Learn about the taxes associated with real estate investment in Vietnam.
The step by step guide for property investment in Vietnam
Key points relevant for foreign investors interested in property for sale in Vietnam.
What investors need to know after buying real estate in Vietnam
The new Residential Housing Law on Real Estate in Vietnam allows the eligible foreign entity and individual to buy and own all residential sectors including apartments and landed properties such as villas and townhouses within the residential property development projects.
Types of Real Estate in Vietnam that can be sold to non Vietnamese nationals: Apartments or Condominium, Condotel, townhouses and Villas.
All foreigners who are granted permission to enter the country (Visa stamp in Passport) are allowed to buy and own certain types of real estate in Vietnam: residential properties within a property development project in the country (with the exception of foreigners entitled to diplomatic or consular immunities and privileges prescribed by law).
Non nationals are not allowed to purchase land or landed property (house/villa) outside of approved residential projects.
Foreign individuals or companies cannot own over 30% of the total supply of apartments for sale in a single approved residential project.
For housing projects with landed property (house/villa), foreign ownership quota should not exceed 10% of total number of villa or house for sale in that project.
The advantage of foreign ownership is that, after the apartment building is sold out, they are allowed to sell to both Vietnamese and foreigners, which sometimes maintain a higher price than the units owned by Vietnamese, which cannot be sold to foreigners.
The tenure allowed to foreign individuals buying homes is 50 years from the date the authority issues the house ownership certiﬁcate to the relevant owner with renewal possibility upon expiration.
Long Term Lease is usually, 50 years from the project license date.
Foreign individuals married to Vietnamese citizens are entitled to freehold tenure of their real estate in Vietnam.
When buying Real Estate in Vietnam, the developer will be contractually binded with the buyer through the SPA. The SPA is a legally binding contract between the buyer and developer to prove that a house or an apartment is sold to the buyer by the developer. The SPA is also used as proof of ownership of the house or apartment before the house ownership certiﬁcate has been granted to the owner. The SPA is provided by the Ministry of Construction.
The owner of apartment/house shall have the following legal rights:
The “House Ownership Certiﬁcate”, which stands for “Certiﬁcate of land use rights or house and land-attached asset ownership” is the certiﬁcate granted by the State Authority to certify/recognize the ownership of an eligible individual/organization over his/her/their land or house. It is commonly referred to as the “ownership certiﬁcate” or “pinkbook”. The ownership term of foreigners is 50 YEARS from the day on which the ownership certiﬁcate is granted.
If a foreign individual marries a Vietnamese citizen or an overseas Vietnamese (refer as Viet Kieu), he/she qualiﬁes for stable and long-term home ownership and has all rights of a homeowner similar to Vietnamese citizens.
A foreigner may either directly or authorize a third party (by power of attorney) to declare and pay tax at a District level tax bureau at the District where the property is located.
VALUE ADDED TAX (VAT)
10% VAT is taxed on any sale of property by local or foreigners.
A minimal administration fee is to be granted an ownership certiﬁcate at the current regulation.
REGISTRATION TAX FOR OWNERSHIP
0.5% registration tax for obtaining the house ownership certiﬁcate on the apartment value.
When selling the apartment : 2% on the selling price
If personal income is earned through the assignment or resale of apartments or houses, a 2% transaction fee has to be paid on the transacted value (the selling price)
*If apartment is purchased under 100% foreign company, seller must pay 20% corporate tax on profit, which then will be divided into shareholders as dividend. Shareholders will have to pay 5% tax on the dividend.
The “monthly management fee” is a fee contributed by residents to managing operations of the development, such as operating the elevator system, generator and providing services for the building such as security, pest control, rubbish collection service, etc. Management Fee is calculated per Net Salable Area(NSA).
The “maintenance fee”, commonly referred to as “sinking fund”, is a fund contributed by buyers of a development to maintain commonly owned areas of the development. It is used for maintenance, small repairs, medium repairs and overhauls of commonly owned areas in order to preserve quality. Currently the sinking fund is 2% of the house/apartment price before VAT.
PERSONAL INCOME TAX (PIT)
If personal income is earned through rental of house/apartment, 5% VAT and 5% PIT has to be paid on revenue.
For rental income exceeding VND 1,500,000 per month, a business license tax of VND 1,000,000 per year applies.
*It is very important that buyers keep all the receipts to purchase apartment for smooth transaction to transfer money back to his/her country.
Generally, when interested in investing in Real Estate in Vietnam, property financing options are limited for foreign individuals.
There are few international banks that might accept to provide loans against a collateral property in your own country, but the proceedures could be complex and time consuming.
Alternatively, if you are married to a Vietnamese national, there are more options for accessing a bank loan from a local or international bank.
Moreover, if you hold a Temporary resident card of minimum 3 years in Vietnam, you can access a loan that must be repaid within the period left in your Resident card.
*When buying real estate in Vietnam, you should do some prior due dilligence on the Real Estate developer and their financial capabilities.
Foreign investors are recommended to set up a local bank account to transfer payments for their apartment to the Developer’s bank account. Agencies also take refundable deposits prior to developer officially launch project.
Below are some international banks with branches in Vietnam:
– Standard Chartered Bank
– Shinhan Bank
Due to the Covid 19 situation worlđwide and the border closure of Vietnam, Real Estate developers are supporting the foreign buyers with a temporary contract valid until the buyer is allowed to get his/her Vietnam Entry Visa stamp and sign the SPA legally in Vietnam. The International Banks above should be able to open an off shore acount in Vietnam (opened directly from your home country) from which the payment can be processed. Buying Real Estate in Vietnam is an increasing trend worldwide, given the international recognition the country is getting for the efficient fight with the covid pandemic.
Yes, is possible to transfer the rental income, the profit generated by the sale of the property, as well as the initial investment outside of Vietnam using your personal bank account used when you initially have bought real estate in Vietnam. You should keep any invoices, tax receipt, licenses and legal agreements, as they will be required by the bank and/or tax authority as a proof of where the money are coming from and the relevant taxes and fees for the transaction has been paid in full.
When buying real estate in Vietnam, upon the completion of the building, the developer shall serve a Handover Notice to the buyer to indicate the date of handover for the units and the outstanding amount to be paid before taking over the units. The buyer pays the outstanding amount as per the Handover Notice.
On the handover date, the buyer will check the unit and take over the units by signing the Minutes of Handover. The buyer will also sign the application for a pink book, electricity, water, and telephone contracts with supplier at the handover date.
Developer will measure the unit once again to confirm the final size of the unit. If the unit is smaller than the purchasing size, developer must pay for the difference, usually deducted from the payment. If the unit is bigger than the purchasing size, buyer must pay the difference.
*There will be a acceptable range depending on the developer for the size.
Owning a home is a keystone of wealth… both financial affluence and emotional security.Suze Orman