For business investors, Vietnam property rights can be complicated and confusing. In Vietnam, the people collectively own the land and are only administered by the government on their behalf. This means, legally, property owners do not have full and legal ownership of the said land. The only right they have is to use the land as permitted by the law.
Foreign investors thinking of establishing in Vietnam often find it difficult to secure a property. Most of the time, foreigners who intend to the land receive a Land Use Right Certificate (LURC), which they can hold for 50 years. The government can choose to grant LURC holders a one-time extension of another 50 years or retake the land bank if the other party fails to use the land accordingly.
Foreigners in Vietnam have the same land rights as any locals according to the Housing Law No. 65/2014/QH13. However, foreigners are not allowed to own more than 30% of the apartments in a building structure or more than 205 houses in an area with a ward-administrative division population. Below is what investors should know about Vietnam property rights:
Leasing Land in Vietnam
Those keen on leasing land in Vietnam can choose to do so with a LURC. There are four ways foreigners can lease land in Vietnam. This includes:
One way of leasing land in Vietnam is through allocation. In this method, the state allocates a LURC through an administrative decision. The receiving end must pay a land use fee to the government. This method is applicable to foreign investors engaged in residential housing and infrastructure projects in cemeteries.
In this method, the government awards the user a rental permit, payable annually or as a lump sum.
Lease or Sub-Lease Agreement
This method is applicable in industrial clusters, economic zones, industrial zones, and processing zones. The landlord is oftentimes a commercial enterprise that has a land-use right that falls under allocation and rental.
Transfer of Assets
Another method of leasing land in Vietnam is through an agreement of transfer of assets with attachment to the land such as transfer of land use right or land lease agreement. The investor who will acquire the land use right will become the user of the land area.
Of all these methods, most foreign investors choose the lease or sub-lease agreement. Since it is pretty straightforward as settlement of most necessary paperwork occurs before the rental.
Annually, the People’s Committee together with the Ministry of Natural Resources and Environment sets the land price depending on the market value. In Vietnam, land lease price cannot exceed 20% of the official price.
State-owned enterprises and limited liability corporations, citizens living abroad, or foreign-invested companies can lease out their properties. Companies can do so under the allocation method if they obtained the land before July 1, 2004. As a result, most of the lease has been paid out already. The land has a maximum lease term of 50 years and 70 years in special cases. For extension of a lease, investors must receive approval for an extension for those who want to lease the land after it expires.