Shedding light on the legal and social dimensions of this income tax policy, Prof Dr Tran Tho Dat, Member of the National Financial and Monetary Policy Advisory Council, stressed that this is a reasonable and necessary step toward enhancing the transparency of the gold market.
It will help to curb speculation and short-term trading, and it effectively puts gold on a level playing field with other investment assets like securities and real estate.
Implementing a personal income tax will allow the State to closely monitor large, speculative transactions, reduce informal trading and tax evasion, and limit the arbitrary pricing that leads to a significant gap between domestic and international prices.
It also helps control capital flows and prevent illicit activities like money laundering through the gold market. Ultimately, this contributes to protecting consumer rights and improving macroeconomic management.
However, for the policy to be truly effective, it must be implemented with a clear roadmap, in parallel with broader reforms in gold market management.
Further explaining the subjects of this tax policy and the fear of “double taxation” for individuals who sell their long-term savings for personal needs, Prof Dr Tran Tho Dat agreed that it would be unreasonable to tax every transaction, including the sale of a few taels of gold to cover essential expenses like home repairs or tuition fees.
The money used to purchase that gold was typically from income that had already been taxed. To then tax the proceeds from selling those long-term savings would, in effect, be a form of double taxation.
Therefore, the policy must clearly differentiate the purpose of the transaction. Small-scale ones for personal savings and family consumption should be exempt from tax and declaration. Conversely, large-scale, investment-oriented transactions should be subject to personal income tax, perhaps with a progressive rate to promote fairness and control speculation.
The professor then mentioned three possible criteria used to establish a tax threshold that avoids negative impacts and ensures the policy is enforceable:
- Absolute value. The State could set a cap based on the amount of gold or its monetary equivalent, for example, VND250 million to VND400 million (US$10,000 to $16,000) per person, per transaction. Anything below this would be considered a small, personal transaction and thus tax-exempt.
- Transaction frequency. If an individual sells gold only a few times a year – say, a maximum of two or three times, with a total volume not exceeding three taels – it could be classified as personal savings. In contrast, frequent, repeated transactions would be deemed speculative and subject to tax.
- The purpose of use. Sales intended for essential expenditures, which can be verified with invoices or loan documents, should be exempt. Transactions aimed at generating profit or converting large assets would be taxed. Inheritances, family gifts, and the sale of low-value jewelry should also be exempt.
A crucial underpinning for all of this is that transactions must be transparent, conducted via bank transfer, accompanied by an e-invoice, and ideally take place on a centralized gold exchange to facilitate state oversight.
Answering the question of whether this tax should be calculated on the profit margin – the difference between the purchase and sale price – or on the total value of the transaction at the time of sale, Prof Dr Tran Tho Dat said that taxing the net profit, or capital gain, is undoubtedly the fairest method. It ensures that only those who actually profit pay tax.
This aligns with international standards but is very difficult to implement in Vietnam right now. Determining the original purchase price, or cost basis, is complicated, especially for individuals who have made multiple purchases over a long period and may lack complete records.
Taxing the total transaction value at the time of sale is simpler to administer but is potentially unfair, as it could tax individuals even if they sell at a loss. This could create an incentive for tax avoidance and push more activity into the informal market.
He then recommended starting by applying a low tax rate on the sale price, coupled with a high exemption threshold for small transactions. This should be implemented alongside the mandatory use of e-invoices, bank transfers, and the development of a centralized gold exchange. In the future, once the data infrastructure is robust, it is possible to transition to the fairer system of taxing actual profits.
This obviously calls for a phased roadmap necessary for this policy to be effective in a comprehensive reform of the gold market.
The initial phase should focus on implementing the low tax on the sale price with generous exemptions, while mandating e-invoices for all transactions and bank transfers for large ones to boost transparency. The next step is to build a centralized gold exchange.
In the medium to long term, once the technical infrastructure is in place, there should be a transition to a profit-based tax system. Alternative financial instruments, such as gold certificates or gold-backed bonds, should also be developed to provide people with legal, transparent investment channels beyond simply hoarding physical gold.
