Preventing the problem of false declaration of real estate prices in Vietnam, false declaration of real estate prices in Vietnam, real estate sales prices in Vietnam, Risks of false declaration of real estate sales prices in Vietnam

Preventing the problem of false declaration of real estate prices in Vietnam

When buying and selling real estate in Vietnam, the buyer and the seller often agree with each other to record the transfer price much lower than the actual price to reduce the amount of tax and other fees and charges. However, this false declaration of real estate purchase and sale prices is a violation of the law, leading to heavy consequences for the state and society. Therefore, we need to prevent the problem of false declaration of real estate prices in Vietnam.

The state of false declaration of real estate purchase and sale prices is taking place continuously throughout the territory of Vietnam. According to information from many notaries of notarial practice organizations, currently in Vietnam, more than 90% of real estate sales contracts are falsely declared in order to minimize tax payable.

Preventing the problem of false declaration of real estate prices in Vietnam
Preventing the problem of false declaration of real estate prices in Vietnam

When declaring false prices, usually the seller and the buyer will prepare 2 copies of the contract. A contract with the actual price will be kept by both parties. On the other hand, the remaining contract that is notarized will be recorded at a ‘virtual price’ with the transfer price much lower than the actual price, usually equal to or equivalent to the land price issued by the State.

Thus, the seller will have to pay less personal income tax and the buyer will also have to pay less registration fee. Both sides benefit. However, is that really the case?

Risks of false declaration of real estate sales prices in Vietnam

First of all, it is necessary to confirm that when the two parties agree to falsely declare the real estate sale price lower than the actual price in order to evade tax, they are conducting a violation action against the law.

When falsely declaring real estate prices to evade taxes, both the seller and the buyer will benefit in the short term but have many potential risks in the long run.

In addition to being administratively sanctioned, for particularly serious violations with a very high total amount of tax evasion, they can be imprisoned for up to 7 years.

Particularly for the buyer, they may have to bear the risk when the fraudulent land price transaction is discovered and the sale contract is determined to be invalid. Specifically, according to Clause 2, Article 131 of the Civil Code 2015, when a civil transaction is invalid, the parties shall restore everything to its original state and shall return to each other what they have received.

Thereby, according to the law, if the contract is found to be invalid, the seller may decide to double-crossing the buyer and only return the low amount of money stated in the fraudulent agreement. At this time, the buyer may have to bear the difference in the amount between the real contract and the fake contract.

In short, the false declaration of the sale and purchase price of the house in the real estate purchase and sale contract lower than the actual price will only have short-term benefits such as reducing the amount of personal income tax that the seller has to pay or the amount of registration fee that the buyer needs to pay, but such false declaration poses great risks in the future.

Thereby, when making real estate transactions, it is best for both parties to declare the correct price, both to comply with the law and to avoid possible risks if the false declaration is discovered.

Difficult to determine the actual house price

Knowing that it is necessary to correctly determine the actual land price, however, in the current market, it is very difficult for the authorities to determine what is the real transaction price if both the buyer and the seller equally agreed to a lower price.

Tax authorities have a database of prices. However, in the current real estate market, the same street, the same apartment building with the same land area also has different transaction prices because the price of a house depends on many other factors.

Accordingly, the comparative price of the State is only relative to make comparisons and declarations are not too low, but we cannot rely on that to evaluate all issues about land.

ASL LAW is the top tier Real Estate law firm in Vietnam. If you need any advice, please contact us for further information or collaboration.

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