The real estate market is expected to see further decline as investors are trying to sell out to avoid the personal income tax (PIT) as the PIT law will become effective as of January 1, 2009.

The real estate market will remain cold

Thu Huong in Phu Nhuan district in HCM City is now offering to sell two apartments in Nha Be district. Huong has been advised to keep the apartments as the land prices in the area are increasing. However, Huong thinks differently.

Huong said that if she sells the apartments four months from now, she will have to pay PIT, 2% of the transfer value or 25% of the margin of profit.

The director of a brokerage company in district 7 in HCM City said that real estate prices will decrease further as investors are trying to sell out to pay bank debts and to avoid the personal income tax, effective as of January 1, 2009.

In the stock market, though the VN Index has been recovering, experienced investors are quietly restructuring their investment portfolios and reducing investments.

Minh Nam, an investor on Saigon Securities Incorporated (SSI) trade floor, said that his group of investors now injects money in OTC shares instead of listed stocks. Nam said that in principle, PIT will also be imposed on OTC share transactions; however, it will be difficult to define the profit and loss of OTC share transactions.

Securities and real estate investors are now like cats on hot bricks as the moment for tax application is nearing. A lot of securities investors are trying to seek new destinations for their money.  When the PIT law comes into effect, securities investors will have to choose either to pay 0.1% of the transaction values or 20% of the profit margin.

Securities, real estate markets will be cold

Dr Vuong Quan Hoang, an economist, said that real estate and share prices will decrease when PIT is imposed. However, the tax imposition will help limit speculation in the two markets, thus making the markets healthier in operation.

Lawyer Tran Vu Hai, Deputy Chairman of the HCM City Securities Investors’ Club, also said that the real estate and securities markets will be heavily influenced when the PIT tax law becomes valid.

Hai said that investors will make transactions at a moderate level and consider which way of tax declaration to go. The markets will fall down for a short time to see some changes in the trading habits. In the real estate market, for example, previously, buyers had to bear all kinds of taxes in transactions, while buyers now also have to pay tax.

The director of an investment fund management company in HCM City forecast that at the end of 2008, the time just before the PIT law goes into effect, the VN Index will fall as a lot of investors will sell shares at the moment.

Hai said that in the long term, the state should reconsider the taxation of securities transfer deals as the 20% tax rate proves to be high for a fledgling market.

Hai has suggested that Vietnam should follow China in taxing securities deals. When the market is overly hot, the state should impose high taxes, and when the market is cold, the state should consider lowering taxes.

(Source: PL TP HCM)

 

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