In Vietnam, is it required to pay PIT when selling a house at a loss? This is a question that Lawnet has recently received quite a lot from our customers and members. The editorial board of Lawnet would like to clarify this issue as follows:
Article table of contents
Vietnam: Is it required to pay PIT when selling a house at a loss? (Illustrative image)
According to current legal regulations, when buying and selling houses and land in Vietnam, both parties must pay taxes.
PIT of the seller
Tax amount payable: When transferring (buying and selling) real estate, the seller must pay PIT equal to 2% of the transfer price.
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 price
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 price, and the regulation of a 25% tax rate on taxable income for real estate transfers has been abolished.
02 cases eligible for PIT exemption in Vietnam
1. Transactions are conducted between individuals with marital, blood, or adoptive relationships
According to Point a, Clause 1, Article 3 of Circular 111/2013/TT-BTC, Incomes from real estate transfer (including future houses and constructions according to regulations of law on real estate trading) between
+ husband and wife,
+ parents and children;
+ adoptive parents and adopted children;
+ parents-in-law and children-in-law;
+ grandparents and grandchildren, and
+ among siblings
The real estate (including future houses and constructions according to regulations of law on real estate trading) that is established by either spouse during the marriage, considered marital property, divided under agreements or judgment of the court when they divorce shall be tax-free.
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, PIT does not apply to income from the transfer of a person's only house or right to use residential land and property thereon in Vietnam if the transferor only has a single house, a single parcel of land.
To qualify for PIT exemption in this case, the following 03 conditions must be met:
- Only own a single house or a single parcel of land:
The transferor owns only one house or right to use residential land plot (with or without property thereon) at the time of transfer. To be specific:
+ The house ownership and right to use land shall be determined based on the certificate of rights to use land, ownership of house and other property on land;
+ If the house ownership or rights to use land are shared, the person that has no ownership of houses or rights to use land in other areas shall be eligible for tax exemption, the person that has ownership of houses or rights to use land in other areas is not eligible for tax exemption;
+ If the house ownership or right to use land is the marital property and only property of the husband and wife, the person that has no other private house or land is eligible for tax exemption, the person that has another private house or land is not eligible for tax exemption.
- Own the house, right to use residential land for at least 06 months:
To be specific:
+ The house or land plot has been under the transferor's ownership for at least 183 days before they are transferred;
+ The time for determine the house ownership or land use right is the date of the certificate of land use right, ownership of house and other property on land.
- Transfer the entire house and residential land
If the individual has or shares the ownership of the only house or land use right and transfers part of it, the transferred part is not tax-free.
Thus, although the house is sold at a loss compared to the initial purchase price, the seller still has to pay personal income tax equal to 2% of the transfer price.
Legal Basis:
Ngoc Tai
