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Vietnam clarifies foreign ownership rules but confusion grows over new property tax

Foreigners are allowed to own one apartment in Vietnam for up to 50 years, according to a statement.

This will include investors, those who contribute to national development, experts in various fields, those with a Vietnamese spouse, and non-real estate companies.

They will be able to buy one apartment in residential projects that do not prohibit foreign ownership, according to the statement.

When the ownership term ends, the foreign owners will have to sell or transfer the house.

Foreign buyers will receive their ownership titles within 30 days of submitting applications to the construction department, it added.

But there is still confusion over the new property tax system proposed by the government and whether or not it will reduce speculation on the real estate market.

Some industry commentators are claiming that it is not a large enough to act as a deterrent.

There is currently no property tax in Vietnam.

The new system would introduce various rates of tax based on the value of the piece of real estate and its size.

Last week the details were made public for the first time. And this has added to the confusion.

A new draft says that a homeowner would have to pay an annual property tax of 0.03% based on the assessed value of the property, with a tax free threshold of VND500 million.

The value would be assessed on total construction costs.

But space exceeding an official quota of 120 square meters per four member family, would be taxed progressively at 0.06% and then 0.09%.

Officials claim that the new tax system aims to curb property speculation and ensure economical use of land in the country when it comes into effect at the beginning of 2011.

The National Assembly Finance and Budget Committee said it generally supported the draft law.
However, many committee members doubt the impact the new property tax would have on property speculation.

Committee Chairman Phung Quoc Hien said the new tax system would not be able to deter speculation because the tax payments would be low compared to the profits that speculators could earn.

He also said that an agency need to be assigned to assess property values as leaving this to brokers would create confusion.
The government expects the property tax law to be passed by the National Assembly next year.

However, some legislators said 2012 would be a better time to put the new tax into practice.