The government has officially announced a further postponement of the capital gains tax implementation on real estate transactions. This decision, confirmed by the General Department of Taxation on January 2, specifies that the tax on the sale or transfer of real estate will now only apply to capital gains realized from January 1, 2027, onwards.
Initially, the government had planned to introduce the 20 percent capital gains tax as early as 2021. However, ongoing challenges, primarily stemming from the global COVID-19 pandemic and subsequent economic uncertainties, both domestically and internationally, prompted the initial deferral of its implementation. This latest extension means the tax’s effective date has been pushed back until the end of 2026, with the expectation that it will come into force on January 1, 2027, barring any further changes.
It is important to note that a separate capital gains tax framework applies to other types of assets. Gains derived from the sale or transfer of leases, investment assets, business reputation, intellectual property, and foreign currency will be subject to taxation from January 1, 2026, onwards. The General Department of Taxation clarified that the 20% capital gains tax across all specified asset types — including real estate (when applicable), leases, investment assets, business reputation, intellectual property, and foreign currency — will be levied after the state permits an 80% deduction from the total profit realized.
To illustrate the calculation, Mr. Kong Vibol, the Director General of the General Department of Taxation, previously provided an example to the public: ‘If real estate is sold for $1 million, the law and regulations allow for a deduction of $800,000. The remaining $200,000, when multiplied by 20 percent, results in a tax liability of $40,000. Therefore, for a $1 million real estate sale, the owner would pay $40,000 in capital gains tax.’
Furthermore, individuals who incur a loss or merely break even on the sale of these specified assets will not be subject to this capital gains tax. Mr. Vibol emphasized the broader societal benefits of this tax revenue, stating that the funds generated from these capital gains would be directed towards vital public services and development initiatives, such as rural development, the construction of hospitals and schools, and improvements to infrastructure like roads, wells, and ponds, ultimately benefiting the less fortunate.
