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Only the State is a loser in Vietnam’s real estate boom
There are many ways to evade taxes on the sale of houses. Everyone knows them so the State loses lots of revenues, reports the Hanoi Daily, Tien Phong.
TDQ had a house in Tan Quy ward (HCM City District 7) that he purchased for 1.5 billion dong, about $75,000. Recently, he bought another house for five billion dong in the same ward. With real estate prices high, Q resolved to sell the first house, but of course he did not want to pay income tax on his gain.
Only people who own two houses or more are liable to pay the tax. Q solved his problem by arranging the paperwork necessary to convey the first house to his son. Once it was in his son’s name, Q sold the house for 2.5 billion dong without having to share one dong with the tax office.
Under current law, Q was liable to pay 25 percent of his gain on the house sale as income tax. Just by registering the house in his son’s name, Q saved himself 250 million dong.
VTT purchased a 90 square metre house in HCM City District 9’s Phuoc Binh residential quarter for 950 million dong. However, T and the seller agreed to declare the sales price was 36 million dong only. Assuming that officials overlook the preposterously low sales price, the seller will face a much lower tax obligation.
A real estate broker in District 7 says the practice of declaring a falsely low sales price is very risky for the buyer, because it increases the apparent gain whenever the buyer decides to sell the property – something many buyers don’t foresee.
Wheeling and dealing
The current regulations were established in the early years of the doi moi policy when people were granted the right to buy and sell real estate. Ownership papers were granted free to people who had been living on a piece of land prior to October 15, 1993. People who bought the right to use a piece of land after that date were required to pay the State a fee equal to fifty percent of the assessed land price.
An official of a ward office in Tan Phu district revealed that to avoid paying that tax, people arrange to ‘make some changes’ with the paper. “We can help them make ‘some changes,’” he said. “However, the fee is high.”
“Travelling by night” (di dem) is the slang term for the many tricks real estate dealers have to minimize the tax liability. In the guise of a prospective buyer, a Tien Phong reporter went to a real estate agency in an upscale HCM City suburb. He said he wanted to sell a house in another place and buy a house in the suburb. Would one of the agency’s staff be his advisor, he asked, on how to hold down his tax liability?
N. T. Chau, the staff member who takes care of tax matters for customers, showed that he was expert in such matters. He enthusiastically advised the reporter on various ways to dodge taxes but also explained that implementing them involved a lot of difficult paperwork, but that he could manage this for the reporter.
Nga, who lives in the upscale South Saigon urban area, purchased her 200 square metre villa two years ago from a person who had bought the villa directly from the Phu My Hung section’s development company, a Vietnamese-Taiwanese joint venture. However, Nga did not have to do a lot of paperwork and pay a tax at the local government office. She only had to deal with the developer.
The Phu My Hung Company managed things simply: it took back the sales contract made with the previous owner of the villa and replaced it with a new contract, where it was the seller and the buyer was Nga.
Nga had to pay five billion dong (about $250,000) for the villa, but the contract showed that the villa was sold for three billion dong only. Nga said she’s heard that sellers have to pay a fee of four to eight million dong (a few hundred dollars) to Phu My Hung every time a new sales contract is issued.
As people have countless ways of evading taxes on real estate sales, it is understandable why the State comes up short.
vietnamnet, tp
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