The Ministry of Finance has proposed police coordinate with tax departments to investigate and handle tax avoidance in real estate buying and selling.

This is part of proposals that Minister of Finance Ho Duc Phoc sent to the Ministry of Public Security, the Ministry of Justice and the people's committees of the provinces and centrally-run cities to fight tax losses in real estate transactions.

This ministry has also proposed that justice departments and tax departments request notary agencies to guide individuals, real estate project investors and real estate trading enterprises in declaring actual transaction prices.

At the same time, local tax departments must coordinate with police and justice departments to fight against tax avoidance in real estate.

Income tax revenue from real estate transactions, inheritance and gift of real estate every year has ranked second among sources of income tax, accounting for over 10 per cent of total tax revenue.

However, the amount of just over VND10 trillion per year is inadequate compared to the actual transactions. It is common for the declaration of real estate prices to be lower than the actual transaction prices to reduce the amount of tax payable.

The finance ministry said the declared price being lower than the actual transaction price was a violation of tax law and would be dealt with accordingly

According to the existing regulations, income tax from real estate transactions is 2 per cent for individuals and 20 per cent for enterprises. The taxable price is the declared price in the notarised contract.

Real estate purchase contracts are often declared at a very low value, many times lower than the agreed value between the sellers and the buyers to avoid paying high taxes.

Lawyer Bui Dinh Ung said that to limit tax avoidance in real estate transactions, it was necessary to inadequacies in the regulated price frame. At present, the calculation of tax for property transactions is based on the price frame which is much lower than the market price.

Therefore, the State needs to bring the price frame closer to the market price and adjust the price frame annually. In addition, it is necessary to have joined management of authorities and tax departments, and strengthened inspection of real estate transactions showing signs of tax avoidance.

The General Department of Taxation has proposed departments of justice in localities to request notary offices to provide tax departments with a monthly list of organisations and individuals who implemented contracts related to property transactions to supervise tax declarations and payments.

Tax authorities must also focus on inspecting tax declaration documents from enterprises and individuals involved in real estate to identify those at high risk of tax avoidance.

Lawyer Tran Minh Cuong, CEO of Solution & Partner Law Firm, said that the supervision and handling of tax avoidance in real estate transactions were not thorough. There has been no close coordination between banks, intermediaries for payment and the notary agencies that authorise contracts.

Recently, Khanh Hoa Province has been a hot spot of the real estate market. Many large companies have been researching the property market in Cam Lam, Van Ninh, and Ninh Hoa districts, bringing real estate fever to the province, according to Nguoi lao dong (Workers) newspaper.

Lawyer Nguyen Hong Ha in Khanh Hoa Province said that at present, it was difficult to control the price of real estate.

If the State stipulates that all individuals, businesses and organisations must implement real estate transactions via the bank channel, tax evasion could reduce, Ha said. — VNS