Tax advice on income of selling apartment in Vietnam

TAX ADVICE ON INCOME OF SELLING APARTMENT IN VIETNAM

I. Is it taxable to sell a house or land?

"Income from the transfer of real estate, including: Income from the transfer of land use rights and assets attached to land; Income from the transfer of ownership or use of housing; Income from the transfer of land lease rights and water surface lease rights , other income received from real estate transfers of any kind. "

According to the above provisions, the sale of houses/land must pay taxes in accordance with the Law.

II. Who has to pay taxes when selling a house/land?

According to the Personal Income Tax Law, the taxable party is the transferor of land use rights (the seller of real estate) and the buyer will not be subject to this tax. In case the parties when performing the real estate purchase contract do not have an agreement on the transferor (who is the seller of the real estate) will have to pay personal income tax for transferring land use rights.

III. Who is exempt from paying tax when selling a house/land?

The Ministry of Finance stipulates a series of incomes exempt from personal income tax in Circular 111/2013. In particular, there are two notable cases where individuals are exempt from tax when selling houses and land.

a. Buying and selling between people with marital, blood, and nurturing relations.

According to Point a, Clause 1, Article 3 of Circular 111/2013 from the Ministry of Finance, income from real estate transfers (including houses, construction works formed in the future in accordance with the law on real estate business) will be exempt from personal income tax in some cases.

Namely, transfers between husband and wife; biological father, natural mother with biological children; adoptive father, adoptive mother with adopted child; father-in-law, mother-in-law with daughter-in-law; father-in-law, mother-in-law with son-in-law; grandfather, grandmother to grandson; maternal grandfather, grandmother to grandchild; siblings to each other. In case the real estate created by the spouses during the marriage period is determined to be the common property of the spouses, when the divorce is divided according to the agreement or decided by the court, the division of this property is exempt from tax.

b. Sale of an only house or parcel of land

Individuals who generate income when transferring housing, residential land use rights and assets attached to residential land in case the transferor has only one housing or one residential land in Vietnam will be exempt from tax when the following three conditions are met:

Firstly, the individual has only the right to own a dwelling house or the right to use a residential land plot (including in the case of a house or construction work attached to that parcel of land) at the time of transfer, specifically as follows:

- The determination of housing ownership and land use rights is based on the Certificate of land use rights, ownership of houses and other property attached to land. 

- In case of transfer of houses with common ownership, residential land with the same right to use, only individuals who do not have ownership of houses or land use rights elsewhere are exempt from tax; Individuals who share the right to own houses, land use rights also have the right to own houses, other residential land use rights are not exempt from tax.

- In case the spouses share the same ownership of houses, the right to use residential land and are also the only ones of the spouses but the spouses also have their own houses and land, when transferring houses and land of the same spouses, the spouses do not have their own houses and land exempt from tax; Husbands or wives who have their own houses and land are not exempt from taxes.

Secondly, individuals have the right to own houses, residential land use rights up to the time of transfer of at least 183 days. The time of determination of housing ownership and residential land use rights is the date of issuance of the pink book. Particularly in case of being reissued or exchanged, the time of determining housing ownership and residential land use rights shall be calculated according to the time of issuance of the pink book before being reissued or exchanged.

Finally, the individual must transfer all housing and land. In case an individual has the right or common right to own a house, a single residential land use right but transfers a part, it is not exempt from tax for that transfer.

People should note that the only houses and residential land are exempt from tax declared and responsible by the individual transferring the real estate. If detected incorrectly, tax arrears will be handled and fined for violations of tax law in accordance with the law on tax administration.

Please refer to the Form of Contract for sale and purchase of real estate at the link: Form of Contract for sale and purchase of real estate

IV. What taxes and fees should be paid for selling houses/land?

1 - Personal income tax

Personal income tax payable = Transfer price x 2% TAX RATE 2%

2 - Registration fee

The registration fee of the property is 0.5%.

Amount of registration fee payable (vnd) = Value of property charged registration fee (vnd) x Percentage of registration fee collection (%)

3 - Cadastral fee

The current normal usage right certificate is less than 100,000 VND.

4 - Notary fee

It depends on the notary fee of each notary office.

It should be noted that, according to the provisions of the Law on Personal Income Tax, the transferor is obliged to pay personal income tax. However, when signing a transfer contract, the parties can agree to decide which party is obliged to pay personal income tax as well as other fees as prescribed.

V. How to calculate the tax payable when selling a house/ land 

1. Personal income tax

The income from the transfer of real estate subject to personal income tax is the income received from the transfer of real estate land including:

- Income from land use right transfer

- Income from the transfer of land use rights and assets attached to land;

How to calculate personal income tax:

- Personal income tax on income from the purchase and sale of land is determined according to the following formula:

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

In the case of buying and selling real estate as co-ownership (for example, husband and wife are in the same name on the pink book, the tax amount is determined separately for each taxpayer according to the ratio of real estate ownership, usually 50/50). The basis for determining the ownership rate will be based on legal proof documents such as: initial capital contribution agreement, will,... If there are no documents to prove the percentage of ownership, each person's tax liability will be determined according to the average rate.

For example: The agreed 50m2 land plot is 20 million VND/m2, the total transfer value is one billion VND. However, the land price list stipulates that area is 30 million VND/m2. Thus, the closing level will be: 1 billion 500 million VND x 2% = 30 million VND.

2. Registration fee when buying and selling real estate 

Registration fee when transferring real estate where the self-declared price of the parties is higher than the state price is calculated: 

Registration fee = 0.5% x transfer price under the contract 

In case the price is lower than the state land price:  

Registration fee = 0.5% x (Area of registration fee x Price of 1 m2 of land at the land price list issued by the Provincial People's Committee) 

In which:

 - The area of land charged for registration fee is the entire area of the land parcel under the lawful management and use of the organization,  households and individuals shall be determined by the Land Registration Office and provided to the tax authority according to the Information Transfer Form to determine financial obligations on land

- The price of 1m2 of land in the land price list issued by the People's Committee of the province or centrally-run city in accordance with the law on land at the time of declaration of registration fee. 

Particularly in the case of buying land with housing but the contract of sale and purchase of real estate does not separate the value of the house and the value of land in case of separate purchase and sale of houses (mainly apartments), the registration fee will be: 

Registration fee = 0.5% x (The area of the house subject to registration fee x the price of 1m2 x the rate (%) of the remaining quality of the house subject to the advance fee contact

In which:

 - The area of the house subject to registration fee is the entire floor area legally owned by organizations, households and individuals. 

- The price of 1m2 is the actual price of new construction

 - The proportion (%) of the remaining quality of the house subject to registration fees is issued by the People's Committee of the province in accordance with the law. 

Thus, the number of registration fees when transferring two-price real estate = 0.5% x the price of registration fees at state prices.

3. Notary fees 

As prescribed in Article 66 of the Law on Notary Public 2014, notarization fees are fees that are collected when notary requesters have to pay to notary practice organizations for them to perform the work of certifying contracts/transactions, issuing copies of contracts/transactions to notary requesters... And depending on the price of buying and selling real estate, the notary fee will be different:

 

4. Fees for issuance of certificates of land use rights and assets attached to land 

Fees for issuance of certificates of land use rights, ownership of houses and assets attached to land are revenues that organizations, households and individuals must pay when competent state agencies issue land use right certificates,  ownership of houses and property attached to land.  

Fees for issuance of land use right certificates and land-attached assets inclues

- Firstly, the fee for issuance of certificates of land use rights, ownership of houses and land-attached assets is the revenue that organizations, individuals and households must pay when they are granted certificates of land use rights, home ownership and land-attached assets by competent state agencies; 

- Secondly, fees for issuance of certificates of land use rights, ownership of houses and assets attached to land include: Issuance of certificates of land use rights, ownership of houses and assets attached to land; certificates of registration of land fluctuations, documents and cadastral dossier data; 

- Third, based on specific local conditions, local socio-economic development policies to stipulate appropriate fee collection rates, ensuring the principle:

• The level of revenue for households and individuals in urban districts directly under the Central Government, inner city wards of cities or towns directly under the province is higher than the revenue in other areas; 
• The revenue for organizations is higher than the revenue for households and individuals.     

VI. Procedures for paying taxes when buying and selling houses/ land

Step 1: The buyer or seller submits an application for registration of the property name to the one-stop department of the People's Committee of the district where the land is located. The dossier includes:

1. Notarized real estate transfer contract
2. ID card/ identity card and household registration of the Buyer
3. Volatility Application
4. Original real estate certificate

The People's Committee will issue a receipt of the dossier and set a date for returning the results. On the date of receipt of the results, if the dossier is valid, the People's Committee will issue a "Transfer Slip" to transfer the dossier to the Tax Department to pay taxes. 

Depending on the locality, the One-Stop Department may issue a Notice of Taxation and You may pay property taxes at the One-Stop Department and return the Tax Receipt to the One-Stop Department to receive the original Certificate of Changed Property.

Step 2:

The buyer/ seller submits the application at the tax department of the district where the property is located. 

1 - PIT declaration in form No. 03/BĐ- S-PIT

2 - A copy of the certificate of right to use , proof of ownership ownership or ownership. c á nhân kwill commit to bear the responsibility vào that snapshot .

Note: In case of transfer of a contract for the transfer of houses or construction works formed in the future, a copy of the contract for the transfer of houses or construction works formed in the future shall be signed with the project owner of level I, grade II or the trading floor of the project owner; or a copy of the capital contribution contract to have the right to buy a house or apartment signed before August 8, 2010 (the effective date of Decree 71/2010/ND-CP guiding the Law on Housing).

3 - Contract for the transfer of houses and land.

+ In case of transfer of a contract for the transfer of houses or construction works formed in the future, the contract for the transfer of houses and construction works formed in the future shall be notarized; or a contract for the transfer of a capital contribution contract to have the right to buy a notarized house, floor or apartment. 

+ If the transfer of the contract for the transfer of houses or construction works is formed in the future from the second time onwards, the parties must present the previous transfer contract adjacent. 

4 - Documents as a basis for determining that they are subject to tax exemption (if they are exempt from PIT). 

5 - Non-agricultural land use tax returns for each taxable parcel of land.

7. Time limit for paying property sales tax

Deadline for filing a tax return

• Within 10 days from the date of notarization of the contract for transfer and sale of real estate.

Please contact LVT Lawyers to get your tax advice!