Personal Income Tax on Real Estate: Ministry of Finance Introduces Key Policy Options

The Ministry of Finance has released detailed information on the draft Revised Personal Income Tax Law, now open for broad public consultation. The proposal focuses on redefining the taxation approach for real estate transactions, shifting toward income-based taxation, holding-period-based rates, and a phased implementation roadmap—issues drawing strong public attention.

Higher taxes for short-term speculative gains; taxation based on real profit

Under the current policy, real estate transfers are subject to a flat 2% tax on the transfer price, regardless of profit or loss. Critics argue that this method does not reflect the true economic substance of transactions.

In the draft, the Ministry proposes a new scheme for consultation:
a 20% tax applied to taxable income, defined as:

Taxable income = Transfer price – Purchase price – Related costs

According to the Ministry’s analysis, this mechanism can achieve a similar revenue effect to the current 2% system while offering major advantages:

• Lower tax burden when profit margins are small or when individuals incur a loss
  
• Greater fairness by taxing actual income
  
• Stronger regulation against short-term speculative trading
  

In essence:
Higher profit → higher tax; Low profit or loss → lower or no tax,
differing fundamentally from the current flat-rate system.

The Ministry emphasized that this proposal is still in the consultation stage:

“The 20% income-based tax scheme requires a carefully planned roadmap aligned with ongoing reforms involving land, housing policies, and the maturity of digital databases and IT infrastructure for real estate registration. Tax authorities must have complete and reliable data to ensure accurate taxation.”

Holding-period-based taxation to curb speculation

In alignment with strategic directives—including:

• Resolution 18/NQ-TW (June 16, 2022)
  
• Prime Minister’s Telegram 03/CĐ-TTg (January 15, 2025)
  
• Government Office Notice 294/TB-VPCP (June 9, 2025)
  

—the draft law also proposes applying tax rates based on how long a property is held.

Policy objectives include:

• Preventing speculative behavior
  
• Reducing market manipulation
  
• Increasing transaction costs for ultra-short-term trading
  

Many countries have adopted similar tools, typically:

• Higher tax rates for short-term holdings
  
• Lower or zero tax for long-term holdings
  
• Additional taxation for frequent transactions
  

The Ministry noted it will continue studying tax models in countries with similar economic conditions to design a system suitable for Vietnam.

Six major policy groups and accelerated legislative roadmap

On July 4, 2025, the Government submitted document 622/TTr-CP to the National Assembly Standing Committee, requesting adjustments to the 2025 Legislative Program to include the revised Personal Income Tax Law.

The draft is developed based on:

• Plan 81/KH-UBTVQH15 (Nov 5, 2021)
  
• Politburo Conclusion 19-KL/TW
  

The law is structured around six key policy groups:

1. Clarifying taxable income categories and specifying calculation methods
   
2. Revising tax exemptions/deductions to support innovation, digital transformation, private sector development, and rural agriculture
   
3. Improving policies for individual business households
   
4. Adjusting family deduction thresholds and expanding special deductions and charitable provisions
   
5. Revising progressive tax brackets for salaried residents and flat rates for certain income types
   
6. Reviewing rules on tax periods, withholding, taxable timing, and responsibilities of taxpayers and payers
   

The Ministry of Finance is currently collecting opinions from ministries, local authorities, organizations, and individuals. After consolidation, a finalized proposal will be submitted to higher authorities for consideration and approval.