Risk of “Double Taxation” Weakening Real Estate Investment Demand

Higher Taxes, Higher Market Risks

The draft amendment to the Personal Income Tax Law (PIT) regarding real estate transfers is raising serious concerns among investors and experts. The proposed changes introduce two methods of tax calculation: one based on net profit (20% × [selling price – purchase price – reasonable expenses]) and another based on a fixed tax rate from 2% to 10% (depending on the holding period) if the purchase price and related costs cannot be determined. Experts warn that such changes could result in "double taxation" and negatively affect market liquidity, investor behavior, and pricing structures.

Investment Demand Drops Under Tax Pressure

According to the Vietnam Association of Realtors (VARS), increasing PIT or changing the tax method too abruptly, especially when the market is just recovering, may diminish the attractiveness of real estate as an investment channel compared to alternatives. When expected returns are eroded by high taxes, investors will act more cautiously. This will lead to lower investment demand, reduced transaction volume, and cash flow difficulties for real estate enterprises.

This tax burden may also be passed onto actual homebuyers in many local markets, as sellers tend to factor in the tax into the selling price to preserve their profit margin. In other words, the tax is not absorbed but transferred to the end consumer.

Lack of Data Infrastructure Makes Implementation Risky

Savills Vietnam notes that the effectiveness of profit-based tax calculation depends heavily on the availability of a transparent and comprehensive national database on purchase prices, actual sales prices, and associated transaction costs. Currently, such data is still fragmented and lacks a reliable verification system. Implementing this policy without solid infrastructure may lead to disputes, slow transaction processes, and tax collection bottlenecks.

Double Taxation and Land Use Fee Inconsistencies

Another concern is the potential for overlapping tax burdens when combining PIT with current land use fee and lease mechanisms. Mr. Lê Hoàng Châu, Chairman of the Ho Chi Minh City Real Estate Association, warns that under the existing regime, developers already pay a large one-time land use fee for the entire lease period. Adding the proposed PIT on top could result in double taxation. He suggests abolishing the one-time land use fee, replacing it with an annual land lease fee and a tax on land-use purpose conversion instead—making the system fairer and more sustainable.

Pilot Programs and Clear Timelines Are Necessary

Experts widely agree that any tax policy directly impacting market behavior must be accompanied by a clear implementation timeline and pilot programs in selected areas with better data infrastructure. Mr. Nguyễn Văn Đính, VARS President, recommends clearly defining the effective date of the new law, issuing detailed guidance, and clarifying key terms like “reasonable expenses” and “actual purchase price” to avoid confusion and disputes.

Tax Policy Needs Transparency, Not Urgency

While tax can be an effective tool to regulate the market, prevent speculation, and bring prices closer to actual value, rushing the rollout without legal foundations, data systems, and enforcement mechanisms may backfire. Consequences could include frozen liquidity, rising prices due to cost transfer to buyers, and a loss of investor confidence.
Tax is not only a tool for revenue collection but also a lever to shape market behavior. Therefore, adjustments to real estate tax policy must be part of a long-term strategy grounded in transparent data and market consensus. A gradual, trial-based approach with impact monitoring and adaptive corrections is far more prudent than imposing rigid, nationwide implementation.

Lawyer Nguyễn Đăng Tư (Ho Chi Minh City Bar Association) stated that a 20% tax on profits is relatively high. To ensure fairness in implementation, it is necessary to establish a reliable database system to accurately determine the purchase price and input costs of the seller.

Regarding deductible reasonable expenses, Lawyer Tư suggested that there should be clear regulations on invoice and documentation requirements so that citizens can easily provide proof.

Sharing the same view, Lecturer Trần Nguyên Đán (University of Economics Ho Chi Minh City) argued that a 20% tax on profits is not a low rate. If implemented, those who conduct “two-price” real estate transactions—where the contract price is lower than the actual market transaction—will be affected first. When reselling, their profits will be high, and thus they will be subject to higher taxes.

“To encourage long-term real estate investment, even when the purchase and selling prices are identifiable, taxation should be based on the holding period. This can be calculated as a percentage of the profit or of the selling price,” Mr. Đán proposed.

He further noted, “In reality, those who hold real estate for more than three years are true investors, not speculators.”

If the 20% personal income tax on profits is applied, this expert predicted it would impact the real estate market. Investors might increase selling prices or shift toward income-generating real estate such as rental properties. Buyers would then face two choices: to buy or to rent. Ultimately, the behavior of end consumers will determine the direction of the market.

“If the tax rate is too high, real estate investors will find ways to respond. If selling doesn’t meet profit expectations, they will choose to hold the properties long-term and rent them out. Only when the market becomes favorable and taxes are lower will they consider selling. Taxing real estate transfers will not prevent housing prices from rising,” Lecturer Trần Nguyên Đán emphasized. He believes this policy will shift investor behavior toward longer-term holdings, thereby increasing the supply of rental housing in the market.