Seeking opinions on the proposal to develop a draft Law on Personal Income Tax (replacement), the Ministry of Finance is proposing to collect personal income tax from real estate transfers based on the holding period. This is to institutionalize the policies and orientations of the Party and State on effective use of real estate, and prescribe high tax rates for those who own many real estates. At the same time, taxing purchases and sales based on the holding period also reduces speculation and real estate bubbles.

Giving comments, the Ministry of Justice said that the specific tax rate needs to be studied and determined appropriately, reflecting the actual operation of the real estate market.

However, according to the judicial agency, the application of personal income tax policy on transfers based on the holding period needs to be synchronized with the process of perfecting policies related to land, housing, and the readiness of information technology infrastructure for land and real estate registration.

Therefore, the Ministry believes that the solution of collecting tax based on the holding period is not feasible. The reason is that Vietnam has not yet synchronized state management between tax and land. They suggested that the drafting agency continue to research and perfect the policy content.

Currently, the personal income tax policy in Vietnam does not differentiate according to the transferor's real estate holding period. Taxable income from buying and selling houses and land is determined as the transfer price each time, with a tax rate of 2%.

The proposal to tax according to the holding period was made by this Ministry in the context of constantly increasing housing prices. According to the Ministry of Finance, this policy can be implemented like some countries in the world to increase costs and reduce the attractiveness of speculation, including personal income tax.

Experience shows that some places also apply tax on profits from real estate transactions based on the frequency of transactions and the time of buying and selling houses and land. The faster this time occurs, the higher the tax rate and vice versa, according to the Ministry of Finance.

Specifically, in Singapore, land bought and sold in the first year is taxed at 100% on the difference in value of purchase and sale. After 2 years, the tax rate is reduced to 50% and after 3 years it is 25%. In Taiwan, real estate transactions made in the first 2 years after purchase are subject to a tax rate of 45%. In 2-5 years, the tax rate is 35%, in 5-10 years the tax rate is 20% and after 10 years it is 15%.

This solution is expected to reduce speculation and real estate bubbles - which are the causes of recent high house and land prices. However, according to analysts, this tax collection is unlikely to help lower house prices. Real estate expert Tran Khanh Quang said that imposing a tax based on the year of ownership will have a "huge impact on the market".

He explained that real estate investment also incurs many costs including 2% personal income tax, 0.5% registration fee, about 2% brokerage and capital costs of 8-10%. Meanwhile, house and land prices increase by an average of 8-12% per year. Therefore, according to Mr. Quang, the current real estate investment yield may not be equal to other channels.

"If this tax regulation is applied, investors will be forced to hold real estate longer, possibly for 1 year or more, causing capital costs, interest rates, opportunity costs... to increase," he said, saying that this could have two impacts.

First, the real estate market becomes less attractive to investors because of poor or no profit rates. On the other hand, investors still participate in the market, but real estate prices are pushed higher to compensate for capital costs and increased taxes.

According to a survey by VnExpress (November 25-30) on whether this tax collection method should be applied, with more than 12,500 participants, the number of people who oppose it is "slightly" higher than the number who support it.

In addition to the proposal to tax according to the holding period, the Ministry of Construction previously proposed to collect taxes on the ownership and use of many houses and lands to limit speculation and short-term buying and selling for profit. The Ministry of Finance was asked to jointly study and advise on tax policies for second houses and lands or abandoned or unused properties.

Similarly, the Vietnam Association of Realtors (VARS) proposed a real estate tax policy for two groups, including buyers of second houses or more and owners who abandon the project. The tax rate will gradually increase for transactions where the seller has a short ownership period.

Last year, the National Assembly's monitoring delegation recommended the early promulgation of a tax policy applicable to owners of many houses and lands, and abandoned real estate. Many localities currently have a surplus of products such as shophouses and villas without residents. Meanwhile, affordable housing is increasingly scarce, especially in Hanoi and Ho Chi Minh City, where there is a serious imbalance in the real estate market.

Phương Dung