On 1 October 2009, the General Department of Taxation issued Official Letter No. 4022/TCT-TNCN ("Letter 4022") clarifying the settlement of cases of personal income tax ("PIT") arising from a transfer of land, where the actual land area as measured for the issue of a land use right certificate is greater than the measurements recorded on the land use document ("Increased Land Area").
Under the PIT Law, income from real property transfers is subject to PIT, except for those between husband and wife, parents and children (including foster parents and adopted children), parents-in-law and children-in-law, grandparents and grandchildren, and between siblings.
Letter 4022 applies this provision to a specific case of Increased Land Area where remeasurement is carried out either to determine the currently used land area for issue of a land use right certificate, or to for issue of a new land use right certificate to replace an existing one.
If the Increased Land Area has not originated from a land transfer, then no PIT obligation arises. If it involves a land transfer which was completed prior to the effective date of the PIT Law, but the necessary procedures for issue of a land use right certificate are undertaken at a later date, then the individual transferor will pay PIT on the transfer of real property (unless the transfer contract stipulates that the transferee must discharge tax obligations on behalf of the transferor).
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