Ms. Phan Thi Dung and her husband (in Hochiminh City) are abroad and want to sell their apartment in Vietnam. Mrs. Dung made a contract authorizing her mother to fully sign the sale of the apartment. She would like to ask, how is the PIT calculated? When authorization, do they need any document to proof?

Regarding this issue, the Ho Chi Minh City Tax Department. has the following opinion:

Pursuant to Point b.2, Clause 3, Article 1 of the Ministry of Finance's Circular No. 111/2013 / TT-BTC dated August 15, 2013, guiding personal income tax (PIT) on providing for personal income taxpayers:

“In case of real estate management authorization, an authorized individual has the right to transfer real estate or has the same rights as an individual who owns real estate in accordance with law, the taxpayer is the individual who authorizes the real estate.

In Clause 5, Article 2 of Circular No. 111/2013 / TT-BTC stipulating income from real estate transfer:

 “... b) Incomes from transferring rights to use land and property on the land...

... e) Incomes from delegating the management of real estate, if the person delegated to manage real estate has the right to transfer real estate or similar rights to the real estate owner according to law...”.

At Points a, b, Clause 1, Article 3 of Circular No. 111/2013 / TT-BTC stipulating tax-exempt income:

“Incomes from real estate transfer (including future houses and constructions according to legislation on real estate trading) between husband and wife, parents and children; adoptive parents and adopted children; parents-in-law and children-in-law; grandparents and grand children, and among siblings...”.

“Incomes from transferring houses, rights to use land and property on land of the person if only one house or right to use of only one land plot in Vietnam is transfer.

b.1) The person that transfers the house and right to use land that is tax-free as prescribed in Point b Clause 1 of this Article must meet all conditions below:

b.1.1) Only one house or one land plot (whether with or without property thereon) is transferred, in particular:

b.1.1.1) The house ownership and right to use land shall be determined based on the certificate of rights to use land, ownership of house and other property on land.

... b.1.2) The house or rights to use land has been possessed for at least 183 days before they are transferred.”.

Pursuant to Article 17 of Circular No. 92/2015 / TT-BTC dated June 15, 2015 of the Ministry of Finance amending and supplementing Article 12 of Circular No. 111/2013 / TT-BTC dated August 15, 2013 of the Ministry of Finance’s guidelines on PIT:

“Article 12. Basis for calculating tax on incomes from real estate transfer

The basis for calculating tax on incomes from real estate transfer is the price of each transfer and tax rate.

1. Transfer price

a) The price of transfer of right to use land without constructions thereon is the price written on the transfer contract at the time of transfer. If transfer contract does not specify the price or the price written on the transfer contract is lower than the land prices imposed by the People’s Committee of the province at that time, the land price imposed by the People’s Committee of the province at that time shall apply.

b) The price of transfer of right to use land having constructions thereon, including off-the-plan constructions, is the price written on the transfer contract at the time of transfer.

If transfer contract does not specify the land price or the land price written on the transfer contract is lower than the land prices imposed by the People’s Committee of the province at that time, the land price imposed by the People’s Committee of the province at that time shall apply.

In case of transfer of a house associated with land, the value of the house, infrastructure, and architectural works on the piece of land shall be determined according to the prices imposed by the People’s Committee of the province. If prices are not imposed by the People’s Committee of the province, regulations of the Ministry of Construction on classification of houses, standards, basic construction norms, and value of remaining constructions on land shall apply.

For off-the-plan constructions, if the contract does not specify the transfer price of the transfer price is lower than the ratio of capital contribution to total contract value multiplied by (x) land price and price imposed by the People’s Committee of the province, the transfer price shall equal the price imposed by the People’s Committee of the province multiplied by (x) ratio of capital contribution to total contract value. If the People’s Committee of the province has not imposed the unit prices, the rate of construction investment announced by the Ministry of Construction which is applicable when the transfer is made shall apply.

 c) The price of transfer of right to lease land/water surface is the price written on the transfer contract at the time of transfer. If the sublease price written on the contract is lower than the price imposed by the People’s Committee of the province when the sublease is taken, the sublease rent is based on the price list compiled by the People’s Committee of the province.

2. Tax rate

Tax on real estate transfer is 2% of the transfer price or sublease price. …”.

Based on the above provisions, we recommend  Ms. Dung to study and implement. In case of any problems, we suggest she send her specific documents for guidance.

Ho Chi Minh City Tax Department. would like to inform her to know for compliance with the provisions of the legal documents cited in this document.