Tax Obligations for Non-Resident Property Owners in Vietnam
In this article, Dezan Shira and Associates’ tax expert, Thang Vu, outlines the tax reporting obligations of foreigners who own rental properties in Vietnam.
Housing Law number 65/2014/QH13 took effect in 2015, permitting foreign citizens and investors to purchase property in Vietnam.
Under this law, due to certain restrictions on ownership as well as leasehold land periods, most properties purchased by foreigners are rented out on a long-term basis or used as serviced apartments.
As a foreigner who owns a rental property in Vietnam, it is important to understand your tax reporting and remittance obligations to avoid complications with the tax authorities.
Additionally, it is important to note that there are potential tax exemptions or reductions available for foreign owners of rental properties in Vietnam depending on their home country. Some tax jurisdictions even treat rental income from overseas as tax-free income.
Paying tax on rental income in Vietnam
Firstly, it is important to note that as a foreigner who owns a rental property in Vietnam, you are subject to the same tax regulations as Vietnamese citizens. This means that you will be required to register for and pay taxes on your rental income in Vietnam if your annual aggregated rental income exceeds the 100-million-VND tax-free threshold (approximately US$4,300 per year or US$355 per month).
Example: Mark is an Australian resident who purchased a property in Vietnam in June 2022. He has rented this property out since July 2022 for 15 million VND per month. Although the total rental income earned by Mark for the period July 2022 to December 2022 was 90 million VND, which was below the tax-free threshold, Mark would need to declare and pay tax for this property because his actual annual rental income would be 15,000,000 VND per month or multiplied by 12 months, 180,000,000 million VND per year.
So, what should Mark do to meet his tax obligations in Vietnam?
The first step is to obtain a tax code number (more commonly known as a tax ID). A tax code is a unique identification number assigned to taxpayers in Vietnam. You can obtain a tax code by applying to the local tax office where the investment property is located. This application process can be done via the online tax portal (https://canhan.gdt.gov.vn). However, note that you will need to submit signed hard copies of the application directly to the tax office to activate the tax code in order to submit tax declarations online. Once the unique tax code is obtained and registered for online tax filing, you can start making tax declarations and remittances.
Taxpayers can opt to declare and pay taxes on rental income at the time they occur, or on a quarterly or annual basis. Typically, only lessors who lease serviced apartments via Airbnb or holiday homes declare tax when it occurs due to the irregular nature of their income.
Tax obligations on rental income comprise 5 percent Value-Added Tax (VAT), 5 percent of Personal Income Tax (PIT), and Business License Tax (BLT). The lessor does not need to do anything regarding the BLT, instead, the tax authority will assess the submitted dossiers and advise on BLT amounts payable.
Schedules of fees for Business Licence Taxes
|Annual rental income (VND)|
|100 million to 300 million|
|300 million to 500 million|
|500 million and above|
PIT and VAT can be declared and paid using form 01/TTS, which is filed via the aforementioned online tax portal. At the time of publishing this article, taxpayers were experiencing tax remittance issues via the online portal. Therefore, it may be easier to submit the tax form online and go to a nearby bank branch and request assistance with tax remittances.
Frequently asked questions about owning a property in Vietnam as a foreigner
Is it true that tax responsibilities for foreigners with respect to owning an investment property are the same as those of local owners? I hear that foreigners and non-residents are subject to a flat PIT rate of 20% in Vietnam.
The flat PIT rate of 20 percent applies to non-resident individuals who earn employment and contracting income in Vietnam. Non-residents, who earn rental income from investment properties in Vietnam, are subject to the same tax obligations as local property owners. This was confirmed by Official Letter no.5262/TCT-DNNCN issued by the General Department of Taxation of Vietnam on December 11, 2020.
I am not a resident for tax purposes in Vietnam and my home country has a Double Tax Treaty with Vietnam. Can I claim tax exemption on rental income from my investment property in Vietnam?
You will need to specify your home country so that we can carry out an appropriate assessment. Vietnam currently has approximately 80 double taxation agreements (DTA) with other countries. Rental income is often covered in Article 6 of most DTAs, and they usually stipulate that income from immovable properties is taxed in the country where the property is situated. However, measures for double taxation elimination may be applied, which enable the tax paid to be used as tax credits to offset tax payable in the home country.
It should be noted that the elimination of double taxation under DTAs only applies to the income tax portion and is capped at the actual tax paid.
Let’s use the above example to illustrate how Mark can benefit from the DTA between Australia and Vietnam. Mark earns a total rental income of 180,000,000 million VND from renting his investment property in Vietnam for the period from July 1, 2022, to June 30, 2023. His tax obligations for this period will be a BLT of 300,000 VND, VAT of 9 million VND, and PIT of 9 million VND. Under the DTA between Australia and Vietnam, Mark will be able to offset 9 million VND of PIT paid in Vietnam against his tax payable on the apportioned foreign rental income in his individual tax return in Australia for the 2023 financial year.
I don’t speak Vietnamese and don’t know how to do a tax registration and declaration in Vietnam. I’m not even in Vietnam at the moment. Who is empowered to help me with this?
You can entrust someone in Vietnam to carry out tax compliance procedures on your behalf. It can be either your property manager, your lessor, or a professional tax consultant.
You will, however, need to complete a power of attorney. For a power of attorney in Vietnam to be legally effective, it must be:
- Signed by both of you and the authorized personnel and witnessed by a notary, if you are physically in Vietnam; or
- Signed by you and legalized by the Vietnamese Consulate in your home country, then sent to Vietnam and certified by a local notary, if you are living in your home country.
I purchased a condo in Ho Chi Minh a few years ago but have not been issued a certificate of ownership yet. Why is this happening and what can be done to accelerate the process?
Unfortunately, certificates of ownership for foreign investors have been a controversial issue in Vietnam due to conflicting regulations between Vietnamese government agencies. This is particularly true in Ho Chi Minh City where there have been a significant number of properties sold to foreigners.
The Real Estate Association has been consistently pushing the People’s Committee of HCMC to issue certificates of ownership to foreign owners in accordance with the 2014 Housing Law, but to date, the issue remains unresolved.
At the moment, Hanoi is the only city in Vietnam that issues certificates of ownership to foreign homeowners. Foreign homeowners in HCMC and other provinces of Vietnam will have to wait patiently. You can, however, join forces with other homeowners and put pressure on project owners to keep following up with the relevant authorities.
If such delays are significant and are causing you financial or legal difficulties, you may need to consider selling the property. However, it is important to seek legal advice before doing so to ensure that you comply with all legal requirements and protect your interests.
What are the key points for me, as a foreign investor, to consider before buying a property in Vietnam?
Most foreign investors are interested in investment properties that can be leased out, so the return on investment is probably going to be the most important factor. On the other hand, there are a lot of things for you to consider from a tax and legal perspective before making the decision to buy:
- Foreign ownership restrictions: In Vietnam, there are restrictions on foreign ownership of land. Foreigners can only buy and own apartments and condominiums for a maximum period of 50 years, after which ownership rights can only be renewed for another period of 50 years.
- The property’s legal status: As mentioned above, delays in certificate of ownership issuance have caused frustration for a lot of individual property owners in Vietnam. In addition to these delays, many property owners have lost faith in the real estate market and project owners in particular. As a result, many have decided to dispose of their properties to minimize losses. Some project owners have not even been able to sign purchase contracts with their property purchasers due to incomplete licensing and tax requirements. Without the original purchase contract and certificate of ownership, the legal transfer of property ownership is technically impossible.
- Taxation: As mentioned above, owning a property in Vietnam can come with tax obligations. You will need to register for a tax code and pay taxes on rental income earned. In addition, you may also be subject to capital gains tax if you sell the property in the future. Tax compliance is important because you will need to provide commercial banks with evidence of tax remittance before they allow income earned in Vietnam to be transferred overseas.
- Property management: If you plan to rent out your investment property, it is important to consider property management when you are not in Vietnam. This includes finding reliable property management services to handle tenant communication, maintenance, and rent collection. It is also important to ensure that the property is properly insured against any potential damages or losses.
- Financing: As a foreigner, it may be difficult to obtain financing from Vietnamese banks for the purchase of a property. You may need to seek financing from international banks or finance companies that are willing to lend to non-residents. It is important to research and compare different financing options before deciding to proceed.
In any case, you should always get in touch with a professional real estate consultant who can assist you with the decision-making process. You should also engage a professional lawyer to assist you with any legal aspects related to the negotiation and purchase processes.
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Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at email@example.com or visit us at www.dezshira.com
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