Tax on property gains coming

Vietnam will impose a tax of 25 percent on capital gains in property transactions as it moves to curb skyrocketing prices and speculation, the National Assembly, or parliament, said.

The tax, in addition to a 2-percent transfer tax already in place, would be applicable from January 2009, the office of the one-party legislature said in a report seen on Wednesday.

"The tax will have a huge impact on the property market nationwide which is highly speculative now. People who buy houses to flip for profit will have to think twice now," a property dealer in Hanoi said.

Dealers said prices in Hanoi and Ho Chi Minh City have gone up about 50 percent since the beginning of the year, mainly because investors diverted money from the stock market into property.

The Communist Party government will also apply a 20 percent tax on stock investment earnings, the legislature's report said.

Speculation in land and equities in the emerging market economy is becoming a concern for policy makers and economists who want to avoid market bubbles and sustain Vietnam's high growth rates for years to come.

Dealers said most condominium projects in Hanoi and Ho Chi Minh City are sold out before they are even built.

They also said the government was drafting another law that would tax owners who have more than one home.

Only transfer taxes are levied on property sales and most transactions are paid in cash, making it difficult for authorities to track them and collect taxes on capital gains.