Overall objectives behind real estate transfer tax reform

The ministry emphasised that the applicable tax method would depend on the availability and accuracy of data related to each transaction. If the original purchase price and associated costs can be clearly identified, tax would be levied on net gains at a proposed rate of 20 per cent. This rate aligns with the current corporate income tax on real estate transfers, ensuring consistency across tax regimes.

In cases where the purchase price and related costs cannot be verified, the ministry proposes a flat 2 per cent tax on the total transfer value.

The new tax regime aims to fulfill three primary objectives, including sustainably increasing state budget revenue, curbing speculation and property flipping that distort the market, and encouraging genuine real estate usage, particularly for residential needs.

To achieve these goals, the policy must clearly distinguish between investors, speculators, and homebuyers to ensure fairness and effectiveness, without discouraging legitimate demand.

For property developers, a 20 per cent tax on profit margins could significantly pressure cash flows, particularly in a cooling market with weakening liquidity.

Moreover, without a mechanism to distinguish short-term speculation from long-term investment, legitimate project developers risk being unfairly grouped with speculative actors, raising the risk of unintended policy consequences.

We think that the government should segment real estate projects to allow for a more flexible tax policy. For instance, commercial housing, social housing, and industrial-logistics properties should be treated differently. Tax incentives could also be applied to encourage long-term investment, such as tax exemptions or reductions for reinvested profits or assets held over extended periods.

For ordinary citizens, especially first-time or non-speculative homeowners, the primary concern is being taxed at the same rate as investors or speculators, even when selling due to personal circumstances. This could be seen as inequitable and might discourage transparency in declaring transaction values.

To address this, the policy could prioritise genuine residential buyers by offering exemptions or reduced tax rates for first-time purchases, first-time sales, or cases with verifiable proof of residential use (such as permanent residence registration or long-term occupancy).

A progressive tax scale based on holding duration could also be introduced: higher rates for short-term transfers (for example under one year) to discourage flipping, and lower or exempt rates for long-held properties or those sold for relocation purposes.

To enable profit-based taxation, the government must establish a comprehensive and synchronised nationwide database on property identity, valuation, ownership history, and holding duration. This is a prerequisite for fair and effective implementation of any new tax policy.

If carefully designed with clear segmentation and a phased rollout, Vietnam’s revised real estate transfer tax policy could stabilise the market, boost state revenues, and foster more sustainable development. However, to avoid unintended negative impacts, it is crucial to incorporate targeted exemptions and incentives for genuine homeowners and serious long-term investors.