How to calculate VAT on real estate transfer

What is real estate transfer? How to calculate VAT on real estate transfer, VAT on land use rights transfer, and land and house transfer tax.

Currently, individuals and organizations have the need to transfer real estate (RE) but do not know the VAT rate from this activity. Let’s find out about this issue with Online Accounting.

I. What is real estate transfer?

Pursuant to Article 4 of the 2018 Land Law, real estate transfer is a legal act of individuals, households and organizations transferring related rights and obligations of:

• Land use rights;
• Housing rights;
• Construction works;
• Property and rights attached to land use rights to another entity. This entity must pay money to the transferor.

II. Formula for calculating VAT on real estate transfer

1. Formula for calculating real estate transfer tax (VAT)

Pursuant to Decree No. 91/2014/ND-CP and Decree No. 209/2013/ND-CP, the calculation of VAT on real estate transfer is as follows:

2. Cases where land prices are deducted when calculating VAT on real estate transfer

2.1. In case the state allocates land to invest in infrastructure construction for sale

Land price deducted for VAT calculation is calculated according to the formula:

For example:

Company X was allocated land by the state to invest in building houses for sale with a real estate transfer price of 15 billion VND. Of which, the land use fee is 10 billion VND, compensation and site clearance costs are 2 billion VND. And the project is entitled to a 10% reduction in the land use fee payable.

Real estate transfer VAT is calculated as follows:

• Land use fee is exempted or reduced = 10 x 10% = 1 billion VND;
• Land use fee (excluding exempted and reduced fees) = 10 – 1 – 2 = 7 billion VND;
• Land price deducted for VAT calculation = 7 + 2 = 9 billion VND.

➨ Real estate transfer VAT = (15 – 9) x 10% = 0.6 billion VND.

So the VAT on land use rights transfer is 600 million VND. 

2.2. In case of land auction

For example:

Company X won the auction for a piece of land with a winning bid of 10 billion VND. Then, company X transferred this piece of land to company Y with the transfer value of the land on the contract being 12 billion VND.

Real estate transfer VAT is calculated as follows:

Land price deducted for VAT calculation = Land price at auction = 10 billion VND.

➨ Real estate transfer VAT = (12 – 10) x 10% = 0.2 billion VND.

So VAT on land use rights transfer is 200 million VND.

2.3. In case of land lease to build infrastructure or houses for sale

Land price deducted for VAT calculation is calculated according to the formula:

Land price deducted  to calculate VAT

=

Land rent payable to the state budget (excluding exempted and reduced fees)

+

Compensation costs,  land clearance

For example:

Company X has the business of investing and trading in infrastructure for industrial production and services. Company X is leased land by the State to invest in building industrial park infrastructure to implement the project, collecting land rent once with a land lease term of 50 years. In which:

• The leased land area is ^200,000m2 ;
• Land rental fee paid once for the entire rental period is 80,000 VND/ ^m2 ;
• Total land rent payable is 16 billion VND;
• The company is exempted or reduced from land rent.

After investing in infrastructure construction, the company signed a contract to lease to company Y:

• The lease term is 30 years;
• Land area for lease is ^16,000m2 ;
• The rental price at the time of signing the contract is 600,000 VND/m2 ^for the entire rental period (price does not include VAT).

In this case, the VAT-inclusive price for the proceeds from the 30-year infrastructure lease of company X is determined as follows: 

Price including VAT = 16,000 x [600,000 – (80,000/50 x 30)] = 8,832 billion VND.

➨ Real estate transfer VAT = 8.832 x 10% = 0.8832 billion VND.

So VAT on land use rights transfer is 883.2 million VND.

2.4. In case a business establishment transfers land use rights of an organization or individual

The land price deducted for VAT calculation is the land value at the time of receiving the transfer of land use rights, excluding the value of infrastructure, formula:

Land price deducted  to calculate VAT

=

Land price at the time  transfer  land use rights

–

Infrastructure value

In case the land price at the time of transfer cannot be determined or the infrastructure value cannot be separated from the land price at the time of transfer, the land price prescribed by the People’s Committee of the province or centrally-run city at the time of signing the transfer contract will be used.

For example:

In Hanoi, company X transferred to company Y a piece of land with part of the infrastructure with a total value of 100 billion VND. Of which, the price of the land at the time of transfer could not be determined, so the land price regulated by Hanoi city at the time of transfer was 80 billion VND. The infrastructure on the land was worth 30 billion VND. 

Real estate transfer VAT is calculated as follows:

Land price deducted for VAT calculation = 80 – 30 = 50 billion VND.

➨ Real estate transfer VAT = (100 – 50) x 10% = 5 billion VND.

So the VAT on real estate transfer (land transfer tax) is 5 billion VND.

2.5. In case a business establishment receives capital contribution in the form of land use rights owned by individuals or organizations

Transfer price < Land price stated in capital contribution contract
Land price is deducted when calculating VAT	=	Real estate transfer price

For example:

In Hanoi, company X contributed capital to company Y with a piece of land worth 10 billion VND. Then company X transferred this capital contribution to company Z with a transfer price of 12 billion VND. 

Real estate transfer VAT is calculated as follows:

Land price deducted for VAT calculation = Land price stated in capital contribution contract = 10 billion VND.

➨ Real estate transfer VAT = (12 – 10) x 10% = 0.2 billion VND.

So the VAT on real estate transfer (tax on land transfer) is 200 million VND.

2.6. In case the real estate business establishment implements the build-transfer (BT) form, payment is made using the value of land use rights.

In there:

• Land price deducted when calculating VAT = Land price at the time of signing the BT contract;
• In case the BT contract has not yet determined the price, the land price decided by the People’s Committee of the province or centrally-run city will be used to pay for the project.

For example:

Company X signed a BT contract with the People’s Committee of Hung Yen province to build a highway in exchange for land use rights. The payment price for the project was determined by the People’s Committee of Hung Yen province at the time of signing the contract to be 100 billion VND, but instead of paying, the People’s Committee of Hung Yen province assigned Company X 40 hectares of land with a value of 100 billion VND. Company X transferred this land to Company Y to build houses for sale at a transfer price of 120 billion VND.

Real estate transfer VAT is calculated as follows:

Land price deducted for VAT calculation = Price at the time of signing BT contract = 100 billion VND.

➨ Real estate transfer VAT = (120 – 100) x 10% = 2 billion VND.

So the VAT on real estate transfer (land transfer fee) is 2 billion VND.

2.7. In case of construction or business of infrastructure, construction of houses for sale, transfer or lease of real estate

In which: Land price deducted when calculating VAT = Percentage of collected amount on total contract value.

For example:

In January 2023, company X was transferred the right to sell 10 apartments in building B by company Y with a total value of 10 billion VND. By June 2023, company X earned 10 billion VND from the sale of 8 apartments in building B.

Thus, the land price deducted to calculate VAT corresponds to the percentage of the amount collected on the total contract value = 10 x 8/10 = 8 billion VND.

➨ Real estate transfer VAT = (10 – 8) x 10% = 0.2 billion VND.

So the VAT on real estate transfer (land transfer tax) is 200 million VND.

See also:

>> Formula for calculating VAT in specific cases;

>> How to account for and calculate VAT using the direct method.

III. Questions related to VAT on transfer of land use rights and real estate

1. What is real estate?

Real estate is immovable property and is often attached to land, including land, houses, construction works attached to land and other properties attached to land and houses as prescribed by law.

See also: 

>> Procedures for establishing a real estate brokerage company;

>> Procedures for establishing a real estate company.

2. What is the VAT rate from real estate transfer activities?

Pursuant to Article 11 of Circular No. 219/2013/TT-BTC, the VAT rate from real estate transfer activities is 10%.