During the drafting process of the amended Law on Personal Income Tax, the Ministry of Finance is leaning toward maintaining the current method of calculating personal income tax for real estate transfers, rather than immediately shifting to a tax method based on transaction profits.
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Continued Application of the 2% Tax Rate on Transfer Value
According to information released following a meeting on the draft amended Law on Personal Income Tax, the option currently selected by the Ministry of Finance is to retain the existing calculation method: a 2% personal income tax rate levied on the total real estate transfer value. Consequently, the proposal to impose a 20% tax rate on the profit (capital gains) derived from the transaction has not been included in the draft law at this stage.
Postponement of Holding-Period-Based Taxation
In addition to the profit-based tax option, the implementation of a tax based on the real estate holding period has also been put on hold. According to the drafting agency, this mechanism requires further thorough research before deployment to ensure feasibility and alignment with practical conditions.
Why Has the Tax Calculation Method Not Changed?
According to the Ministry of Finance's assessment, transitioning to a tax model based on profit or holding period must be implemented in tandem with several other factors, including:
- Finalizing the legal system regarding land and housing.
- Building a comprehensive database on real estate registration, ownership, and transfers.
- Upgrading the IT infrastructure that supports tax administration.
- Ensuring that tax authorities have adequate information to accurately determine original costs, capital gains, and the final tax liabilities.
Preparing these conditions fully is deemed essential to minimize errors in determining tax obligations and to enhance administrative efficiency.
Future Outlook
Under the discussed framework, tax policies for real estate transfers may continue to be studied in the coming years. For the immediate future, maintaining the 2% tax collection on the transfer value is evaluated as appropriate for current administrative capabilities, while providing stability to the market during the transition period of perfecting legal foundations and data infrastructure.
Note: This represents the policy direction during the drafting stage of the amended Law on Personal Income Tax. The official provisions will depend on the final text approved by competent authorities.
References: Information from the Ministry of Finance and analytical articles on the draft amended Law on Personal Income Tax.