Tax policy reforms still obstruct real estate businesses

Loss-making real estate firms still have to pay tax

This issue is considered a paradox that many real estate businesses hope to be solved.

Doan Van Binh, Chairman of CEO Group, said that Circular 200/2014/TT-BTC of the Ministry of Finance considers real estate sales to be the same as other goods. However, when it comes to contributing to the State budget, real estate is regarded as a special field, and real estate firms have to pay taxes before their revenue is recognized.

"It not only indicates discrimination in tax policies but also causes difficulties and disadvantages for real estate businesses (when they have to call for a large amount of capital in the investment process),” Binh said.

Pressure from other taxes

While the pressure on the fairness in the way taxes are paid off has not been relieved yet, real estate firms may have to cope with different disadvantages as some tax laws related to real estate are proposed. In particular, the policy receiving the most forceful response is the pilot taxation of the second home.

However, as soon as it was proposed, many businesses and Vietnam Real Estate Association (VNREA) said that apart from leaving a severe impact on the market, property taxes would reduce the need to purchase houses.

Meanwhile, Bui Ngoc Tuan, Deputy General Director of Deloitte Vietnam, believed that VAT is essentially a tax on the added value of goods and services for consumption. Accordingly, the land use right under the Commercial Law is not considered as normal goods. It is a legal right similar to the intellectual property right and the right to buy and sell foreign currency, which are all not subject to VAT.

Reforms should follow open-door direction

According to Ph.D. Nguyen Tri Hieu, a financial expert, compared with other countries in the region, Vietnam has not yet achieved its goal of owning private economic groups considered strong in the region.

In a new market economy, apart from open-door policies, tax policies are fundamental. In developed countries, the private sector develops thanks to co-operation and support from the government. Vietnam should follow these examples.

Sharing the same view, Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said that real estate is one of the primary economic sectors of the country. It not only connects to most other industries but also provides accommodation and creates jobs for the people. Therefore, it is necessary to reform the tax policies in light of transparency and fairness to support enterprises.