Legislation

The Land Law adopted on 29 November 2013, which took effect on 1 July 2014 and was amended in 2018 (“Land Law”), covers all the land matters relating to the land, varying from the ownership, the State’s power and liabilities, the land management and use regime to the land user’s rights and obligations, and relevant transactions. Under the Law, there are dozens of regulations issued by the GoV and various ministries and agencies.

Principal Features

All lands in Vietnam are owned by people and the State, representative of the people, has the sole authority to administer it. In the central level, the NA has the ultimate power to supervise and administer over the land. However, the day-to-day management is assigned to provincial-level People’s Committees. Any use of land is evidenced by a certificate of the land use rights, ownership of house and other assets attached to land. MONRE, for its part, is responsible for determining and setting up the land price bracket commonly applicable to each of categories of land to be submitted to the GoV for issuance. Pursuant to the principles of and methods for valuation of land and land price brackets, the provincial-level People’s Committees will set up and submit the localities’ land price tables to the People’s Councils at the same level for their approval before issuing.

Foreign-invested companies (including 100% foreign-owned enterprises; joint venture enterprises; Vietnamese enterprises which foreign investors purchase shares/ capital contribution portions in or merge with or acquire in accordance with the laws on investment), can obtain the land use rights through leasing with collection of annual rent or with one-off payment of land rental for the entire lease term (frequently in the case of FOCs), allocating with collection of land use fee (only applicable to projects on investment in construction of residential housing for sale or lease out or hire-purchase), acquiring it from the contributions by the local partners in the case of JVCs, or being assigned investment capital which is value of land use rights. In all cases, a decision on leasing or allocating land from relevant state agency together with a land lease agreement signed between relevant state agency and the FIE in case of land lease are taken as the basis for the issuance of a certificate of the land use rights, ownership of home and assets attached to land (hereinafter referred to as “LURC”).

The value of the land use rights means monetary value of land use rights with respect to a fixed land area for a fixed duration of land use, which is generally arrived at by calculating the total value of land rental or land use fee for the entire lease or allocation period, by multiplying the used land area (recorded in the LURC or the decision on land allocation or land lease by a competent state agency, the land lease contract in case where the LURC is not yet available. In case where the LURC or the decision on land allocation or land lease, land lease contract is not yet issued by a competent State agency, the land user shall base on the dossiers and documents related to the land use rights to determine the land area to be taken as a basis to determine the value of land use rights) with the applicable land rental or use fee rate(s) (determined according to the land price in the Land Price List issued by the provincial-level People’s Committee) multiplied by land price adjustment coefficient prescribed by the provincial-level People’s Committee at the time of determining the value of land use rights).

Capital Contributions using Land use rights

According to the Land Law, capital contribution using land use rights is one of the ways to transfer land use rights from a person to another. This Law also made it clear that the entity receiving such capital contribution is granted a certificate of land use rights and that such entity, which may be a FIE, will have the rights of a common land user.

In the context of JVCs, it is common that local parties use land use rights to make all or part of their contributions to the charter capital of the JVCs. As earlier said, such right will last throughout the duration of the investment registration certificate.

When receiving the capital contribution using land use rights, it is particular to verify the conditions for capital contribution using the land use rights. The use of land for production and business through capital contributions using land use rights must ensure the following principles:

• In accordance with the annual land use plan of the urban or rural district already approved and published;
• Cleared ​​land, which may be used for implementation of investment projects, is exhausted in the area, except the projects in sectors or geographical areas where investment is encouraged;
• In case the economic organization receives capital contribution using the usage rights of agriculture land to implement a non-agriculture investment project, it must have a document made according to the standard form to be sent to the provincial-level Department of Natural Resources and Environment and obtain a written approval from the provincial-level People’s Committee (to be implemented within 36 months from the date of signing);
• Where the land area for ​​the implementation of investment project has a part of land where the current land user is not entitled to contribute capital using land use rights but has assets attached to the land, the investor is allowed to enter into an agreement on purchase of assets attached to land from the people who are using the land, the State shall recover the land, allocate or lease the land to the investor without any auction of land use right or any bidding for implementation of land using project, convert the purpose of land use for implementing the investment project and determine specifically land prices for calculating land use fee and land rental as prescribed. Contents of the agreement on purchase of assets attached to the land must clearly reflect the fact that the property seller voluntarily returns the land to the State for revocation of land and allocation of land to the property buyer;
• Where the land area for ​​the implementation of investment project has a part of land where the current land user is not entitled to contribute capital using land use rights and has no asset attached to the land, and this part of land is among the part of land, which has been already used for capital contribution, there are 02 cases as follows:
• if the land meets requirements to be split into an independent project, the competent People’s Committee shall decide to recover the land to allocate or lease it, for implementation of that independent project, through an auction of land use rights to be implemented no later than 90 days from the date the State issues a decision on land recovery;
• if the land does not meet requirements to be split into an independent project, the provincial-level People’s Committee shall base on the current land use status and local socio-economic conditions to organize review and specifically determine the project size, the investment location and decide to recover the land to allocate or lease land for implementation of the investment project without any auction of land use rights or any bidding for project using land, and must specifically determine land prices for calculating collected land use fee or land rental as prescribed.
• In case where land is used to implement an investment project in the form of capital contribution with land use rights and has different land use terms, the land use term shall be redefined according to the term of investment projects as follows:
• Land allocation or land lease term for organizations to use land for (i) the purposes of agricultural production, forestry, aquaculture, salt making; (ii) commercial and service purposes, non-agricultural production facility; (iii) carrying out investment projects; overseas Vietnamese, foreign-invested enterprises to implement investment projects in Vietnam shall be considered and decided on the basis of investment projects or application forms for land allocation or lease but not more than 50 years;
• For projects with large investment capital but slow capital recovery, investment projects in areas with difficult socio-economic conditions, areas with extremely difficult socio-economic conditions, which require a longer term, the time-limit for land allocation or land lease shall not exceed 70 years;
• For projects on residential housing business for sale or for sale in combination with lease or for lease purchase, the time limit for land allocation to the investor is determined according to the term of the project. Upon the expiration of the land use term, if the land user wishes to continue using land, the State shall consider extending the land use term but not exceeding the time limit specified in this clause (vi).

In case not subject to investment procedures as prescribed by the laws on investment, the land use term shall be decided by the People’s Committee of the level competent to allocate or lease land but must not exceed 50 years.

The following conditions ensure a realization of the land contribution by the local parties to a JVC, which include the existence of a LURC, dispute-free land, land use rights not subject to seizure for enforcement of a judgment, land use term not yet expired, the possibility of land using change so as to be suitable to the new purposes, and the permission by the authority of the local parties to do so.

Capital contribution using land use rights must be registered with the Land Registration Office directly under the provincial-level Department of Natural Resources and Environment (“DONRE”) and shall take effect at the time of being recorded in the cadastral book.

As a part of the capital contribution, the payment of the land rental or use fee is destined for the local parties’ responsibility, hence not falling within the responsibilities of the JVCs or foreign parties as well.

The capital contribution with land use rights shall terminate when:

• The time limit for capital contribution with land use rights has expired;
• A party or parties has/have a request therefor as agreed in the capital contribution contract;
• Land has been recovered under the provisions of the Land Law;
• The party contributing capital with land use rights in the business cooperation contract or the joint-venture enterprise is declared bankrupt or dissolved;
• The individual participating in the capital contribution contract dies; declared dead; loses capacity for civil acts or has limited capacity for civil acts; is prohibited from operating in the field of business cooperation in which the capital contribution contract must be performed by that individual;
• Operations of the legal entity participating in the capital contribution contract are terminated and the capital contribution contract must be performed by such legal entity.

The handling of land use rights upon termination of capital contribution shall be carried out as follows:

• In case where the capital contribution term expires or the parties agree to terminate the capital contribution, the party contributing capital with land use rights may continue to use that land for the remaining term.

In case where the land use term has expired or the party contributing capital with land use rights no longer needs to continue using land, the State shall allow the party receiving capital contribution to continue renting land if there is a need;

• In case where the capital contribution is terminated under a decision of a competent State agency due to a violation of the laws on land, the State shall recover such land;
• If the party receiving capital contribution or the party contributing capital with land use rights is a bankrupt organization, the land use rights used for capital contribution shall be handled according to the bankruptcy declaration decision of the People’s Court.

Recipients of land use rights and assets attached to land under decisions of the People’s Courts may continue to use the land for the determined purposes for the remainder of the land use term and be granted with a LURC.

If there is no recipient of the land use rights and assets attached to land, the State shall recover such land and assets;

• In case where the individual participating in the capital contribution contract dies, the land use rights used for capital contribution shall be inherited according to the provisions of civil laws;
• In the event an individual participating in a capital contribution contract is declared dead, has been dead or has limited capacity for civil acts, the handling shall follow provisions of the civil laws;
• In case where the joint venture enterprise is dissolved or the party contributing capital with land use rights is a dissolved organization, the land use rights used for capital contribution shall be handled according to the agreement between the parties in accordance with the provisions of the Land Law and other relevant provisions of the laws.

Compensation

Allocation or lease of land, which is having land users will be only decided by the State after the competent State decided on land revocation under the Land Law and have completed the compensation, support and resettlement in accordance with the laws for the case needing ground clearance. Pursuant to the Land Law, organizations in charge of compensation and ground clearance include land-related public service providers and Compensation, Support and Resettlement Councils.

The land user is obliged to submit the issued LURC before receiving compensation and support and the organization in charge of compensation and ground clearance shall collect the issued LURC and transfer it to the Land Registration Office to manage. The land has been recovered for socio-economic development for national and public interests such as implementation of national important projects decided on investment policies by the National Assembly; implementation of projects approved and decided by the Prime Minister; and implementation of projects approved by the provincial-level People’s Council will be assigned to the investor for implementation of the investment project or to a public land service organization for management.

If the FIE, which is allocated land by the State with collection of land use fees or rents land, voluntarily advances funds for compensation, support and resettlement; then, these funds will be reimbursed by the State budget by deducting from payable land use fee or rental amount. Deductible amount of these funds shall not exceed the payable land use fee or rental amount; and the balance, if any, shall be calculated to be included in investment capital of the project.

If the FIE, which is allocated land by the State with collection of land use fees or rents land and is exempt from land use fee or rental, voluntarily advances funds for compensation, support and resettlement under the plan approved by the competent State agencies; then, these funds will be calculated to be included in investment capital of the project.

Levels of funds for compensation, support and resettlement shall be determined in accordance with the plan of compensation, support and resettlement approved by competent State agencies of Vietnam.