3 reasons Vietnam’s proposed second-home tax is complicated
3 reasons Vietnam’s proposed second-home tax is complicated
More consideration please, experts say
Vietnam is mulling a levy on buyers of second homes by 2020, the state news agency announced earlier this month.
A proposal at least five years in the making, the property tax is undergoing studies by the Finance Ministry.
Such plans have sent ripples throughout the country’s real estate arena. The Vietnam National Real Estate Association (VNREA) warned that a second-home tax might reduce the “attraction power” of the property market and affect real estate trading volumes. The HCMC Real Estate Association (HoREA), on the other hand, is backing the proposal as a preventive against a speculative bubble.
Here are some reasons why the proposed cooling measure is not as simple as you think in Vietnam, according to property consultants:
1. Different circumstances
From China to Canada, taxing second homes is common practice around the world, an effective way to cool down overheating markets while bringing in much-needed sums to government coffers. Bringing this kind of taxation to Vietnam comes with complications however, said Stephen Wyatt, general director of Jones Lang LaSalle Vietnam, in a recent interview. “In Vietnam we do not have a computerised registry for land registration, where you can actually see who buys a property. So, if you are going to introduce a second home tax it is very difficult to trace who owns a property without a computerised land registry system.”
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2. What “second home”?
Since land registration is still largely a paper-based process in Vietnam, it can be tricky for authorities to know you already own another property. “I think that in order for this to work effectively you need a dedicated computerized system so you can see who owns property,” Wyatt said. “It will be a challenge, as family members can combine different names when buying a property.”
3. Possible slowdown of the second-home market
The levy could have dire consequences in the short term, according to Nguyen Hoai An, director of research and consulting at CBRE Hanoi. “The application will affect demand and sales rate of projects that must pay second-home tax,” she said.
Wyatt agrees, saying that Vietnamese investors are not unheard of to splurge on third or even fourth homes. “Many people want to buy a second home,” he said, “so this idea would slow down the second home market.”
Overall, the tax could reverse gains that the Vietnamese real estate market has achieved in recent years. “We recommend that a lot of consultation takes place before a new tax is introduced,” he said. “We need to fully understand the implications for the property market.”
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Source: Property Report