Selling a house at a loss, are you exempt from personal income tax? This is a question that Law Secretary has recently received quite a lot from our customers and members. The editorial board of Law Secretary would like to clarify this issue as follows:
Article table of contents
Is it possible to be exempted from Personal Income Tax when selling a house at a loss? (Illustrative image)
According to current legal regulations, when buying and selling houses and land, both parties have the obligation to pay taxes.
Personal Income Tax of the Seller
Tax amount payable: When transferring (buying and selling) real estate, the seller is obligated to pay personal income tax of 2% of the transfer value.
According to Article 17 of Circular 92/2015/TT-BTC, when transferring houses and land, personal income tax is determined as follows:
Personal income tax payable = 2% x Transfer value
Thus, according to current law, there is only one method of calculating personal income tax for real estate transfers, which is 2% of the transfer value, and the regulation of a 25% tax rate on taxable income for real estate transfers has been abolished.
02 Cases of Personal Income Tax Exemption
1. Transactions between individuals with marital, blood, or adoptive relationships
According to Point a, Clause 1, Article 3 of Circular 111/2013/TT-BTC, income from the transfer of real estate (including future housing, future construction projects in accordance with real estate business law) between the following individuals is exempt from personal income tax:
- Between husband and wife;
- Biological father, biological mother with biological child;
- Adoptive father, adoptive mother with adopted child;
- Father-in-law, mother-in-law with daughter-in-law;
- Father-in-law, mother-in-law with son-in-law;
- Paternal grandparents with grandchildren;
- Maternal grandparents with grandchildren;
- Siblings with each other.
In the case of real estate (including future housing, future construction projects in accordance with real estate business law) created by either spouse during the marriage period and determined as common property of the spouses, when it is divided upon divorce according to the agreement or court decision, this division is exempt from tax.
2. The transferor only has a single house, a single parcel of land
According to Point b, Clause 1, Article 3 of Circular 111/2013/TT-BTC, income from the transfer of housing, the right to use homestead land, and assets attached to homestead land where the transferor only has a single house, right to use homestead land in Vietnam is exempt from tax (only homestead land, other types of land still must pay tax).
To qualify for personal income tax exemption in this case, the following 03 conditions must be met:
- Only own a single house or a single parcel of land:
Only own a single house or a single parcel of land (including the case of having a house or construction attached to that parcel) at the time of transfer, specifically:
- Ownership of the house, use rights to homestead land is based on the Certificate of land use rights, house ownership, and other assets attached to the land;- When individuals have joint ownership of a house, use rights to homestead land, but also have ownership of another house, use rights to other homestead land, they are not exempt from tax;- In the case of spouses with joint ownership of a house, use rights to homestead land, and it is the only common property of the spouses, if one spouse has separate ownership of a house, foreign depot land, when transferring joint ownership of a house, homestead land, the spouse without separate property is exempt from tax; the spouse with separate ownership is not exempt from tax.
- Have ownership of the house, use rights to homestead land for at least 06 months:
To be specific:
- Have ownership of the house, use rights to homestead land for at least 183 days at the time of transfer;- The time of determining ownership of the house, use rights to homestead land is the date of granting the certificate.
- Transfer the entire house, homestead land:
If an individual has sole or joint ownership rights but only transfers a part, the exempt tax does not apply to the transferred part.
Thus, although the house is sold at a loss compared to the initial purchase price, the seller still has to pay personal income tax of 2% on the transfer value.
Legal Basis:
Ngoc Tai
