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Circular No. 161/2009/TT-BTC dated August 12, 2009, of the Ministry of Finance guiding personal income tax in some cases of transfer and receipt of inheritances or gifts being real estate
13/05/2011
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THE MINISTRY OF FINANCE

 

Circular No. 161/2009/TT-BTC of August 12, 2009, guiding personal income tax in some cases of transfer and receipt of inheritances or gifts being real estate

 

Pursuant to November 21, 2007 Law No. 04/2007/QH12 on Personal Income Tax;

 

Pursuant to the Government’s Decree No. 100/2008/ND-CP of September 8, 2008, detailing a number of articles of the Law on Personal Income Tax; Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

 

Pursuant to the Prime Minister’s directing opinions in the Government Office’s Official Letter No. 657/VPCP-KTTH of February 3, 2009, guiding the Law on Personal Income Tax; Official Letter No. 3199/VPCP-KTTH of May 19, 2009, on personal income tax on real estate transfer; and Official Letter No. 3945/VPCP-KTTH of June 11, 2009, guiding the Law on Personal Income Tax;

 

The Ministry of Finance additionally guides the handling of tax in some cases of transfer and receipt of inheritances or gifts being real estate as follows:

 

Article 1. Identification of taxpayers

 

In cases of transfer and receipt of inheritances or gifts being real estate, payers of personal income tax shall be identified as follows: 1. In case of real estate transfer, payers of personal income tax are transferors. If it is agreed in the transfer contract that the transferee will perform tax obligations, the transferee shall declare and pay tax for the taxpayer.

 

2. In case of receipt of inheritances or gifts being real estate, payers of personal income tax are inheritance or gift recipients.

 

3. In case the transferred, inherited or given real estate belongs to different owners, payers of personal income tax are co-owners of this real estate. For inherited or given real estate, taxpayers are inheritance or gift recipients stated in the document on inheritance or gift giving. In case of real estate transfer, taxpayers are individuals named in land use right and house ownership certificates. In case the real estate is under joint ownership of a group of persons or a household but only one representative is named in the land use right and house ownership certificate, the

 

taxpayers include this representative and these individuals that agree in writing to allow this representative to be named in the certificate (such agreement must be notarized, or certified by the commune-level People’s Committees of localities where they reside), or persons named in the list enclosed with the land use right and house ownership certificate in the name of that representative under law (if any). If such agreement or list is unavailable, the representative named in the land use right and house ownership certificate is the taxpayer.

 

Income used as a basis for calculating the tax amount payable by each coowner of the real estate shall be determined under law, based on the document on inheritance or gift giving as agreed among these co-owners at the time the real estate is formed. If none of these bases exists, the income will be equally divided among co-owners.

 

          4. In case the land use right and house ownership certificate has not yet been issued but the real estate has been transferred as permitted by a competent state management agency, taxpayers shall be identified based on other lawful papers recognized by the competent state agency. Article 2. Cases eligible for exemption or temporary non-collection of tax In addition to persons eligible for exemption from tax on income from the transfer or receipt of inheritances or gifts being real estate under Clauses 1, 2, 3, 4 and 5, Section III, Part A of the Finance Ministry’s Circular No. 84/2008/TT-BTC of September 30, 2008, the following persons are also eligible for exemption or temporary non-collection of personal income tax: 1. Personal income tax is temporarily not collected from individuals and households having land use rights or house ownership that contribute real estate as capital to establishing enterprises or increasing production and business capital of enterprises in accordance with law. The value of the real estate contributed as capital to enterprises shall be determined under the Enterprise Law. Contributors of real estate as capital

shall enclose tax declarations with papers proving the contribution of real estate as capital in accordance with the Enterprise Law and guiding documents.

 

If contributors of real estate as capital to enterprises receive divided profits, they shall pay personal income tax on capital investment. If transferring the contributed capital portions to other organizations or individuals, they shall pay personal income tax on income from capital transfer and, at the same time, retrospectively pay personal income tax on real estate transfer when contributing capital to enterprises.

 

2. Incomes earned from compensation upon land recovery by the State, including incomes being compensations or supports from economic

 

organizations upon land recovery under the Government’s Decree No. 197/2004/ND-CP of December 3, 2004, and Decree No. 17/2006/ND-CP of January 27, 2006, on compensation, support and settlement upon land recovery by the State.

 

3. Incomes from transfer of houses or rights to use residential land and assets attached to residential land of transferors who have the sole house or land-use right in Vietnam are eligible for personal income tax exemption under Point 2, Section III, Part A of Circular No. 84/2008/TT-BTC of September 30, 2008, guiding a number of articles of the Law on Personal Income Tax and the Government’s Decree No. 100/2008/ND-CP detailing a number of articles of the Law on Personal Income Tax. Transferors shall declare their ownership of the sole house or land-use right in Vietnam, clearly stating that they are entitled to personal income tax exemption under Clause 2, Article 4 of the Law on Personal Income Tax, and take

          responsibility before law for their declaration.

 

All cases of untruthful declaration are regarded tax fraudulence and violators shall pay the evaded tax amounts and shall be sanctioned for tax fraudulence under the tax administration law.

 

Article 3. Tax declaration and payment obligations in some cases of real estate transfer

 

1. For individuals who mortgage their land use rights or house ownership for loans or payment to banks or credit institutions, upon the expiration of the debt-payment time limit, if they are unable to pay their debts, banks or credit institutions shall carry out procedures to sell this real estate and, at the same time, declare and pay personal income tax for these individuals before dealing with their debts.

 

Individuals who mortgage their land use rights or house ownership for loans or payment to other organizations or individuals and now transfer the whole (or part) of this real estate to pay debts shall declare and pay personal income tax, or otherwise organizations or individuals that carry out transfer procedures shall declare and pay personal income tax for these individuals before dealing with their debts.

 

          Individuals named in land use right certificates are exempted from personal income tax if the house or residential land sold by banks is their sole house or residential land area under Article 4 of the Law on Personal Income Tax.

2. In case the real estate is transferred by individuals to other organizations or individuals under courts’ judgment enforcement decisions, the transferors shall declare and pay personal income tax or the auctionholding organizations or individuals shall declare and pay personal income tax for the transferors. Particularly, personal income tax declaration and

 

payment are not required for individuals’ real estate which is confiscated or auctioned by competent state agencies for remittance into the sate budget under law.

 

3. In case of exchanging land between individuals (except cases of exchanging agricultural land for production which are eligible for personal income tax exemption under Clause 6, Article 4 of the Law on Personal Income Tax), each of them shall declare and pay personal income tax. 4. In case individuals contribute capital with other organizations and individuals to build houses in order to enjoy the right to buy apartments or house grounds but later, during the performance of contracts, transfer the contributed capital portions and right to buy house grounds or apartments to other organizations or individuals, they shall declare and pay personal income tax on real estate transfer.

 

5. In case taxpayers do not make declaration dossiers of personal income tax on real estate transfer, organizations or individuals that make declaration for taxpayers shall write the words “declaration for” before the phrase “income earner” at the bottom of the declaration form and, at the same time, sign, write their full names, and append their seals, for organizations. In tax calculation dossiers and tax payment documents, taxpayers must still be the earners of income from real estate transfer. Article 4. Determination of tax obligations for income earned from real estate transfer arising prior to 2009 for which financial obligations towards the State have not yet been performed

 

1. Cases in which individuals signed contracts on real estate transfer under law and submitted valid dossiers to competent state management agencies before January 1, 2009, are settled as follows:

 

1.1. In case individuals signed contracts on real estate transfer under law and submitted valid dossiers to competent state management agencies before January 1, 2009, if the payable tax amount calculated under the Law on Land Use Right Transfer Tax is lower than that calculated under the Law on Personal Income Tax, the transferor shall pay tax under the Law on Land Use Right Transfer Tax. If the payable tax amount calculated under the Law on Land Use Right Transfer Tax is higher than that calculated under the Law on Personal Income Tax, the transferor shall pay tax under the Law on Personal Income Tax. If the taxpayer has remitted the tax amount into the state budget before the effective date of this Circular, which is higher than the payable tax amount, the tax agency shall refund the overpaid amount under regulations.

 

Individuals who submit valid dossiers to competent state agencies after January 1, 2009, shall pay tax under the Law on Personal Income Tax.

 

1.2. In case condominium apartment transferors submitted valid dossiers to competent state agencies before January 1, 2009, personal income tax will

          not be collected for the value of the house; for the value of land (if any), personal income tax or land use right transfer tax shall be paid under Point 1.1 above.

 

2. In case individuals have been issued land use right certificates and are allowed to owe tax obligations, tax policies effective at the time of issuing land use right certificates apply.

 

3. Those who are currently using land with any of the papers defined in Clause 1, Article 50 of the Land Law (on valid papers and papers considered valid regarding land use rights) which bears the name of another person and is accompanied with a paper on the transfer of land use rights signed by the involved parties, but have not yet carried out the transfer of land use rights under law, and already submitted valid dossiers to competent state agencies before January 1, 2009, shall pay tax as follows: 3.1. If competent state management agencies issued land use right certificates before January 1, 2009, allowing the owing of land use right transfer tax, these individuals shall pay land use right transfer tax. 3.2. If dossiers were submitted to competent state agencies before January 1, 2009, but tax offices have not yet calculated and notified the payable tax amounts, these individuals shall pay land use right transfer tax or personal income tax under Clause 1 above.

 

Article 5. Real estate transfer prices used as a basis for personal income tax calculation

 

The real estate transfer price used as a basis for personal income tax calculation is the price indicated in the transfer contract. If the contractual land price is lower than the land price prescribed by the provincial-level People’s Committee at the time of submission of valid dossiers to competent state agencies, tax shall be calculated based on the land price prescribed by the provincial-level People’s Committee. If the contractual land price is higher than the land price prescribed by the provincial-level People’s Committee, the contractual price applies.

 

In case of receipt of inheritances or gifts being real estate, the tax basis is the value of real estate at the time of submission of valid dossiers to competent state management agencies. The value of land use rights shall be determined based on land prices prescribed by provincial-level People’s Committees. The value of houses and works built on land shall be determined based on the prices used for calculating registration fees prescribed by provincial-level People’s Committees. Article 6. Application of tax rates

 

Under the Law on Personal Income Tax and the Government’s Decree No. 100/2008/ND-CP detailing a number of articles of the Law on Personal Income Tax, the personal income tax on real estate transfer shall be paid at either of the following rates:

 

1. 25% of taxable income.

 

2. If it is impossible to determine the cost price and related expenses used as bases for determining taxed income, the tax rate of 2% of the transfer price applies.

 

          The application of the tax rate of 25% of taxable income applies only to cases in which real estate transferors have sufficient valid dossiers and vouchers for use as bases for determining the transfer price, cost price and

          other expenses related to the transfer. If it is impossible to determine the cost price and related expenses, the tax rate of 2% of the transfer price applies.

 

In case the land transfer price is lower than the land price set by the provincial-level People’s Committee at the time of tax calculation, the tax rate of 2% of the land price set by the provincial-level People’s Committee also applies.

 

3. Selection of the applicable tax rate upon tax declaration and payment: Tax agencies shall coordinate with land and house management agencies in publicly posting up guiding documents on tax bases, methods of determining taxable income and tax calculation methods, and this Circular and, at the same time, providing specific guidance to taxpayers in declaring and paying personal income tax at the rate of 25% of taxable income or 2% of the transfer price.

 

Article 7. Organization of implementation

 

1. This Circular takes effect 45 days from the date of its signing. To annul relevant provisions of the Finance Ministry’s Official Letters No. 16181/BTC-TCT of December 31, 2008, and No. 762/BTC-TCT of January 16, 2009, guiding personal income tax on real estate transfer. 2. Other matters not guided in this Circular comply with the Finance Ministry’s Circular No. 84/2008/TT-BTC of September 30, 2008, guiding a number of articles of the Law on Personal Income Tax and the Government’s Decree No. 100/2008/ND-CP of September 8, 2008, detailing a number of articles of the Law on Personal Income Tax; and the Finance Ministry’s Circular No. 62/2009/TT-BTC of March 27, 2009, amending and supplementing Circular No. 84/2008/TT-BTC. Any problems arising in the course of implementation should be promptly reported to the Ministry of Finance (the General Department of Taxation) for study and settlement.

 

For the Minister of Finance

 

Deputy Minister

 

DO HOANG ANH TUAN

 

 

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