Personal Income Tax on Real Estate Transfers Made via a Power-of-Attorney Contract
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Based on:3438/TCT-PC - Ministry of Finance
This explanation was generated by AI and checked by an automated AI review, not by a human expert. It is not legal, tax or accounting advice and may contain errors. Check the official document before you rely on it.
The Ministry of Finance issued Q&A guidance on personal income tax (PIT) obligations for a real estate deal carried out through a power-of-attorney contract. Individual A held land-use rights but had not yet received the certificate, so A granted individual B full authority to dispose of the land; after B helped A obtain the certificate, B, acting on A's behalf, signed a gift contract transferring the land to individual C, who is B's wife. Citing Official Letters 1133/TCT-TNCN, 3373/TCT-TNCN, and 3438/TCT-PC (dated August 5, 2024), the Ministry held that when a power-of-attorney contract grants the attorney-in-fact full rights of possession, use, and disposal under the Civil Code, the arrangement is treated as a real estate transfer between the grantor (A) and the attorney-in-fact (B), even without a separate written transfer contract. As a result, A must declare and pay 2% PIT on the transfer value. On the subsequent gift from B to C, gifts of real estate between spouses are exempt from PIT under Clause 4, Article 4 of the PIT Law, so C does not owe the 10% gift-receipt PIT provided the marital relationship is properly documented. If C is not B's lawful spouse, both A and C would owe PIT simultaneously. Using a power of attorney to dispose of property is a common practice in Vietnam when land certificates are pending, so this guidance is a practical reference for individuals, investors, and accountants: tax authorities examine the substance of the contract - whether it grants all three rights of possession, use, and disposal - rather than its outward label.
The Citizen's Question
A citizen wrote to the Ministry of Finance asking about personal income tax (PIT) obligations in the following scenario: individual A holds land-use rights but authorized individual B, through a power of attorney, to fully dispose of the land. In practice, A and B had agreed on a transfer, but because A had only just been allocated the land and had not yet received the land-use rights certificate, they proceeded via a power-of-attorney contract instead of a transfer contract. B then completed the procedures for A to obtain the land-use rights and property-on-land certificate, after which B, acting on A's behalf under the power of attorney, signed a gift contract transferring the land-use rights to individual C, who is B's wife.
The citizen asked the Ministry to clarify four points: (1) whether this arrangement counts as a transfer between A and B; (2) if so, whether A must declare and pay 2% PIT; (3) whether C must pay 10% PIT on receiving the gift; and (4) under what circumstances both A and C would owe PIT at the same time.
The Ministry of Finance's Answer
1. Whether the arrangement is a transfer between A and B
The Ministry relied on:
- Official Letter 1133/TCT-TNCN dated April 5, 2011, from the General Department of Taxation (now the Tax Department) on PIT issues for real estate transfers;
- Official Letter 3373/TCT-TNCN dated September 20, 2011, from the General Department of Taxation on PIT for real estate transfers made through power-of-attorney contracts;
- Section 1 of Official Letter 3438/TCT-PC dated August 5, 2024, from the General Department of Taxation on taxing land-use-right transfers made through power-of-attorney contracts.
Official Letter 3438/TCT-PC cites Clause 5, Article 3 of PIT Law No. 04/2007/QH12 (as amended by Law No. 26/2012/QH13), Point d, Clause 5 of Decree 65/2013/ND-CP, and Point d, Clause 5, Article 2 of Circular 111/2013/TT-BTC, stating that when a land-use-right transfer takes the form of a power-of-attorney contract, and the contract grants the attorney-in-fact the rights of possession, use, and disposal of the land-use rights and house ownership under Articles 158, 186, 189, 192, and 237 of the 2015 Civil Code, and income arises from the delegated management of the property, that income is taxable PIT income from a real estate transfer.
Based on these documents, and because the power-of-attorney contract in this case is fully valid under the Civil Code, the Ministry determined that this case is treated as a real estate transfer between A and B.
2. A's declaration and payment obligation
Because the transaction is classified as a transfer between A and B, individual A must declare and pay 2% PIT on the transfer value, as required by law.
3. Individual C's tax obligation
Under Clause 4, Article 4 of PIT Law No. 04/2007/QH12, exempt income includes: «income from inheritance or gifts of real estate between spouses; biological parents and biological children; adoptive parents and adopted children; parents-in-law and daughters-in-law; parents-in-law and sons-in-law; grandparents and grandchildren; and siblings».
Since C is B's wife, the real estate B gave to C falls within this exemption. C therefore does not owe the 10% PIT on the gift, provided the marital relationship is fully documented as required.
4. When both A and C would owe tax at the same time
Based on the specific facts presented (where C is B's lawful wife), this case does not trigger simultaneous PIT obligations for both A and C - only A owes the 2% transfer tax, while C's gift is exempt.
However, the Ministry noted that if C is not B's wife, both A and C would owe PIT simultaneously - A paying 2% PIT on the transfer, and C paying 10% PIT on the gift, since the family-member exemption would no longer apply.
The Ninh Binh provincial Tax Sub-Department (Sub-Department No. 9) forwarded this answer to the inquirer, Mr. Nguyen Van Khanh; further questions were directed to a named tax official at the phone number provided in the original official letter.
Practical Significance
This guidance confirms an important principle: tax authorities look at the legal substance of a power-of-attorney contract - specifically, whether it grants all three rights of possession, use, and disposal - to determine whether a taxable transfer has occurred, regardless of whether the contract is labeled a power of attorney rather than a transfer. This is a common real-world scenario in Vietnam, especially for land without a certificate yet, making this ruling a useful reference for individuals, real estate investors, and accountants advising on tax obligations in property-disposal power-of-attorney arrangements.