Personal Income Tax for Foreigners in Vietnam (Part 4)

Following Part 3 specializing on incomes from capital investment, this part of the series on Personal Income Tax for Foreigners will focus on personal income tax imposed on incomes from real estate transfer.

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. Property on the land includes:

+     Houses, including future houses according to law on real estate trading.

+     Infrastructure and constructions on the land, including off-the-plan constructions.

+     Other property on land includes agriculture, forestry and fishery products (such as plants and animals).

–   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.

Several incomes from real estate transfer will be exempt from taxes including the following ones:

–   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.

–   Incomes from transferring houses, rights to use land and property on land of the person if only one house or right to use of only one land plot in Vietnam is transfer.

+     The person that transfers the house and right to use land that is tax-free as prescribed in Point b Clause 1 of Article 3 of Circular No. 111/2013/TT-BTC must meet all conditions below:

• Only one house or one land plot (whether with or without property thereon) is transferred. 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 or rights 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.

• The house or rights to use land has been possessed for at least 183 days before they are transferred.

The time for determine the house ownership land use right is the date of the certificate of land use right, ownership of house and other property on land.

• Transferring the entire house or residential land.

If the individual has or share the ownership of the only house or land use right and transfers part of it, the transferred part is not tax-free.

+     The only house and residential land that is tax-free shall be declared by the person that transfers real estate himself/herself. If false declaration is discovered, the person has to pay tax arrears and incur penalties for violations against the laws on taxation.

+     Transfer of future houses and constructions that are not exempt from personal income tax according to Point b Clause 1 of Article 3 of Circular No. 111/2013/TT-BTC

Tax rate on real estate transfer is 2% of the transfer price.

Time for taxing real estate transfer is determined as follows:

–   If the transfer contract does not require the buyer to pay tax on behalf of the seller, the taxing time is the effective date of the transfer contract as prescribed by law;

–   If the transfer contract requires the buyer to pay tax on behalf of the seller, the taxing time is time of registration of the right to own or right to use the real estate. In case the person receives an off-the-plan house or land use right associated with off-the-plan constructions, the taxing time is the time the person submits tax declaration documents to the tax authority.