Recently, the Government has just sent the National Assembly a report on the reception and explanation of the draft Land Law (amended) after consulting the people and National Assembly deputies at the 4th session (October 2022). In it, there is a remarkable proposal on the imposition of additional tax on the second real estate property of real estate owners to deal with real estate speculation.
In the report on receiving and detailing the draft Land Law (amended) for public opinion, the issue of land finance and land price received the most comments.
The proposal to impose additional taxes on second property contains the application of taxes and fees such as progressive taxes on second home buyers or more and over the time of sale of the property. In addition, the competent authority can also charge a high surcharge for real estate in the central area or city.
These solutions are assessed to limit speculation, unused houses or land causing waste of Vietnam’s limited land resources and the sudden increase in land prices in Vietnam, far from the actual land price, leading to social security imbalance, people saving their whole life can’t buy a piece of land,…
At the meeting, the Government said that the proposal to impose additional taxes is in line with the spirit of Resolution 18 of the Central Government, specifically, which stipulates that “stipulate a higher tax rate for users of many land areas, housing, speculation, abandoned land”.
Thereby, in this revision of the Land Law, the drafting committee needs to supplement the regulations that abandoned projects, projects behind schedule, will be subject to an increase in land use and land rental fees. However, the specific tax rate must be specified in the tax law. Therefore, this agency said that it will report and propose to the National Assembly, the Government and the agency in charge of drafting the tax law to study and apply this regulation into law.
Vietnam plans to impose tax on second real estate
It is known that this is not the first time the departments have proposed a second property tax. The government proposed to pilot this mechanism 6 years ago in Ho Chi Minh City. However, the time did not match the market situation and the proposal was not approved.
In 2022, the proposal was again brought up, by Ho Chi Minh City itself, proposing that this area be the first pilot site for the second property tax mechanism. However, the proposal was again rejected because the agencies considered that the policy “does not guarantee fairness in many cases”.
The draft Land Law (amended) was first commented on by the National Assembly at the 4th session (October 2022) and will continue to be discussed at the 5th session, scheduled to open on May 22.
Inadequacies in policy
This second property tax proposal was proposed by the people but was also opposed by many different classes of people. Due to the policy of imposing taxes on all second real estate, even within a certain period of time, has many restrictions.
There are many classes of people who do not have enough money but can buy two non-adjacent properties, each of which is only a few tens of square meters, will be subject to high tax. However, a billionaire buying a property of thousands of square meters will not be taxed. This is one of the unreasonable points of this second property tax policy.
Thereby, many parties suggested that the policy against real estate speculation should not be focused in the direction of imposing taxes on the second real estate, but should prevent the possibility of speculation through the imposition of tax if the owner sells real estate after 1 year, 2 years.
For example, if after 1 year of ownership and sold, 30% tax may apply, if after 2 years of ownership, 20% tax may apply, etc. until 5 years of ownership, or 10 years mark that the owner can sell without being taxed, in line with the policy against real estate speculation in Vietnam.
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.