In recent weeks, a proposal from Vietnam's Ministry of Finance to impose a 20% tax on profits from real estate transfers has stirred significant discussion in the property market. This potential tax change comes amid ongoing efforts to streamline taxation and enhance transparency in real estate transactions.
The Ministry is currently evaluating two methods for calculating this tax. The first method involves taxing individuals based on their taxable income, which would be calculated as 20% of the selling price minus any related expenses. The second option is a flat tax rate of 2% applied to the total transfer price. If the exact purchase price and related expenses can be verified, the 20% tax would apply to the taxable income. Conversely, if these figures cannot be determined, the 2% tax would be levied on the total transfer price.
Investment advisor Mr. Le Quoc Kien highlighted three prevalent misunderstandings regarding this proposal. Firstly, many individuals mistakenly believe that the new calculation method replaces the existing 2% tax on real estate transfer prices. In reality, the Ministry's proposal merely introduces an additional calculation method, allowing sellers to choose which one to use. This means that properties currently taxed under the old method will not be affected.
Secondly, there is a misconception that the tax on real estate sales will increase from 2% to 20%. Kien clarified the difference between the "real estate transfer price" (the selling price) taxed at 2% and the "taxable income" (selling price minus total related expenses) taxed at 20%. This confusion has negatively impacted market sentiment, although the proposal itself does not inherently increase tax burdens.
For example, if a property is sold for 5 billion VND, with a purchase price of 4 billion VND and related expenses totaling 800 million VND, the tax under the current method would be 100 million VND (5 billion x 2%). Under the new method, the tax would be calculated as ((5 billion - (4 billion + 800 million)) x 20%), resulting in only 40 million VND owed. This demonstrates that sellers who can substantiate their expenses could benefit significantly from the new tax calculation.
Moreover, if a property sells for 4.8 billion VND, the seller would not owe any tax under the new method, as the taxable income would be zero.
Lastly, Kien addressed concerns regarding the possibility of sellers incurring losses still being subject to taxation. He noted that the Personal Income Tax Law of 2007 previously allowed for both taxation methods, with the taxable income rate reaching as high as 25%. After amendments in 2015, only the 2% method remained, which led to situations where sellers who experienced losses were still required to pay taxes. The introduction of the new calculation method aims to alleviate this issue, allowing sellers who can prove their related costs to potentially avoid tax obligations.
However, Kien also emphasized that for the effective implementation of the 20% profit tax on real estate transfers, two critical conditions must be met. First, a robust database of historical transaction data must be established to accurately reflect the real value of properties during transfers. Additionally, there must be a comprehensive framework for monitoring payment methods in real estate transactions to prevent instances where sellers report losses to evade taxes.
In a related development, the new tax calculation method has already begun to influence behavior in the real estate market. At Notary Office No. 5 in Go Vap District, Ho Chi Minh City, a surge in activity was observed in late April 2025. Ms. Tran Thi Anh, who owns a 300 m2 agricultural land plot in Cu Chi, was negotiating with a buyer over the recorded purchase price on the contract. They had agreed on a price of nearly 1.3 billion VND, but Ms. Anh was concerned about the tax implications.
Previously, calculating personal income tax at 2% on the total contract value would have resulted in an estimated tax of 26 million VND. However, upon learning about the new tax calculation based on the updated land price list issued by the City People's Committee, Ms. Anh's tax liability was reduced to just 2.3 million VND, a reduction of over 10 times compared to her initial expectations.
Similarly, Mr. Van, who needed to sell a land plot of over 350 m2 in Binh Duong Province for 2.8 billion VND, faced a similar situation. The tax he would have owed under the old calculation method would have been nearly 60 million VND. Thanks to the new tax framework, his tax liability was reduced to 27.2 million VND based on the local land price list.
The change in tax policy has not only brought relief to individual sellers but has also invigorated the market. Real estate broker Mr. Hoang noted that many landowners in Binh Duong and other provinces are now more willing to negotiate and finalize deals due to the reduced tax burden. The new tax rates have made transactions more transparent, with both buyers and sellers feeling confident in declaring the actual sale price on contracts.
Nguyen Toan Thang, Director of the Department of Natural Resources and Environment of Ho Chi Minh City, confirmed that the new tax regulations under the 2024 Land Law are advantageous for the public, as they result in lower tax payments compared to previous methods. He reported a 16% increase in property purchase records in the first quarter of 2025, with the city issuing approximately 100,000 land use right certificates.
As the demand and confidence of investors return, the real estate sector is poised for growth this year. Lawyer Nguyen Giang Nam pointed out that the new personal income tax calculation method is particularly beneficial for sellers, especially in land transactions. Furthermore, it helps mitigate disputes and even potential legal issues that previously arose from the practice of declaring "two prices" on contracts.
While the new tax approach is a positive step towards transparency in real estate transactions, it has raised concerns regarding registration fees, which still rely on the contract value. The disconnect between personal income tax calculations and registration fees could lead to confusion among buyers and sellers. Legal experts are calling for a review of the Personal Income Tax Law to ensure consistent application of tax regulations across the board.
