New tax rules for real estate: fairness or bureaucracy?

New tax rules for real estate: fairness or bureaucracy?

On June 3, 2025, the Ministry of Finance proposes two different methods for calculating tax on income from real estate transfers. These measures are part of a comprehensive approach to adapting tax legislation in the real estate sector and are in the context of the current housing shortage and the constant development of the real estate market.

The first proposed method imposes a tax rate of 20% on taxable income. This corresponds to the sales price minus the total cost of the property. Alternatively, a second method is offered which includes 2% of the transfer price if the purchase price and costs cannot be determined. The framework of these proposals is complemented by the Land Law of 2024, which states that the taxable income when transferring land use rights should be based on the price indicated in the price list. The aim of these regulations is to create incentives to specify the actual transaction price in the contract.

Regulations and concerns

It is noteworthy that these regulations apply exclusively to land use rights; Sellers of houses and land are still allowed to provide inaccurate prices. The desired system of profit-based taxation should be seen as fairer because it reduces the tax pressure on sales at a loss. There is also the possibility of introducing progressive tax rates, which depend on the length of time the property has been owned and is intended to curb speculation and promote sustainable market development.

However, there are public concerns about the viability of this profit-based tax. Difficulties in determining costs, susceptibility to fraud and handling are key points that led to the rejection of this tax management. The previous tax rate of 25% on gains from real estate transfers was deemed ineffective and abolished in 2015. Currently, the tax is levied uniformly as 2% of the transfer price.

Jurisprudence on profit taxation

In the context of the taxation of private property sales, Section 23 EStG is particularly relevant. The Federal Finance Court (BFH) has repeatedly addressed questions of interpretation of this paragraph, which has led to clarification of the scope of application. Accordingly, the purchase of a property means the acquisition of it as owner from a third party. If the purchase is made free of charge or in part, the purchase of the legal predecessor will be taken into account.

In addition, it is important to note that private sales transactions occur if the period between purchase and sale is no more than 10 years. Buildings and outdoor facilities that were built or expanded within this period must also be included. In recent BFH rulings, it has also been made clear that expropriation does not constitute a sale as it occurs without the taxpayer's influence and the replacement of a usufruct right is not considered a sale within the meaning of Section 23 EStG.

The development of tax regulations in the real estate sector shows the government's efforts to both create transparency and develop a sustainable market strategy. Both the opinion of the public and the interpretation of applicable law are crucial in achieving the desired goals.

Further information on the topic is available here Vietnam.vn and Haufe.de available.