How to calculate personal income tax for real estate transfer

As you may observe from Personal Income Tax for Foreigners in Vietnam – Part 1 and Personal Income Tax for Foreigners in Vietnam (Part 4), incomes from real estate transfer will be considered as a taxable income. In this article, we will discuss on how to calculate the personal income tax (PIT) on such an income.

As mentioned in Part 4 of the series of Personal Income Tax for Foreigners in Vietnam, incomes from real estate transfer can be one of the followings:

Taxable incomes from real estate transfer include the following types:

–  Incomes from transferring rights to use land.

–  Incomes from transferring rights to use land and property on the land.

–  Incomes from transferring ownership of houses, including future houses.

–  Incomes from transferring rights to use land, rights to rent water surface.

–  Incomes from capital investment by real estate to establish enterprises or increase capital of enterprises as prescribed by law.

–  Incomes from delegating the management of real estate, if the person delegated to manage real estate has the right to transfer real estate or similar rights to the real estate owner.

–  Other incomes from real estate transfer in any shape or form.

 (Such incomes are stipulated in Paragraph 5, Article 2 of Circular No. 111/2013/TT-BTC)

– In case the taxable income can be determined, personal income tax on income from real estate transfer is determined as follows:

Personal income tax payable = Taxable income x Tax rate (25%)

–  In case the taxpayer cannot determine or has no documents to determine the cost price or purchase price or rental price and relevant documents of real estate transfer activities as a basis for determining taxable income, personal income tax is determined as follows:

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

–  Where the transfer of real estate is co-ownership, the tax liability is determined separately for each taxpayer according to the proportion of real estate ownership. Bases for determining the ownership rate are legal documents such as initial capital contribution agreement, will or division decision of the court, … In case there are no legal documents, the tax liability of each taxpayer is determined according to the average rate.

Important Note:

In PIT calculation of for incomes from real estate transfer, taxable incomes will be defined differently regarding different properties.

(i) Transfer of land use right without construction works on land

Taxable income = Transfer price – (Cost price + Related reasonable costs)

In which:

–  Land use right transfer prices are actual prices stated in transfer contracts at the time of transfer.

–  The cost price of land use right transfer in some specific cases is determined as follows:

+   For land allocated by the State with the collection of land use levies, the cost price shall be based on the receipts of the State’s land use levy collection.

+   For the origin of land allocated by the State without payment or reduction of land use levy according to the provisions of law, the cost price of the transferred land shall be determined according to the price set by the provincial-level People’s Committee. time of land allocation.

+   For land where use rights are transferred from organizations or individuals, the cost price is based on the price stated in the transfer contract at the time of receiving the transfer of land use rights.

+   In the case of land use right transfer auction, the cost price is the amount payable according to the winning price.

+   For land origin not in the above cases, the cost price shall be based on documents proving the fulfillment of financial obligations to the State when it is granted a certificate of land use rights, house ownership and financial assets. other assets attached to land to determine cost price.

–  Related reasonable costs: Relevant reasonable expenses deducted when determining income from the transfer of land use rights are actual expenses incurred in connection with the transfer activities with vouchers and invoices under the prescribed regime, including: types of fees and charges as prescribed by law related to the grant of land use rights to which the transferor has paid to the State budget, expenses for land reclamation and ground leveling (if any), other related expenses. costs such as the cost of doing legal procedures for the transfer, the cost of measuring hiring.

(ii) Transfer of land use rights associated with constructions on land, including future constructions

Taxable income = Transfer price – (Cost price + Related reasonable costs)

–  Transfer price

Transfer price is the actual price stated in the transfer contract at the time of transfer. In case the contract does not state the transfer price or the transfer price stated in the contract is lower than the price set by the People’s Committee of the province, the transfer price shall be determined according to the land price list or house registration fee calculation price set by the Commission. Provincial People’s Committee at the time of transfer.

In case the People’s Committee of the province has no regulations on house registration fee calculation prices, the transfer price shall be based on the Construction Ministry’s regulations on house classification, capital construction standards, norms and prices. actual residual value works on land.

For future construction works, it is determined on the basis of the capital contribution ratio to the total contract value multiplied (×) by the construction work registration fee calculation price issued by the provincial-level People’s Committee. regulations. If the People’s Committee of the province has not yet regulated the unit price, the rate of work construction investment announced by the Ministry of Construction, which is currently applicable at the time of transfer, shall apply.

–  Cost price

Cost prices are determined on the basis of prices stated in transfer contracts at the time of purchase. In cases where the real estate is not derived from the transfer, the cost price shall be based on the documents proving the fulfillment of financial obligations to the State at the time of being granted the Certificate of land use rights or ownership. own houses and other land-attached assets.

–  Related reasonable costs

(iii) Transfer home ownership, including future houses

Taxable income = Sale price – (Purchase price + Related reasonable costs)

–  Selling price is the actual transfer price determined according to the market price and recorded in the transfer contract.

In case the house transfer price stated in the transfer contract is lower than the house registration fee calculation price prescribed by the provincial-level People’s Committee at the time of transfer or the transfer price is not specified in the transfer contract. is determined according to the registration fee calculation price set by the provincial-level People’s Committee.

–  The purchase price is determined based on the price stated in the purchase contract. For a house not derived from the receipt of transfer or acquisition, based on documents proving the fulfillment of financial obligations to the State at the time of being granted the certificate of land use right or house ownership and other assets attached to land.

–  Relevant reasonable deductible expenses are actual expenses incurred from transfer activities with legal invoices and documents, including: fees and charges as prescribed by law relating to the grant of House use rights paid by the transferor, expenses for home repair, renovation and renovation, other expenses directly related to the transfer.

(iv) Transfer of land lease rights, water surface lease

Taxable income = Sublease price – (Lease price + Related reasonable costs)

–  The sublease price is determined by the actual price stated in the contract at the time of transferring the right to rent the land or water surface.

In case the sublease unit price on the contract is lower than the price set by the People’s Committee of the province or city at the time of sublease, the sublease price is determined according to the rent list issued by the provincial People’s Committee.

–  The rental is determined based on the lease contract.

–  Relevant reasonable deductible expenses are actual expenses arising from the transfer of the right to have lawful invoices and documents.

Time of determination of a taxable income with respect to incomes from real estate transfer s the time when the individual carries out the real estate transfer procedures in accordance with law.