The government has proposed the National Assembly slash VAT by 50% for social housing transaction contracts in an effort to help warm up the domestic property market.
Social housing buyers will have to pay only 5% of VAT from July 1, 2013 to June 30, 2014
The tax reduction would be applied to people who sell, lease, buy and hire low-income houses less than 70 square metres in area and priced at below 15 million per square metre between July 1, 2013 and June 30, 2014.
The government’s proposal is aimed to support low-income earners to buy houses, and also help deal vacant property and unused construction materials.
If approved, social housing buyers will have to pay only 5% of VAT from July 1, 2013 to June 30, 2014, instead of the current level 10%.
The government’s recommendation has received agreement from most of delegates of the National Assembly Financial Budget Committee, however, some experts have raised concerns that this would lead to a situation where existing properties would be subdivided into smaller accommodation for sale and lease. Without strict controls, this also would cause a massive construction boom of houses smaller than 70 square metres.
The National Assembly Financial Budget Committee has also proposed applying the tax reduction by December 31, 2014 to ensure it has more impact on other policies to revive the real estate market.
As of December 31, 2012, the total value of inventories in Vietnam’s real estate market reached VND111.96 trillion, including VND26.44 trillion from the apartment segment.
