Currently, we experience the situation of many people declaring two prices to not pay tax in business, real estate transfer, a proposition about Law on real estate trading propose some compulsory transaction conduct through the real estate transaction platform. However, in practice, there are objections from legal and management experts due to concerns about manipulating the market and abetting acts of tax evasion. 

The real estate transaction platform is not an agency with tax control and management functions.

As per discussion with the Government News, lawyer Manh Xuan Son, Director of Asia Law Firm (Hanoi City), analyzed: Vietnamese law does not recognize the real estate transaction platform as one of the tax management departments.

Even the provisions of Article 64 of the proposition about the Law on Real Estate Trading do not recognize tax control and management as a function of the real estate transaction platform.

According to Article 2 of the Tax Administration Law 2019, the tax department only includes tax and customs departments at all levels.

The General Department of Taxation is the agency advising and assisting the Ministry of Finance in managing, controlling and operating tax activities in Vietnam.

Also, according to lawyer Manh Xuan Son, the real estate transaction platform is understood as a place having activities of buying, selling and exchanging real estate.

Therefore, the real estate transaction platform can only have information about the image, location, property size, or the owner’s proposed price…

The agreement on prices and conditions for real estate transactions will depend on the party’s decision. Accordingly, are there any “implicit” outside agreements on prices?

When a transaction is established, the responsibility for performing the transaction rests with the parties. The responsibility for declaring, paying taxes, and registering transactions about real estate with the State still belongs to the parties, not under the management scope of the real estate transaction platform.

For example, lawyer Manh Xuan Son said, according to the Certificate on Tax Law of the People’s Republic of China posted on the database of the Food and Agriculture Organization of the World (FAO), the deed tax rate, or property contract tax is not the same across China, as provincial governments are allowed to set tax rates ranging from 3-5% of the transfer price.

Transfer prices can be obtained from the annual abstracts of statics which collects the average selling prices of commercial buildings across the country and region.

A real estate trading transaction platform is just a place to organize and conduct real estate transactions for profit purposes.

In fact, the platform is still just a place to organize and conduct real estate transactions for profit. The platform is not a State agency that manages and collects taxes for the State.

According to the proposition about Law on Real Estate Trading, the conditions for establishing the platform do not set out the professional tax requirements of the managers and operators.

The real estate trading transaction platform is organized and operates under the law on businesses, and the manager and operator only need to graduate from high school and meet the requirements for a real estate brokerage practice certificate through a short training course.

With the description of the operation of the real estate trading transaction platform in Article 61 of the proposition about the Law on Real Estate Trading, in addition to recording and providing information, there is no mechanism to confirm the information that the real estate trading transaction platform guarantees authenticity. Therefore, it is difficult to say that the platform can effectively combat tax loss.

Can transactions through the real estate transaction platform prevent tax evasion?

Regarding the proposition proposal about Law on Real Estate Trading, which mandates that real estate transactions must go through the platform (except for transfers to people related by blodforhold), many experts believe that it is impossible to take real estate transactions. Tax evasion forces all transactions through the platform because three units control this: the notary agency, the tax agency, and the registry office.

To digitize data quickly, and all transactions will be updated with the legality of name transfer and public and transparent transaction value.

Responding to the Government News, Mr. Dao Duy An, General Secretary of the Vietnam Association of Notaries, said that the real estate transaction platform only provides information about real estate transactions, not the tax management department.

Sellers and buyers are still responsible for paying taxes under the law, not the real estate transaction platform.

The real estate transaction platform cannot guarantee that all the above transactions are fully taxed. In some cases, the parties may agree with each other to evade taxes or forge invoices.

The real estate transaction platform does not check the validity of the provided information by the parties involved. Therefore, if this information is incorrect or incomplete, it will be difficult for tax authorities to collect taxes fully and accurately.

Thus, the platform can be a channel for tax authorities to consult to decide on tax policies and improve the management of land tax and personal income tax for real estate transactions but it cannot be considered a tool to prevent tax evasion.

Lessons from the significant cases of manipulating the stock and bond markets, etc during time are a “wake-up call” for the need to carefully consider the issue of assigning authority to control the real estate trading market in the platform.

The management and collection of taxes must be managed and performed by a competent state agency according to their functions.

Is there a repeat of the past ‘trace’?

The summary of the Law on Real Estate Trading implementation in 2014 showed many shortcomings and the operation of the trading transaction platform needed to go according to the State’s plans. We have suffered heavy consequences from the grave mistakes of a series of exchanges in providing information and assessing the legal status of real estate traded through the platform, on contracts, transaction procedures through the platform, violations of price blowing, price manipulation…

The Ministry of Construction’s Government Report on the Law on Real Estate Business also stated that: The regulations on the conditions for establishing a real estate transaction platform are still inadequate, leading to difficulties in state management, creating loopholes for real estate transaction platforms to circumvent the law to operate.

In addition, the Ministry of Construction also recognized that the current Law on Real Estate Trading stipulates the conditions for organizations and individuals to be able to provide real estate brokerage services, the conditions to be tested on their qualifications about knowledge of the law and skills of real estate brokerage is too easy, there is no requirement that a certificate of course completion is required to take the exam for a real estate brokerage certificate.

Thus, the fact that real estate transaction platforms cooperate with parties to sell at arbitrage prices, leading to fraud, misappropriation of capital, and misuse of capital, causing risks to homebuyers, has caused damage to property owners for society… The laxity in controlling the platform’s operation also leads to other reckless acts on appropriate people’s property.

With a series of tricks by real estate brokers, it has caused significant consequences when buyers are intercepted, lose money, and cannot buy real estate… Tax evasion still exists, causing loss of revenue for the State budget, causing manipulation, and lack of transparency in the real estate market.

From these “expensive” lessons, there must be a mechanism to control the operation of the real estate transaction platform before prioritizing or forcing real estate transactions to be approved through the platform.

If there is no effective tool to control the operation of the real estate transaction platform, forcing real estate transactions to go through the floor risks repeating the “trace” in the past.

According to a report by the Ministry of Construction, by the end of 2022, the country now has more than 1,100 active real estate transaction platforms.

According to Le Son – Government News