One of the issues most concerned by the seller when transferring their real property is the declaration and payment of personal income tax. However, the transfer of real property does not always generate the obligation to pay personal income tax. So, in which cases will the transfer of real property be exempted from tax and what is the order and procedures for tax exemption application? Within the scope of this article, the author will focus on answering the above questions.
1. Two cases are exempted from tax when transferring real property
a. Transfer transactions are made between people who are related by marriage, blood and nurturing
The transfer of real property (including future houses, future construction works in accordance with the law on real estate business) is exempt from personal income tax if the transactions are made between.
- Marriage relation: as between husband and wife; fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law;
- Blood relation: as between biological father, biological mother and their biological child; grandparents and grandchildren, and as between biological siblings;
- Nurturing relation: adoptive father, adoptive mother and their adopted child.
In addition, in case of division of real property (including future houses, future construction works in accordance with the law on real estate business) being the common property of husband and wife as agreed or declared by the court upon divorce, is also exempt from tax.
b. Transfer transactions of the sole real property
Income obtained from the transfer of houses, residential land use rights and properties attached to residential land in case the transferred real estate is the sole property of the individual is eligible for personal income tax exemption when satisfying the following conditions:
- Owning only one residential house or the right to use a residential land lot (including the case of having houses or construction works attached to that land parcel) at the time of transfer.
In case of transferring houses with common ownership, residential land with common use rights, only individuals who do not have the right to own houses or land use rights in other places are exempt from tax; individuals who jointly own house, residential land use rights but also have other house, and land use rights are not exempt from tax.
In case the husband and wife jointly own houses, residential land use rights, which are also the sole property of them, but wife or husband still has separate houses and residential land. For this caser, when transferring the houses or residential land under the common use right, wife or husband who does not have houses or separate residential land are exempt from tax and the husband or wife owning their own house or residential land is not exempt from tax.
- Having the right to own house, right to use residential land up to the time of transfer for at least 183 days.
The time for determining the ownership of residential house, and land use right shall be the issuance date of the Certificate of Land Use Right and Ownership of House and Other Assets on The Land. Except for the case of replacement or reissuance, the time for determination of land use right and house ownership shall be calculated according to the issuance time of the Certificate of Land Use Right and Ownership of House and Other Assets on The Land before the replacement or reissuance.
- Transfer of entire houses and residential land.
In case an individual has the right or share ownership of houses, land use rights , and only transfers part of it, he/she will not be subject to tax exemption on such transaction.
2. Dossier and procedures for tax exemption declaration
a. Components of the dossier:
- Personal income tax declaration form No. 03/BĐS-TNCN No. 03/BĐS-TNCN enclosed with Circular No. 92/2015/TT-BTC.
- A photocopy of the Certificate of Land Use Right, proof of Ownership of House and Other Assets on The Land and the individual signing is committed to taking responsibility for such copies. When transferring the sale and purchase agreement of houses or construction works to be formed in the future, a photocopy of the sale and purchase agreement of houses and construction works to be formed in the future signed with the level I and level II project owner or the project owner’s real estate exchange, or a photocopy of the capital contribution contract for the right to buy the house, apartment signed before 08/08/2010 shall be submitted.
- Real estate transfer contract. When transferring the sale and purchase agreement of houses or construction works to be formed in the future , a notarized contract for transferring the sale and purchase agreement of houses or construction works to be formed in the future; or the notarized contract for transferring the capital contribution contract for the right to buy the house, apartment shall be submitted. When transferring the sale and purchase agreement of houses or construction works to be formed in the future from the second time onwards, the previous sale and purchase contract shall be presented. In case of real estate authorization, the real estate authorization contract shall be submitted.
- Documents being the basis for determination of being the subject to tax exemption.
For transfer transactions that are made between people being related by marriage, blood and nurturing, the tax exemption dossiers for each specific case are as follows:
| No. | Case | Dossiers |
| For the case of real estate transfer between husband and wife | A copy of the household registration book or a copy of the marriage certificate or the court’s decision on divorce or remarriage (in case of division of house due to divorce or consolidation of ownership rights due to remarriage). | |
| For the case of real estate transfer between biological father, biological mother and their biological child. | Copy of household registration book (if having the same household registration book) or copy of the birth certificate.
In case the child was born out of wedlock, a copy of the competent agency’s decision on recognition of father, mother and child is required. |
|
| For the case of real estate transfer between adoptive father, adoptive mother and adopted child | A copy of the household registration book (if having the same household registration book) or a copy of the decision on recognition of child adoption issued by a competent agency. | |
| For the case of real estate transfer between paternal grandfather, paternal grandmother and paternal grandson. | A copy of the paternal grandson’s birth certificate and a copy of the grandson’s father’s birth certificate; or a copy of the household registration book showing the relationship between paternal grandfather, paternal grandmother and paternal grandchild. | |
| For the case of real estate transfer between maternal grandfather, maternal grandmother, and maternal grandchild. | A copy of the maternal grandchild’s birth certificate and a copy of the grandchild’s mother’s birth certificate; or a copy of the household registration book showing the relationship between maternal grandfather, maternal grandmother, and maternal grandchild. | |
| For the case of real estate transfer between biological siblings. | A copy of the household registration book or a copy of the birth certificate of the transferor and the transferee showing the relationship with the same parents, or the same father or mother, or other papers proving the blood relationship. | |
| For the case of real estate transfer between fathers-in-law or mothers-in-law and daughters-in-law or sons-in-law. | Copy of household registration book clearly stating the relationship between father-in-law, mother-in-law and daughter-in-law; between father-in-law, mother-in-law and son-in-law; or a copy of the marriage certificate and birth certificate of the husband or wife as a basis for determining the relationship between the transferor being father-in-law, mother-in-law and daughter-in-law, or father-in-law, mother-in-law and son-in-law. |
Note: In case the transferor does not have a birth certificate or household registration book, it is required to have a confirmation of the commune-level People’s Committee about the relationship between the transferor and the transferee as a basis for determining income being tax exemption.
For the transfer of sole real estate:
On the declaration form No. 03/BĐS -TNCN, the individual self-declares tax-exempt income and clearly states that he or she is exempt from personal income tax in accordance with the regulations on sole houses, the right to use sole residential land and is responsible before the Law on the declaration of having only one house, residential land use right in Vietnam.
b. Place for submission of tax declaration dossiers
The taxpayer shall submit tax declaration documents and real estate transfer documents to the single-window system or district-level tax department where the real estate is located. The documents may be submitted to the land registration office where the real estate is located if the single-window system is not adopted in the localities.
If the individual transfers houses formed in the future, construction works formed in the future, tax shall be declared and paid to the district-level tax department where such construction is located, or a collector authorized by tax authorities.
Disclaimer: This article is for general information only and is not a substitute for legal advice. Apolat Legal is a Vietnamese law firm with experience and capacity to advise on matters related to Real Estate. Please click here to learn more about our services and contact our lawyers in Vietnam for advice via email info@apolatlegal.com.
