Tax authorities ask for estate transactions through banks. (Source: Vietnamplus)

This is to control cash flow in real estate transactions and prevent tax losses while ensuring transparency for both buyers and sellers, according to Ly Thi Hoai Huong, deputy head of the Tax Administration Department for Small and Medium Enterprises, Business Households and Individuals.

The General Department of Taxation also proposed adding an investigation function to the tax agency, and amending several regulations related to the Land Law, so that the land price of the provincial People's Committees will gradually approach the market price.

The Hanoi Tax Department has issued a warning about false declarations of real estate prices to evade taxes. In the terms of estate investors, this is 'the difference' that exists outside of a contract, with no written proof. However, the Department warns that the buyer has a high probability of losing this difference if there is a dispute, and will be handled by the law when this behaviour is discovered.

In Ho Chi Minh City, District 10’s Tax Department discovered many apartment sales with a transfer value of 4-5 billion VND, but a declared and paid tax amount of just 1 billion VND. They transferred the file to the police to investigate and clarify.

Many people think that it is very difficult to determine the real trading price if both buyers and sellers agree to a lower price. The tax authority has a database of prices, but the same street or the same apartment building has different values.

According to lawyer Nguyen Thanh Nha from DBS Law Firm, the seller usually only declares about 30 or 50 percent of the real value. Especially in transactions of a large value, tax evasion can be higher.

Economist Dinh The Hien told Nguoi Lao Dong (Labours) Newspaper that the Government has implemented a non-cash payment policy for many years. This is a major policy for effective and transparent economic development.

At the same time, the newly proposed regulation also requires transaction units of over 20 million VND to pay through banks for tax deductions. Therefore, the regulation is nothing new or sudden. Real estate is both a commodity and a great asset that needs to be controlled for transparency. Payment through banks is beneficial and safe for both parties to limit risks for both buyers and sellers and to raise the level of the estate market. It would also help State management agencies to have macro-level research data on prices, trends, and market capitalisation.

He added that in many countries, especially the US, property transactions are only done through a licensed broker and all payments must go through a bank. Banks themselves can provide intermediary payment services as, after notarisation, the buyer's money will be frozen. The seller can only receive the money after completing the transfer procedure.

Nguyen Van Dinh, chairman of the Vietnam Real Estate Brokers Association, also said that it was necessary to make payment through banks for real estate transactions. This would help prevent tax loss, fight money laundering and create transparency for the market. From there, it could also contribute to limiting the situation of price inflation and manipulation, causing instability in the property market.

At the same time, it was necessary to raise people’s awareness of the benefits of implementing this solution and to apply it synchronously with other regulations.