PIT law has little impact on real estate market

The property volume now offered on HCM City’s real estate trading floors has reduced slightly after the announcement of the Personal Income Tax (PIT) law, but sale prices remain high. Experts think that the newly ratified tax on real estate capital gains will not have a considerable impact on the market.

Under the PIT Law, taxable income will be calculated by subtracting sales price from purchase prices and related expenses.

People will have two PIT real estate options: either paying 25% tax on the profit from a real estate sale after deducting expenses (margin between the sale and purchase prices), or 2% tax on the sale price or real estate value.

Huy Nam, an economist and real estate expert, said tax policy changes will cool the market down for some time as real estate traders speculate on possible consequences and changes, but not for too long.

According to Ho Dac Hung, Chairman of Vietnam Real Estate Consultancy and Brokerage Company, people will accept paying 2% on turnover. “This tax calculation method proves to be simple enough to be implemented and 2% is considered a suitable rate,” Mr Hung said.

Analysts also say the first calculation method is too complicated, especially for property purchased long ago. In many cases, property owners do not keep documents showing purchase prices and other expenses.

Meanwhile, analysts say 25% on net profit proves to be high, thus not encouraging real estate transactions.

Mr Hung does not think speculators will try to offload real estate before PIT law comes into effect to avoid the tax.

In fact, taxation is only eligible on transactions recognized by the state, i.e. land plots and houses that have ‘red book’ (land use right certificates) and ‘pink book’ (certificates on house ownership). Meanwhile, the state is unable to collect on transactions without ownership certificates, and these account for a big proportion of total transactions.


source: http://english.vietnamnet.vn