Taxing personal income from real estate transfers based on ownership duration, as practised in some countries, is necessary to curb speculation, according to economists and industry experts.

 

However, some argue a carefully calibrated roadmap is essential to prevent underreporting or misreporting to evade taxes.

 

Busting bubbles

 

In its latest draft proposal submitted to the Government for the new Personal Income Tax Law, the Ministry of Finance has supported studying a tax rate structure for real estate transfer income based on how long property is held.

 

Currently, Việt Nam's personal income tax policy does not differentiate based on how long a property has been held before being sold. In contrast, several countries have adopted tax measures to discourage so-called 'flipping' of property, increase costs for such speculative activities and reduce their appeal.

 

For example, in Singapore, properties resold within the first year are taxed at 100 per cent of the price difference, with the rate decreasing to 50 per cent in the second year and 25 per cent in the third year. In Taiwan (China), transactions within the first two years are taxed at 45 per cent, dropping to 35 per cent for sales within two to five years, 20 per cent for five to ten years, and 15 per cent after ten years.

 

To implement an effective tax mechanism and curb speculation and real estate bubbles, the Ministry of Finance proposes applying a similar approach.

 

The vice chairman of the Vietnam National Real Estate Association (VNREA), Nguyễn Văn Đính, supports the proposal, stating that taxing property sales based on ownership duration will help reduce speculative activity. However, he emphasised that comprehensive data is necessary to track short-term property transactions accurately.

 

"The principle of taxation is that only those who profit should pay. If a property is resold within months, a higher tax should apply. If it is sold after three, five, or seven years, the tax rate should decrease accordingly," he added.

 

Economist Dr Đinh Trọng Thịnh believes higher taxes should apply to properties left empty or not used as intended. In major cities, many prime urban areas remain vacant for years due to speculation. Instead of fuelling economic activity, capital is locked up in real estate.

 

"This is a waste, but more importantly, it creates an unsightly urban landscape. Taxing real estate based on holding duration is necessary to deter speculation and foster a healthier market," Thịnh said.

 

Addressing concerns that the tax could increase property prices, he noted that when demand far exceeds supply, sellers have the advantage in pricing. However, if supply improves, speculation will decrease, making the market more stable.

 

"Taxing short-term real estate transactions more heavily is essential. The specific tax structure should be carefully considered during the legislative process. A possible approach is to impose high taxes on sales within the first year and gradually reduce them over time, potentially exempting sales after five years," Thịnh said.

 

Planned roadmap

 

Former Deputy Minister of Natural Resources and Environment, Prof. Đặng Hùng Võ, said taxing real estate transactions based on how long the properties are held, has been successfully applied in many countries.

 

"This measure helps curb speculation and real estate bubbles. Higher taxes on short-term property owners will reduce the liquidity of speculative trading while boosting the availability of homes for actual buyers. This, in turn, fosters a more stable and healthy market by eliminating artificial price inflation caused by speculation," Võ said.

 

However, he stressed that while taxation is an effective market regulation tool, the policy must be implemented through a well-planned roadmap. A comprehensive land management system is necessary, ensuring transparency and coordination among provincial administrative units to track real estate holdings accurately.

 

"Avoiding tax evasion requires a robust system to verify ownership and transactions. Additionally, careful planning is needed to prevent overlapping taxes," he said. VNS

 

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