Property taxes are thought to be dated and there are pleas for them to be reassessed.
Many countries generate significant income from property taxes. With Vietnam’s buoyant property market there is great potential for the government to benefit from property transaction taxes. Currently there are taxes on agricultural and non-agricultural land use. But these have not resulted in a steady revenue stream.
Therefore the finance ministry has called for a tax to be implemented on second homes. Something which has been discussed since 2016. Whether it will be implemented is yet to be seen. But the suggestion was made also in a bid to put a halt to speculation, which is often blamed for escalating property prices.
According to the ministry developing economies collect 1.4 percent less revenue from property taxes than developed nations. However they feel that Vietnamese investors can afford new taxes due the increase in personal incomes. The country’s middle class is growing hand-in-hand with household incomes. Last year the average income was USD 2,200, a rise of USD 800 from 2013. This figure is expected to rise to USD 3,400 by 2020.
Any amendment to the tax structure has raised concerns amongst those working in the industry. Calls have been made to ensure a fair system as high taxes will discourage investors from transacting. Additionally any implementation needs to be made at the right time for the market to avoid the implementation having a direct impact. A few different tax proposals have been made. The government’s preference is for a tax of 0.03 percent for properties over VND 500 million.
At the same time the country want to draw in more international investors to specific zones. Drafting a law to permit foreigners to own houses for a term of 99 years is expected to ramp up interest. However the chair of the Vietnam Real Estate Brokerage Association, Nguyen Manh Ha, has commented that this new length of tenure is not a new concept. Currently foreigners can own houses for 50 years and this comes with a 50 year extension giving owners a potential 100 years. The difference is that foreign owners will automatically be granted 99 years and will not have to request an extension. This alone is a more transparent system and should hopefully generate even more international interest.
