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Second home tax would hit property market

Released at: 12:32, 16/11/2016

Second home tax would hit property market

Photo: JLL/Courtesy

Mr. Stephen Wyatt, General Director of JLL Vietnam, spoke with VET about proposals to tax the purchase of second homes.

by Ngoc Lan

■ What are your thoughts on the idea of taxing second home purchases?

The proposal to tax second homes has attracted a lot of attention. What we see from a property consultancy point of view that this taxation system has been introduced in a number of countries around the world. So it is fairly common process. In terms of bringing it to Vietnam, there will be complications, so we need to address a few issues.

In Vietnam we do not have a computerized 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 computerized land registry system. That’s one complication that needs to be considered going forward.

In terms of the idea, I think its works in principle in other countries. It brings in revenue for the government but also affects the number of transactions in the real estate market. Generally, a tax on real estate buyers would have a positive impact on the market when a suitable tax system is applied. In principle, I think it is a good idea but there are a lot of steps to go through.

■ What would be a suitable tax rate for second homes? What rates are applied elsewhere around the world?

I will give you two examples from around the world.

Singapore shares many similarities with Vietnam. When you buy a property in Singapore you have to pay a 3 per cent tax. For second homes there is different rate. If you are Singaporean the rate is 7 per cent, for 10 per cent in total. If you are a foreigner, you will have to pay an additional 15 per cent.

In the UK you pay a base tax rate for the first property and then an additional 3 per cent. But in the UK it is slightly complicated as it is based on the value of the property. You have different rates for different property values. There are many examples that could be studied.

■ It is difficult in Vietnam to determine what is a “second home” for taxation purposes. What is the solution to this?

This is something that needs to be studied in detail. You could apply the Singapore model, which is basically adding a percentage on second properties to the normal tax. In the UK, properties valued under $250,000 are not subject to tax. Vietnam could apply a rate similar to Singapore, of 3 per cent. Any new tax legislation requires the involvement of relevant authorities and professional property market research companies, so that the implications are fully understood. Matters must be considered carefully before legislation is introduced.

In Vietnam you need a land registry certificate and registration is all done via paperwork with local authorities. So it very difficult. If I buy a property in Vietnam, how can authorities know that I 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. It will be a challenge, as family members can combine different names when buying a property.

■ What will be the impact of this tax policy?

Vietnam’s property market is moving ahead and is very active. There are many investments in the market in second homes or even third or fourth homes. Many people want to buy a second home, so this idea would slow down the second home market. We recommend that a lot of consultation takes place before a new tax is introduced. We need to fully understand the implications for the property market.

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