the property registration fee price of construction set by the provincial People's Committee. If the provincial People's Committee has not set the unit price, the applicable rate will follow the construction investment rate of the project announced by the Ministry of Construction at the time of transfer.

+ In cases of sublease where the rental price on the sublease contract is lower than the price set by the provincial People's Committee at the time of sublease, the sublease price shall be determined based on the price list set by the provincial People's Committee.