• 7 Asian Countries Without Capital Gains Tax

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    Investors often pay much attention to the taxes and fees they have to pay at the time of buying property.

    Truth be told, stamp duties, VAT and real estate agent fees can become significant when added up.

    But, to have a complete exit strategy, it’s equally important that you understand what taxes you need to pay when holding and selling property.

    In most countries, sellers need to pay capital gains tax when selling property. The tax can be substantial, especially if the property has increased much in value.

    In this article, I list Asian countries where you don’t have to pay capital gains tax.

    First, let me explain what capital gains tax is and how it’s calculated.

    What is Capital Gains Tax?

    Capital gains tax, sometimes referred to as CGT, is collected by governments and charged to the profits made when selling assets. Might it be real estate, businesses or stocks.

    In Asia, capital gains tax rates normally range between 0% to 20%, depending on where you buy. With rates that high, the tax can reduce your profits significantly.

    Not to forget, you might even be subject to capital gains tax in countries where the tax is generally not charged.

    Here, tax authorities make individual evaluations, looking at your buying patterns and whether you trade properties for the sole purpose of making profits.

    We mostly see this in countries where the property markets are overheated and where governments try to avoid speculation. This is something I will explain more about later.

    How to calculate capital gains tax

    When calculating the tax, you simply multiply the tax rate by the capital appreciation.

    Let’s say that you buy a unit for USD 500,000 and sell it for USD 700,000. The tax rate will then be multiplied by the profit made, that is: USD 200,000.

    To highlight, the tax is not multiplied by the sales value, but the capital appreciation.

    Now, let’s have a look where you don’t have to pay capital gains tax when selling property in Asia.

    1. Hong Kong SAR

    Hong Kong has some of the lowest corporate- and personal income taxes in the world. The government doesn’t levy any import taxes or VAT either, for that matter.

    Not surprisingly, Hong Kong has become one of the most crowded and expensive places to buy property.

    Still, capital gains tax is rarely levied when selling real estate in Hong Kong, even if each case is treated individually by the Inland Revenue Department (IRD).

    Here, the IRD review your buying patterns, especially if you deal with bigger transactions.

    The following items will be of interest to the IRD to judge whether you need to pay capital gains tax or not:

    • The background of the transaction
    • The financial arrangements
    • How often you buy and sell
    • For how long you keep the properties

    In short words, trading properties might result in a scenario where you have to pay capital gains tax.

    The IRD also requires that you keep your transaction records for at least seven years.

    Even if sellers are exempt from capital gains tax, you will be charged with a seller’s stamp duty (SSD), if you sell your property within 3 years. The SSD ranges between 10% to 20%.

    In comparison to the capital gains tax, the seller’s stamp duty is multiplied by the sales value, not only the profit.

    2. Singapore

    Singapore has similar buying regulations as Hong Kong and you’re generally not charged any capital gains tax when selling property.

    Yet, the Inland Revenue Authority of Singapore (IRAS) reviews each case individually.

    If you trade properties or simply buy with a profit seeking incentive, IRAS has the rights to charge you with a capital gains tax.

    As shown on IRAS’ website, they review the following when:

    • Frequency of transactions
    • Reasons for acquiring and selling property
    • Financial means to hold the property long-term
    • Holding period

    Even if you generally don’t need to pay capital gains tax when selling property, a seller’s stamp duty (SSD) is levied if you sell your property within three years.

    The SSD increases progressively from 4% to 12% and is multiplied by the sales value, not the profit.

    3. China (Mainland)

    China might not be the best country to buy property as a foreigner. You can only buy one unit if you’ve worked or studied there for at least one year.

    On top of that, you cannot rent out your unit, it can only be used for self-dwelling purposes.

    However, China is still one of the few Asian countries where you’re generally exempt from paying capital gains tax.

    The only requirement is that you don’t sell the property within 5 years. In that case, you’ll need to pay a capital gains tax of 5%, which is still low.

    To many’s surprise, China has comparably low real estate taxes. The government doesn’t charge any annual property tax either, even if it’s been under discussion for years.

    As China’s economy relies heavily on its real estate market, small regulatory changes can have a big negative impact.

    4. Dubai

    Dubai’s property market has been in decline for years and it’s not the most preferred country to buy real estate in Asia. At least at the moment.

    However, this is something that the government is obviously aware of and tries to change.

    In the past years, we’ve seen a number of changes in foreign property ownership regulations, ease of doing business and the introduction of a 10 year visa.

    You’re not charged with any capital gains tax or annual property tax when holding or selling property here.

    Property transfer fees and taxes are also low compared to most other Asian countries.

    As such, Dubai has some of the most tax friendly policies in the region.

    5. Cambodia

    Cambodia is a relatively new market for property buyers and has become increasingly popular among foreigners. There are a number of reasons for this.

    First of all, if you buy and sell property as an individual, you don’t have to pay capital gains tax. A capital gains tax of 20% only applies if you buy through a company.

    In addition, you’re allowed to fully own freehold property (strata-titled units) as a foreigner. This is not the case in countries like China, Indonesia or in Vietnam.

    There are other benefits of investing in Cambodia. To give you two examples, rental yields are high and non-residents can open local bank accounts.

    6. Vietnam

    Vietnam’s property market is one of the hottest in Asia and prices have increased much in the past years.

    With that said, Vietnam also has some of the lowest property taxes in the region.

    In theory, capital gains tax doesn’t exist in Vietnam and you only need to pay a personal income tax of 2% when selling condos.

    If you rent out units, you only need to pay a total tax rate of 10%, with a VAT of 5% and a personal income tax of 5%.

    The only real disadvantage of buying real estate in Vietnam is that you cannot own units on a freehold basis.

    Instead, you need to lease property with lease terms of up to 50 years.

    7. Thailand

    Thailand doesn’t have any capital gains tax, but a business tax of only 3.3%. The tax is paid when selling property.

    It’s also one country where you don’t need to pay annual property tax.

    In addition, you only need to pay a stamp duty of 0.5% and a transfer fee of 2% when selling property. However, the transfer fee is usually split between the buyer and the seller.

    Overall, Thailand has some of the lowest property taxes in Asia.

    What speaks for Thailand as an investment destination is that you can also own freehold property (strata-titled units) as a foreigner.

    Being one of the most visited countries in Asia, Thailand continues to be a popular country for overseas investors.

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