Guidance on declaring corporate income tax arising from the transfer of real estate projects in compliance with applicable legal regulations

NPLaw has observed that many enterprises are experiencing difficulties or inadvertently committing violations in the declaration and payment of Corporate Income Tax arising from the transfer of real estate projects. The following article provides an in-depth analysis of such issues to assist business entities in minimizing potential legal risks.

I. What are the potential legal risks when enterprises declare Corporate Income Tax arising from the transfer of real estate projects at a value lower than the actual market value?

The deliberate understatement of the transaction value in a transfer agreement compared to the actual payment value for the purpose of reducing tax liabilities constitutes a serious violation of tax regulations. If tax authorities conduct inspections or audits and discover that an enterprise has declared Corporate Income Tax (CIT) arising from the transfer of a real estate project at a value lower than the prevailing market value, the first legal consequence is a tax assessment in accordance with Clause 2, Article 24 of the Tax Administration Law 2025. Subsequently, the enterprise will be required to pay the full amount of underpaid CIT and will also be subject to late payment interest at the rate of 0.03% per day under Clause 2, Article 16 of the Tax Administration Law 2025.

More seriously, if there are indications that the enterprise intentionally fabricated documents or structured transactions to conceal the true transfer value, the enterprise may be administratively sanctioned for tax evasion, with fines ranging from one to three times the amount of tax evaded under Article 17 of Decree No. 125/2020/ND-CP.

In case the amount of tax evaded reaches 100,000,000 VND or more, both the commercial legal entity and the individuals managing the enterprise may be subject to criminal prosecution for the offense of Tax Evasion under Article 200 of the Criminal Code 2015 (as amended by Clause 47, Article 1 of the Law Amending the Criminal Code 2017). 

II. Detailed overview of Corporate Income Tax on the transfer of real estate projects

1. What constitutes income from the transfer of a real estate project, and which entities are subject to tax under current regulations?

Pursuant to Clause 2, Article 3 of the Corporate Income Tax Law 2025 and Article 15 of Decree No. 320/2025/ND-CP, income derived from the transfer of real estate projects constitutes taxable income for CIT purposes, excluding income from real estate transfers conducted by real estate enterprises. Such income includes income arising from:

• The transfer of all or part of an investment project involving construction works associated with the transfer of land use rights or land lease rights;
• The transfer of land use rights or land lease rights relating to a project;
• Other forms of project-related real estate transfers as prescribed by law.

Pursuant to Clause 4, Article 16 of Decree No. 320/2025/ND-CP, the applicable CIT rate for such a category of income is 20%. Such income must be separately accounted for and declared and may not be offset against losses arising from other business activities, except in certain cases specifically provided by current law.

2. How is the revenue recognition date determined for tax purposes when a project is transferred in stages?

Pursuant to Clause 1, Article 17 of Decree No. 320/2025/ND-CP, the time for determining taxable revenue is the date on which the seller transfers possession of the real estate to the purchaser, regardless of whether the purchaser has completed registration of ownership rights, land use rights, or other legal procedures before the competent State authority.

For enterprises implementing infrastructure investment projects or housing projects for sale or lease and receiving advance payments from customers according to project progress under any form, the time for determining provisional CIT revenue is the date on which payment is received from the customer.

3. What constitutes a “transfer price inconsistent with market value” from the perspective of tax authorities?

Pursuant to Clause 6, Article 10 of Decree No. 320/2025/ND-CP, the value of land use rights is determined based on the purchase price stated in the real estate transfer agreement, provided that such price reflects market value and is not lower than the land price stipulated in the land price schedule promulgated by the provincial-level People’s Committee at the time of acquisition.

Furthermore, Clause 2, Article 24 of the Tax Administration Law 2025 provides that where goods or services are bought, sold, exchanged, accounted for, or declared for tax purposes at values inconsistent with actual payment values or normal market transaction values, resulting in reduced tax obligations, tax authorities have the power to impose a tax assessment.

Based on these provisions, a transfer price inconsistent with market value may be understood as a transfer price stated in the project transfer agreement that is significantly lower than the prevailing market value at the time of transfer. In determining market value, tax authorities may rely upon:

• National tax and land databases;
• Comparable project transactions within the same geographical area;
• Land price schedules issued by provincial-level People’s Committees;
• Infrastructure investment costs and other relevant valuation factors.

If a substantial and unreasonable discrepancy exists and the enterprise fails to provide a satisfactory explanation, the tax authority may reject the contractual transfer value and impose an adjusted taxable value.

III. Legal framework governing Corporate Income Tax on the transfer of real estate projects

1. How is tax declared for each real estate project transfer transaction?

Pursuant to Clause 4, Article 8 of Decree No. 126/2020/ND-CP, Corporate Income Tax arising from real estate transfer activities conducted by taxpayers under the revenue-based method prescribed by CIT legislation is subject to declaration on a transaction-by-transaction basis.

In addition, Clause 1, Article 11 of Decree No. 126/2020/ND-CP provides that VAT declarations relating to infrastructure investment projects or housing projects for transfer, including cases involving advance payments from customers according to project progress, must be submitted at the location where the real estate transfer activity occurs.

The declaration procedure is generally as follows:

• The enterprise submits a tax declaration dossier in accordance with Article 7 of Decree No. 126/2020/ND-CP;
• The deadline for submission is no later than the tenth day from the date the tax obligation arises (being the date on which the project handover minutes are executed);
• If the enterprise’s head office is located in a different province from the project location, tax declarations and tax payments must be made at the project location and subsequently consolidated into the annual tax finalization dossier submitted at the head office.

2. Which decrees and circulars provide detailed guidance on determining revenue and deductible expenses for real estate projects?

The determination of taxable revenue and deductible expenses relating to the transfer of real estate projects is strictly regulated to ensure transparency and prevent losses to the state budget. Enterprises should pay close attention to the following legal instruments:

• Decree No. 320/2025/ND-CP (guiding the Corporate Income Tax Law): Pursuant to Clause 3, Article 16, taxable income from project transfers is determined by deducting project cost value and directly related deductible expenses from transfer revenue.
• Decree No. 126/2020/ND-CP (guiding the Tax Administration Law): Pursuant to Clause 4, Article 8, this Decree establishes the principle that CIT must be declared on a transaction-by-transaction basis for real estate transfers. Revenue must be recognized at the time of lawful project handover regardless of whether the purchaser has fully completed payment.
• Circular No. 20/2026/TT-BTC (guiding the Corporate Income Tax Law and Decree No. 320/2025/ND-CP): This Circular provides guidance on deductible expenses. Deductible expenses are those directly related to the transferred project, supported by lawful invoices, supporting documents, and non-cash payment evidence. Such expenses may include land use fees, site clearance and compensation costs, infrastructure development expenses, and project management costs.

3. What administrative sanctions apply to late tax declarations or incorrect declarations resulting in underpaid tax?

Pursuant to Article 13 of Decree No. 125/2020/ND-CP governing administrative sanctions in taxation and invoicing, fine levels are clearly prescribed.

If a tax declaration dossier is submitted after the statutory deadline, the enterprise may be fined from 2,000,000 VND to 25,000,000 VND. In addition, Article 16 of the same Decree provides that an incorrect declaration resulting in an underpayment of tax is subject to a fine equal to 20% of the underpaid tax amount.

In case the conduct is determined to constitute tax evasion but does not yet warrant criminal prosecution, the applicable fine ranges from one to three times the amount of tax evaded, depending on aggravating and mitigating circumstances, under Article 17 of Decree No. 125/2020/ND-CP.

In addition, the enterprise must pay all outstanding tax amounts together with applicable late payment interest.

4. In which cases may an enterprise be eligible for mitigating circumstances when violating tax regulations applicable to project transfers?

Pursuant to Article 9 of the Law on Handling Administrative Violations 2012 (as amended in 2020) and Article 6 of Decree No. 125/2020/ND-CP (as amended by Clause 4, Article 1 of Decree No. 310/2025/ND-CP), an enterprise may be entitled to mitigating circumstances in the following situations:

• The violator has actively prevented or reduced the consequences of the violation;
• The violator has voluntarily remedied the consequences or compensated for damage, including voluntarily paying the full tax deficiency before a tax violation record is issued;
• The violation was committed under coercion or dependency;
• The violation occurred under particularly difficult circumstances.

Each mitigating circumstance serves as a basis for tax authorities to reduce the applicable penalty within the statutory fine range, such as reducing a fine from 1.5 times the evaded tax amount to 1 time the evaded tax amount.

IV. Questions regarding Corporate Income Tax arising from the transfer of real estate projects

1. Does an investigative authority have the power to suspend a project transfer transaction if there are suspicions of tax evasion?

An investigative authority has the power to apply preventive and coercive measures where there are grounds to believe that a project transfer transaction exhibits signs of a serious tax evasion offense. Although the law does not expressly use the term “suspension of a transaction”, investigative authorities are empowered to apply asset distraint measures under Article 128 of the Criminal Procedure Code 2015 and account freezing measures under Article 129 of the Criminal Procedure Code 2015 in order to prevent the dissipation of payment proceeds.

In addition, investigative authorities may coordinate with land administration authorities to temporarily suspend procedures relating to the transfer of title, registration of ownership changes, or registration of land-use right changes concerning the real estate project in question for the purpose of facilitating the investigation and ensuring the enforcement of judgments.

2. Can the entire land use rights and assets attached to land of a project be distrained to secure the fulfillment of tax obligations?

Pursuant to Clause 3, Article 128 of the Criminal Procedure Code 2015 regarding asset distraint measures, the governing principle is that only assets corresponding to the amount that may be subject to fines, confiscation, or compensation obligations may be distrained. In such a context, such an amount generally includes the evaded tax and related sanctions.

Thus, if the value of a real estate project substantially exceeds the tax obligation under investigation, the competent authorities are not permitted to distrain the entire project. Instead, they may only distrain a portion of the project or other assets of equivalent value. Any distraint exceeding the value necessary to secure the obligation constitutes a procedural violation.

Nevertheless, in practice, due to the integrated nature of many real estate projects, even a legally limited distraint may adversely affect the liquidity and commercial viability of the project as a whole.

3. How can the personal liability of company executives be distinguished from the financial liability of the corporate entity?

Pursuant to Clause 1, Article 74 of the Civil Code 2015, a legal entity possesses assets independent of those of individuals and takes liability with its own assets.

From a financial perspective, obligations relating to Corporate Income Tax payments and administrative fines are generally the responsibility of the company as a legal entity. However, with respect to criminal liability, Clause 2, Article 75 of the Criminal Code 2015 provides that the criminal liability of a commercial legal entity does not exclude the criminal liability of individuals.

Accordingly, directors, chief accountants, and other individuals who directly direct, organize, or carry out acts of tax evasion may still face criminal prosecution and imprisonment in their personal capacities, independently of any fines imposed upon the company.

4. How long does investigative detention typically last in cases involving tax violations related to real estate projects?

Pursuant to Articles 118 and 173 of the Criminal Procedure Code 2015, the period of temporary detention may not exceed three (03) days from the time the investigative authority conducts certain investigative activities.

If necessary, the authority issuing the detention decision may extend the detention period for an additional period not exceeding three (03) days. In special circumstances or in particularly serious cases, a second extension of up to three (03) additional days may also be granted.

V. If you are facing issues relating to corporate income tax arising from the transfer of a real estate project and are unsure how to proceed, contact NPLaw for timely assistance

To maximize the protection of an enterprise’s lawful rights and financial interests, partnering with a professional law firm is one of the safest and most effective solutions.

With many years of practical experience, the team of lawyers, legal professionals, and tax specialists at NPLaw is committed to assisting enterprises in reviewing all relevant documents, advising on legally compliant transaction structures to optimize tax liabilities, and representing enterprises in dealings with competent state authorities.

The information provided above is for reference purposes only. Should you require detailed advice regarding a specific matter, please contact NPLaw for prompt legal consultation.