Vietnam’s Property Tax Regime 2024

Vietnam’s property tax regime plays a significant role in shaping the real estate market, impacting investment decisions, the development of supporting infrastructure, and market stability. This article offers a comprehensive overview of Vietnam’s property tax landscape to help investors make well-informed choices.

Vietnam’s property tax regime is complex and demands a thorough understanding of compliance obligations.

Rental income tax

Rental income tax (RIT) is a critical consideration for property investors in Vietnam given its impact on rental property profitability. The RIT structure includes:

• Tax-free threshold: Rental income up to VND100 million (about US$4,000) per annum is exempt from taxes, offering relief to small-scale landlords and investors with modest rental earnings.
• Value added tax (VAT): Rental income exceeding the tax-free threshold is subject to VAT at a 5-percent rate. This tax applies to the gross rental income, adding to the overall tax burden for investors.
• Personal income tax (PIT): Rental income is also subject to PIT, calculated at a rate of 5% on the gross rental income, further reducing net returns from rental properties.
• Business license tax (BLT): Investors earning rental income must pay BLT, which varies with total annual rental income. The rates are as follows:
  >> Annual rental income up to VND100 million (about US$4,000): Exempt.
  >> Annual rental income from VND100 million to VND300 million (approx. US$4,000-US$11,900): VND300,000 (US$12).
  >> Annual rental income from VND300 million to VND500 million (approx. US$4,000-US$20,000): VND500,000 VND (US$20).
  >> Annual rental income above VND500 million VND (approx. US$20,000: 1,000,000 VND (US$40).

Also Read: Tax Obligations for Resident and Non-Resident Property Owners in Vietnam

Tax obligations for property transfer

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Businesses and individuals making property transfers must pay property transfer tax, VAT, and three other fees. When transferring a property, the parties must declare and pay all the required taxes, fees, and charges to avoid unnecessary administrative penalties.

Property transfer tax

The Property Transfer Tax in Vietnam is levied at a PIT rate of 2 percent on the transfer value of the property applicable for individual sellers and a 20% corporate income tax (“CIT”) rate on net gains applicable for corporate sellers. This tax is payable by the seller.

Details are as below.

For enterprises

If an enterprise is the transferor, but registered business activities is not real estate, the enterprise will have to pay CIT to the tax authority where the property is located. Income from property transfer activities must be determined separately by the enterprise for tax declaration and payment.

CIT will be declared for each occurrence, specifically no later than the 10th day from the date of tax liability (based on Point e, Clause 4, Article 8 of Decree 126/2020/ND-CP).

CIT from property transfer is determined as follows:

Corporate income tax = Taxable income x Tax rate (20%)

In which:

Taxable income = Revenue from real estate transfer – Cost of real estate – Deductible expenses related to real estate transfer – Losses from real estate transfer in previous years (if any)

In case the transferor is a real estate enterprise, when transferring the property, it is required to issue a VAT invoice and record revenue from business operations. The CIT rate is 20% on profit. The CIT return will be declared on an annual basis.

For individuals

If an individual is the seller, they must declare and pay personal income tax, except in the following cases:

• Income from property transfer is subject to tax exemptions specified in Point a and Point b, Clause 1, Article 3 of Circular 111/2013/TT-BTC;
• In case an enterprise, individual, or other organization is the property buyer, and the property transfer contract has an agreement that the buyer is the taxpayer on behalf of the seller (an individual), the buyer is responsible for declaring and paying personal income tax on behalf of the seller.

Personal income tax is determined as follows:

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

Value added tax

When transferring real estate (except for transferring land use rights), the business enterprise will pay VAT calculated as follows:

• Applying the deduction method:

VAT payable = Output VAT – Deducted Input VAT

• Applying the direct method on revenue:

VAT payable = Revenue x Tax rate

Additional fees

Registration fee

Under Clause 1, Article 2 of Circular 13/2022/TT-BTC, the following real estate will be subject to a registration fee when transferred:

• Houses, including residential houses, offices, and houses used for other purposes.
• Land, including agricultural land and non-agricultural land, according to the provisions of the Land Law (regardless of whether the land has been built or not).

Fee for dossier appraisal for granting land use right certificates

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Under Point b Clause 3 Article 1 of Circular 106/2021/TT-BTC, the fee for appraisal of documents for granting land use rights certificates is a fee for the appraisal of documents and necessary and sufficient conditions to ensure the issuance of certificates of land use rights and rights and ownership of houses and other land-attached assets (commonly known in Vietnam as Pink Books).

Based on the size of the land plot, the complexity of each type of document, the purpose of land use, and specific local conditions, fees will be determined case by case.

Notarization fee

Under Clause 3 Article 27 of Law on Land, contracts for the transfer of land use rights, land use rights, and assets attached to land must be notarized.

Regarding this procedure, parties may visit any notary office to complete this process and pay the notarization fee. Under Clause 2 Article 4 of Circular 257/2016/TT-BTC, the notarization fee will be calculated based on the total value of the land use rights and the combined value of all attached assets with the following fees:

Land tax

Land tax in Vietnam is assessed on non-agricultural land and is calculated using progressive rates ranging from 0.03 percent to 0.15 percent. The tax rate depends on the land’s location and usage, with higher rates applied to urban areas and commercial properties.

• Residential Land: 0.03 percent of the land value.
• Non-residential land: 0.07 to 0.15 percent, depending on the property’s purpose and location.

The land value is determined by local authorities based on market prices and other factors. Land tax is an ongoing obligation for property owners, contributing to the overall cost of property ownership.

What should foreign investors pay attention to?

Foreign investors in Vietnam must adhere to specific tax obligations to ensure lawful and profitable investments. There are key actions that must be taken:

• Registration for a tax code: Foreign investors need to register for a tax code with the Vietnamese tax authorities, which involves submitting documentation like passports, investment certificates and other related documents to obtain a tax identification number. The tax code is essential for tax filings.
• Filing tax returns: Investors must file annual tax returns or return one-time basis for property-related income, including rental income and capital gains, paying any owed taxes by the established deadlines to avoid penalties. Vietnam has tax treaties with several countries, providing potential exemptions or reductions in tax rates designed to prevent double taxation. Investors should consult tax experts to determine eligibility for these benefits based on their home country.
• Avoiding violations: Failure to pay property taxes can result in penalties, legal action such as seizure, and restricted transactions, hindering the ability to sell or transfer properties.

With expert inputs from Luy Doan and Tam Nguyen.

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