Shall I have to pay tax on the transfer? How shall the tax be calculated, if any?
Question:
I entered into a contract to purchase an apartment with an apartment-building company. I have paid 70% of the contract price to the seller. Now I want to transfer the purchase contract. Shall I have to pay tax on the transfer? How shall the tax be calculated, if any?
Answer:
Under Circular No. 161/2009/TT-BTC of the Ministry of Finance date August 12, 2009 guiding Personal Income Tax (PIT) applicable to transfer, receipt of inheritances and gift being real estate, in case that an individual contributes capital to an entity constructing a house to get the right to purchase an apartment or house foundation but during the process of contract implementation, such individual transfer his capital and the right to purchase the apartment or house foundation then such individual must declare and pay PIT on such activity being a transfer of real estate.
Recently, the General Department of Taxation issued Official Letter No. 3929/TCT-TNCN on September 24, 2009 to provide the additional guidelines for PIT on transfer of real estate. According to this Official Letter, you shall have to pay the PIT on transfer of the apartment purchase contract that you have entered into with an apartment-building company.
The PIT shall be determined by one of two methods as follows.
In case of being eligible to determine the taxed income, the PIT shall be calculated as taxed income multiply with tax rate of 25%.
Taxed income is the transfer price minus (-) the cost price and related expenses.
The transfer price is the price stated in the transfer contract that you enter into with the transferee of the apartment. The cost price and related expenses are the price stated in the apartment purchase contract plus expenses directly related to the transfer provided that they have valid invoice and vouchers.
In your case, you have paid a part of the contract price to the seller then the cost price is the total contract price minus (-) the unpaid part.
Moreover, if you received a loan from credit institutions to purchase the apartment, the interest that you have paid to the credit institutions shall be determined as the reasonable expenses.
In case of not being eligible to apply the tax rate of 25% as mentioned above, the PIT shall be calculated as transfer price multiply with tax rate of 2%.
In case that the transfer price stated in the transfer contract can not be defined or is lower than the market price at the time of transfer then the tax agency shall assess the transfer price.
