What financial obligations do individuals have to perform when performing a real estate transfer transaction?

Financial obligations when performing a real estate transfer are divided for both side: seller and buyer.

A.THE SELLER’S OBLIGATIONS:

         The Seller will be responsible for the following taxes and fees when performing a real estate transfer transaction:

1. Personal income tax:

Pursuant to clause 5 Article 3 of the Law on Personal Income Tax, taxable income from real estate transfer includes:

• Incomes from transfer of rights to use land and assets attached to land;
• Incomes from transfer of right to own or use residential houses;
• Incomes from transfer of right to lease land or water surface;
• Other incomes earned from transfer of real estate under any form.

Based tothe aforementioned provisions, the Seller will be the subject of personal income tax due to the taxable income arising from the real estate transfer.

The tax basis for real estate transfer income comprises (i)thetransfer price and (ii) the tax rateaccording to Circular 92/2015/TT-BTC.

The transfer price:

• The price of transfer of right to use land without constructions thereonis the price written on the transfer contract at the time of transfer.

If transfer contract does not specify the price or the price written on the transfer contract is lower than the land prices imposed by the People’s Committee of the province at that time, the land price imposed by the People’s Committee of the province at that time shall apply.

• The price of transfer of right to use land having constructions thereon, includingoff-the-plan houses, constructions, is the price written on the transfer contract at the time of transfer.

If transfer contract does not specify the land price or the land price written on the transfer contract is lower than the land prices imposed by the People’s Committee of the province at that time, the land price imposed by the People’s Committee of the province at that time shall applyaccording to the provisions of the law on land.

• In case of transfer of a house associated with land, the value of the house, infrastructure, and architectural works on the piece of land shall be determined according to the prices imposed by the People’s Committee of the province. If prices are not imposed by the People’s Committee of the province, regulations of the Ministry of Construction on classification of houses, standards, basic construction norms, and value of remaining constructions on land shall apply.
• For off-the-plan constructions, if the contract does not specify the transfer price of the transfer price is lower than the ratio of capital contribution to total contract value multiplied by (x) land price and price imposed by the People’s Committee of the province, the transfer price shall equal the price imposed by the People’s Committee of the province multiplied by (x) ratio of capital contribution to total contract value. If the People’s Committee of the province has not imposed the unit prices, the rate of construction investment announced by the Ministry of Construction which is applicable when the transfer is made shall apply.

The tax rate:

Tax on real estate transfer is 2%of the transfer price or sublease price.

Time for taxing:

Time for taxing real estate transfer is determined as follows:

• If the transfer contract does not require the buyer to pay tax on behalf of the seller, the taxing time is the effective date of the transfer contract as prescribed by law;
• If the transfer contract requires the buyer to pay tax on behalf of the seller, the taxing time is time of registration of the right to own or right to use the real estate.
• In case the person receives an off-the-plan house or land use right associated with off-the-plan constructions, the taxing time is the time the person submits tax declaration documents to the tax authority.

Tax calculation:

Personal income taxon income from real estate transfer is calculated as follows:

Personal income tax payable=Transfer pricex 2%tax

Note:In case the transferred real estate in under a co-ownership, the tax liability incurred by each taxpayer is proportional to their portions of real estate ownership. The basis for determining the portion of ownership is legal documents such as:the initial capital contribution agreements, the testament, or the decision on division made by the court, etc. If no legitimate documents are provided, the tax liability incurred by each taxpayer shall be evenly divided.

2. Application assessment fee:

According to point i clause 1 Article 5 of Circular 85/2019/TT-BTC, the fee for assessment of the application for a land use right certificate is a charge for the assessment of the application, the necessary and sufficient conditions to ensure that issue certificates of land use rights and ownership of houses and land-attached assets (including issuance, renewal, re-issuance of certificates and certification of changes in issued certificates) according to provisions of the law.

Based on the size of the land plot, the complexity of each type of application, the purpose of land use and the specific conditions of the locality, to determine the fee rate for each case.

B. THE BUYER’S OBLIGATIONS:

The Buyerwill be responsible for the following taxes and fees when performing a real estate transfer transaction:

1. Notarization fee:

Pursuant to Article 4 Circular 257/2016/TT-BTC: Notarization of contracts for transfer, donation, division, merging, exchange or contribution of capital by land use right: The notarial service fee shall be calculated according to the value of the land use right. Notarization of contracts for transfer, donation, division, merging, exchange or contribution of capital by land use right and properties attached to land including house and structures on land: The notarial service fee shall be calculated according to the sum of the value of the land use right and the values of properties attached to land, including the values of house and structures on land.

2. Registration fee:

Pursuant to clause 1Article 2, clause 1Article 7 of Decree 140/2016/ND-CP, houses and land are subject to registration fee with the rate (%) of 0.5%. Therefore, organizations and individuals whose properties are subject to registration fees must pay registration fees when registering their ownership and use rights with competent state authorities, except for cases in which they are subject to registration fee. registration fee exemption as prescribed in Article 9 of Decree140/2016/ND-CP.

However, the parties can agree on whether the Buyer or the Seller is the one to pay the fee.