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Property market paralyzed by new tax
A new capital gains tax effective late last month has held back transactions and investments on Vietnam’s property market, realtors said.
Phung Van Nang, General Director of Ho Chi Minh City-based Nam Viet Property, said the new tax had “paralyzed” the local real estate market. About 80 percent of pending transactions could not proceed because both sellers and buyers were discouraged by the high tax rate and cumbersome paperwork.
Nang was speaking at a HCMC conference this week in which developers and experts discussed the impact of the new capital gains tax on the market.
Property developers in Vietnam are allowed to raise funds from their buyers to build their projects, a method by which all new residential projects are funded. Buyers of those projects can transfer the right to own the property in the future to another person if they want.
But starting September 26, every time the property changes hands, the capital gains from the transfer will be subject to 25 percent tax. If it is impossible to calculate the taxable income, a tax of 2 percent of the value of the transaction will be imposed.
Tran Minh Hoang, chairman of Vinaland, said it is not fair because some properties have already changed hands many times, but now only the current owner would be required to pay the capital gains tax when selling it.
Moreover, the tax would eventually drive property prices up and end users would be the ones who have to pay, especially in big cities, he said.
Hoang suggested the tax not be applied to properties that entered transactions before September 26. He also said taxpayers should be allowed to choose from the two options, either a 25 percent tax on capital gains or a 2 percent tax on the transaction value.
Many developers said they were worried that the tax would hurt overall investment in the real estate market as investors were already finding it difficult to sell their properties. According to a report by Nguoi Lao Dong newspaper, 60-70 percent of transactions on the market involve properties developed under the fund raising method.
Nguyen Van Minh, secretary general of the Vietnam Real Estate Association, said on the one hand the new capital gains tax could make the local property market more transparent by eliminating the “dual price” system.
Before the tax, property values in transactions were often reported much lower than the real market prices to avoid high taxes and fees. Many buyers now insist that the real prices are put down on paper because they don’t want to pay huge capital gains tax later.
However, Minh said investors should have been given more time to prepare for the tax so that transactions on the market would not have had to be back.
Tran Thanh Binh
thanhnien
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