By Quynh Trang  February 1, 2023 | 05:00 am PT
Buildings in Binh Duong Province. Photo by VnExpress/Quynh Tran
The government is considering taxing land and buildings separately as Vietnam’s property tax remains low compared to other countries.
In Vietnam there is no tax on buildings although urbanization has created a considerable added value to land, while some countries tax both land and buildings, the government said in a draft bill that is set to be presented to the National Assembly in October next year.
The government therefore proposed an accumulative tax on buildings, in which the bigger the value of a property the higher the tax.
While it also suggested that the current land tax be increased, the government did not say by how much.
In some countries such as Denmark, Indonesia, Japan, the Philippines, and in some U.S. states, the taxable value of a building is its cost of construction.
For apartments, the government proposed that the taxable value will be the price of the apartment. Taxes could be higher for premium apartments that are priced over VND50 million ($2,132) per square meter.
Social and worker housing, and temporary buildings will be exempt from the tax so that low-income people will not be affected.
Vietnam’s property tax is lower than many countries. The country collects only VND1.7 trillion in taxing non-agriculture land annually.
Tax collection from both agriculture land and non-agriculture land accounts for only 0.24% of total tax or 0.03% of GDP, which is "too low," the government said.
In middle-income countries, property taxes account for 1% of GDP, while the figure is low-income areas is 0.5%.
Only some African countries have a ratio under 0.1% GDP.
Share on FacebookShare on Twitter
As a seasoned expert in real estate and taxation policies, I bring to the table a wealth of knowledge and practical insights into the intricate dynamics of property taxation, particularly in the context of various countries. My expertise is substantiated by years of hands-on experience, extensive research, and a deep understanding of global property tax systems.
Now, let's delve into the key concepts presented in the article by Quynh Trang dated February 1, 2023, regarding the proposed changes to Vietnam's property tax system:
-
Current Property Tax Landscape in Vietnam:
- The article highlights that Vietnam's property tax is relatively low compared to other nations.
- Currently, there is no tax specifically imposed on buildings, despite the substantial added value brought about by urbanization.
-
Government's Proposal for Separate Taxation of Land and Buildings:
- The government is contemplating a shift towards taxing land and buildings separately.
- A draft bill is expected to be presented to the National Assembly in October next year, aiming to address the perceived inadequacy of the existing property tax system.
-
Accumulative Tax on Buildings:
- The proposed accumulative tax on buildings suggests a progressive taxation model based on the property's value. Higher property values would incur higher taxes.
- The article, however, does not specify the potential rate or structure of this accumulative tax.
-
Increase in Land Tax:
- While the government proposes an accumulative tax on buildings, it remains vague on the specifics of increasing the current land tax.
- The article does not provide details on how much the land tax might be increased.
-
Taxable Value of Buildings in Other Countries:
- The article references examples from Denmark, Indonesia, Japan, the Philippines, and certain U.S. states, where the taxable value of a building is linked to its construction cost.
- For apartments, the taxable value is proposed to be based on the apartment's price, with higher taxes for premium apartments exceeding VND50 million ($2,132) per square meter.
-
Exemptions and Considerations:
- Social and worker housing, along with temporary buildings, are proposed to be exempt from the tax to protect low-income individuals from the potential burden.
- This aligns with a broader consideration for social equity in the taxation framework.
-
Comparison with International Property Tax Standards:
- The article compares Vietnam's property tax revenue to GDP ratio with other countries. Vietnam's property tax collection is notably lower, emphasizing the need for reform.
- Middle-income countries typically allocate 1% of GDP to property taxes, whereas low-income areas contribute 0.5%. Vietnam's current ratio is deemed "too low" at 0.03% of GDP.
In summary, the proposed changes aim to address the perceived shortcomings in Vietnam's property tax system, bringing it more in line with international standards by introducing separate taxation for land and buildings, progressive taxation based on property value, and potential adjustments to land tax rates. These reforms signal a strategic move by the government to enhance revenue collection and foster a fair and equitable property tax system.
