Private ownership of land is not permitted in Vietnam and the people hold all ownership rights with the State as the administrator. However, the laws of Vietnam do allow for the ownership of the Land Use Right (“LUR”). In Vietnam, the certificate of LUR, ownership of houses, and other assets attached to land is commonly known as the pink book, issued by the Ministry of Natural Resources and Environment.
According to Article 5 of the 2013 Land Law which came into effect on July 1, 2014, foreign individuals are not entitled to obtain land use rights, they can neither have ownership of land nor rent.
However, the Land Law stipulates that the Government can allocate or lease land to foreign invested companies for a period of maximum 50 years (exceptionally for 70 years), to implement their projects. LURs leases are subject to a land use rent and are the only form of land ownership available to foreigners.
If the project is planned on an island, coastal or border areas, land allocation or land lease can only be carried out with the written approval from the Ministry of Defense, the Ministry of Public Security, and the Ministry of Foreign Affairs. This is also the case for land leases or sub-leases in industrial parks, industrial complexes, export processing zones, hi-tech parks, or economic zones. Due to the protection of national defense and security, since 2017, the government has made it harder for foreigners to receive property ownership certificates.
The law allows the foreign-invested businesses to transfer capital in the form of LUR value. Typically, local partners of Joint Ventures in Vietnam contribute their portion of capital in the form of the LUR value, only after receiving land “allocation”, rather than a land “lease”, and where payment in full for the land “allocation” has been made. Where the land usage fee payment is deferred, the contribution of the LUR into foreign investment projects is still permissible as far as the deferment is allowed in writing by the relevant People’s Committee. Once the JV’s investment certificate has been issued, the same JV shall be the holder of the LUR certificate.
Most investors rely on a lease instead of the purchase of land. There are four options for investors to lease land with a LUR specified by the Vietnamese government. The easiest method is to lease or sublease directly from the landlord. Such land must be in a high-tech zone, processing zone, industrial zone, or economic zone. The landlord is usually a commercial enterprise that has already completed all the required paperwork and obtained the LUR.
Every year, the People’s Committee, with the support of the Ministry of Natural Resources and Environment (MONRE), establishes the land price based on market value. When leasing land in Vietnam, the price cannot deviate more than 20% from this official price. In order to renew the lease, the investor has to obtain approval for an extension. Companies also have the option to rent an office in a building or lease from a company in an industrial zone or export-processing zone.
Foreign investors wishing to extend their lease term should apply for an extension 6 months before expiration and include in their applications an amended business or production plan approved by the relevant authorities. An extension of the lease term may be allowed by the Government if:
The lessee has complied with the land regulations during its use period; and
The use of land is consistent with the approved land plan.
Residential Land Use Right
According to Decree No. 99/2015/ND-CP on residential housing, foreigners can only possess up to 30% of total apartment units in a project and are not allowed to own property in the checklists of special areas reserved for national defense and security. Locations are determined by the Ministry of National Defense and the Ministry of Public Security.
Under the 2013 Land Law, all land areas used by households and individuals for the residential purpose are regarded as land for stable and long-term use and subject to no given use term (Article 125 of the Law). Therefore, individuals or households that are named in LUR certificates have full discretion to use and dispose of their residential land areas without any temporal limitations. Unlike land, houses are deemed by Vietnamese Law as private property, therefore, only in some exceptional cases the State may enforce requisition. The Law specifies the following cases of land recovery in case of:
National defense or security purpose.
Socio-economic development for national or public interests.
Violations of the Land Law.
Termination of lawful land use.
In addition to the abovementioned, there are also certain cases where LUR certificates are revoked by the Government. According to art. 4 and 5 of the Housing Law, in case of land recovery for ground clearance, the State will have to pay compensation and implement the resettlement of individuals, households and organizations that lawfully own houses on such land.
Foreign individuals are permitted to own apartments for 50 years, while foreign entities are permitted the same rights for the duration of the term stated in its investment certificate. The categories of Foreign individuals and companies are also allowed to purchase apartments from residential projects in Vietnam include the following:
Foreigners who have direct investments in Vietnam or holding a management position in a company operating in Vietnam;
Foreigners who have made a contribution to Vietnam and such contribution has been recognized by the President or the Prime Minister of Vietnam;
Foreigners who have university degrees or a higher education level and are currently working in socio-economic fields, and those who have special knowledge which Vietnam needs;
Foreigners married to Vietnamese citizens;
Companies with foreign-invested capital operating in Vietnam which are not real estate trading companies and have a requirement for residential accommodation for its employees.
According to the Law on Residential Housing, only foreign entities and individuals who are allowed to enter Vietnam for a period of at least 3 consecutive months are entitled to lease residential houses or apartments.
If you have any questions or would like to seek our professional advice in this field, please send email to info@dandreapartners.com to contact us.
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