Strict taxing of apartment rental incomes could evict landlords

From high-end apartments that fetch revenues of around VND23 million ($1,000) a month, landlords are collecting a profit of only 4.5 percent a year, and the tax will make them lose their interest in this investment channel, said Quynh, who owns many properties in Ho Chi Minh City.

She was referring to a pilot program initiated by HCMC to tighten implementation of existing regulations in collecting income tax from landlords who lease out apartments.

Landlords with an annual rental income of over VND100 million ($4,340) are subject to a 5 percent value-added tax and a 5 percent personal income tax.

Quynh said that the total 10 percent taxation would mostly hit landlords of high-end apartments as those with low-end properties can find tricks to keep their revenues under VND100 million a year, or VND8.3 million a month, on paper.

Trung, a landlord with properties in Binh Thanh, District 2 and District 9, said he was also concerned about his profit margin dwindling with the new program.

Apartment buyers usually hope see the prices of their asset increase in the short term and only lease them during the wait to partly recoup their investment, he said.

Few people buy apartments with long-term expectations of profits as apartment prices are likely to fall in the long run, he added.

Trung said that one option he is considering is leasing only mid-priced apartments to avoid the tax, and another is to sell the apartments to invest in land and houses instead.

Most experts support the tax, though. Economist Dinh Trong Thinh said that the taxing of rental incomes has been regulated since 2015, and it is only fair that landlords pay their share, like other income tax payers.

Economist Vu Dinh Anh said authorities need to implement the regulations in a way that tenants are not hurt, because landlords might try and pass on the burden to them.

Anh also proposed that owners of properties that are not rented are also taxed to avoid wasting an asset.

Nguyen Khac Quoc Bao, head of the Fintech Institute under the University of Economics HCMC, said that the VND100 million threshold is low and might hurt people with low- or middle-income more than it hurts the high-income people.

It should be noted that the nature of taxation is to reduce the income of high-income people to narrow the wealth gap, he said.

Ta Thi Phuong Lan, deputy head of the department of tax administration for small and medium enterprises and individuals, said tax authorities are studying the possibility of increasing the threshold.

Tax authorities have said that, for now, the program only applies to several buildings in HCMC and it is up to municipal leaders of other localities to decide if they want to implement a similar thing there.

An online two-day poll of VnExpress readers on May 17 and 18 showed 85 percent of nearly 2,000 respondents saying they will move to other asset classes if their apartment rental income is taxed.