Government
initiatives and incentives Investment incentives
Investment incentives largely take the form of exemptions
from or reduction of corporate income tax (CIT), land rent and import duty.
Particulars of the import duty and corporate income tax concessions are set out
below.
Investment projects which satisfy one of the following
conditions are entitled to corporate income tax incentives:
- investment in an industry and/or sector which is on the
list of investment incentive sectors promulgated by the Government in
accordance with the IL
- investment in an industry and/or sector which is on the
list of special investment incentive sectors promulgated by the Government in
accordance with the IL
- investment in a region which is on the list of regions with
difficult socioeconomic conditions as promulgated by the Government in
accordance with the IL
- investment in a region which is on the list of regions with
especially difficult socioeconomic conditions as promulgated by the Government
in accordance with the IL.
Land rental
Preferential treatment given to foreign enterprises in
respect of land rental, includes:
- (i) Investment projects in areas where investment is
especially encouraged, and which are carried out in geographical areas facing
exceptional socioeconomic difficulties; and (ii) projects involving the use of
land for construction of condominiums for industrial park workers under
projects approved by competent authorities, covering the house-selling prices
or house-leasing prices which do not include land rent expenses; (iii) projects
involving the use of land for construction of students’ dormitories with State
budget money, for which the units assigned to manage such dormitories may only
calculate charges sufficient to cover expenses for services, electricity and
water supply, for management and other relevant expenses and must not calculate
land rent expenses and depreciate the houses; (iv) projects involving the use
of land for construction of public facilities for business purposes in the
fields of education, health, physical training, sport, science and technology.
- A three-year exemption for projects on the list of domains
where investment is encouraged; and new production or business establishments
of economic organizations which are relocated pursuant to State planning or due
to environmental pollution.
- A seven-year exemption for projects in geographical areas
facing socioeconomic difficulties.
- An 11-year exemption for projects in geographical areas
facing exceptional socioeconomic difficulties, projects on the list of areas
where investment is especially encouraged, and projects on the list of areas
where investment is encouraged which are carried out in geographical areas
facing socioeconomic difficulties.
- A 15-year exemption for projects on the list of areas where
investment is encouraged which are executed in geographical areas facing
exceptional socioeconomic difficulties, and projects on the list of areas where
investment is especially encouraged and which are carried out in geographical
areas facing socioeconomic difficulties.
Further, for cases where annual land rent is payable, the
annual land rental rate is 1.5 percent of the land price based on the use
purpose of the rented land. For land rental to be paid in a lump sum for the
whole rent duration, the payable land rental amount is equal to the payable
land use levy amount for land allocation with a land use levy payment for the
same use purpose and land use duration.
The land rental rate applicable to each project was to be
kept unchanged for five years. At the end of this period, if the land price
prescribed by the provincial-level People’s Committee increases by less than 20
per cent from the land price for calculating the land rental rate at the time
of determining the land rental rate applicable to the preceding period, the
land price bracket prescribed by the provincial-level People’s Committee at the
time of adjustment of the land rental rate will apply for calculating the land
rental rate applicable to the subsequent five year period which must not be
lower than the land rent rate applicable to the preceding stabilization period.
If the land price prescribed by the provincial-level
People’s Committee increases 20 percent or more from the land price for
calculating the land rental rate at the time of determining the land rental
rate applicable to the preceding period, the provincial-level Finance
Department has prime responsibility for determining the land price adjustment
co-efficient and propose it to the provincial-level People’s Committee for
decision. This co-efficient serves as a basis for the provincial Department of
Finance to adjust the land rental rate applicable to the subsequent five-year
period. At the end of the five-year period, if the land rental rate has not
been adjusted due to objective reasons, the land rental rate applicable to the
preceding five-year period will apply for temporary payment of land rentals for
the subsequent period. When a competent authority adjusts the land rental rate
for each adjustment, the policy on and the land price for collection of the
land rental corresponding to such adjustment will apply and the payable land
rental deficit amount (if any) shall be retrospectively collected.
Land and housing
Land
One of the principal matters that an investor must decide at
the outset is the location of its investment project. The investor must,
therefore, understand how it may acquire the right to use land in Vietnam.
General outline of
Vietnamese land law
Under the Vietnamese Constitution, all land in Vietnam
belongs to the Vietnamese people and its use is administered on their behalf by
the State. Private ownership is not possible, although the right to use land
can be allocated by the State. Accordingly, under the Vietnamese legal system,
“land is the property of the entire people” but buildings erected on the land
can be privately owned.
The individual title over the land upon which a building has
been erected is acknowledged by law as the “Right of Land Use”. A certificate
known as the Certificate of Land Use Right, Ownership of Residential Housing and
other Property attaches to the Land (Certificate), and defines the rights
related to the use of the land.
Land use is governed by the Land Law 2003 and related
regulations. Unfortunately, these regulations do not provide a clear system of
land use and related issues.
Organizations being holders of land use rights may
contribute the land use rights to form the capital of a joint venture (JV).
This means that for a foreign investor entering into a joint venture
arrangement with a Vietnamese partner, the Vietnamese partner can contribute
its share of capital by way of land. This can be a major benefit due to the
general inability of foreigners to obtain land use rights. If an investor
requires the use of existing premises, it may rent such premises from entities
and individuals that have the right to lease premises.
Certificate of Land Use Right, Ownership of Residential
Housing and other Property attached to the Land. The fundamental document
evidencing the right to use land is the Certificate. After the State has
allocated or leased land to a user, the land user must apply to the People’s
Committee of the District in which the land is situated for the Certificate if
the land user is an individual, family household, community of citizens or an
overseas Vietnamese who purchases a residential house. In other cases, the
provincial People’s Committee is responsible for the issue of the Certificate.
The Certificate is valid only for the time for which the State allocates the
land as set out in the Certificate. Moreover, the grantee of the Certificate
may only use the land for the purpose stated in the Certificate and is required
to pay land use fees or land rent to the State (usually on an annual or
semi-annual basis).
Land lease by JVs and
100 percent Foreign Owned Enterprises (FOEs)
Under the prevailing legislation on land, JVs and 100 per
cent FOEs can lease land in Vietnam from the State under a lease contract for,
amongst other things, the purpose of construction on the land according to the
investment certificate granted to them and to own the buildings they construct
on the land during the term of the lease.
JVs and 100 percent FOEs may lease land from the State for
the term set out in the lease contract, which is usually also for the term set
out in their investment certificate. Upon expiry of the term of the lease, if
extension of the lease contract is not approved by the relevant Vietnamese
authority, the land use right terminates and reverts to the State and the
foreign investor must then dispose of its interest in the building (if any). As
such rights are relatively new, it is not clear what attitude the authorities
will take upon the expiry of a lease if a foreign owned company wants to renew
the lease.
Foreign companies (as distinct from JVs and 100 percent
FOEs) are not permitted to lease land from the State. They may, however, lease
premises from landlords who are licensed to conduct leasing activities,
provided that the office of the foreign company in Vietnam is duly licensed by
the competent authority of Vietnam. This usually means that they have
established a representative office.
Housing and
construction works
On 23 June 2010, Decree No. 71/2010/ND-CP, on implementation
of the Law on Residential Housing 2005, was issued. Under this decree, local individuals
and organizations, overseas Vietnamese and foreign individuals and
organizations who are entitled under Vietnamese law to own construction works
will be issued with the ownership certificate of construction works (depending
on the purpose of use of such property).
Under the Law on Residential Housing 2005 dated 29 November
2005, Vietnamese persons residing overseas, who return to Vietnam to make
long-term investments and whose work has contributed to the country, cultural
activists and scientists with a requirement to return to Vietnam for regular
activity aimed at serving the cause of national development, persons permitted
to live stably in Vietnam and other persons stipulated by the Standing
Committee of the National Assembly, are entitled to own a residential house in
Vietnam. Even if a non-resident Vietnamese does not satisfy any of the above
conditions but returns to reside in Vietnam for a permitted duration of six
months or more they are entitled to own one individual residential house or one
apartment.
The newly adopted Resolution No. 19/2008/ND-QH12 permits
foreign organizations and individuals to buy and own apartments on a pilot
basis for a term of five years commencing on 1 January 2009.
The Law on Real
Estate Business 2006 was passed on 29 June 2006 and came into force as of 1
January 2007. Based on this Law, foreign organizations and individuals, and
Vietnamese persons residing overseas are permitted to conduct real estate
business and real estate business services within the following scopes:
- investment in the creation of houses and buildings for
sale, lease out or grant of hire purchase
- Subject to this
Resolution 19, there are five groups of foreigners eligible to purchase
apartments, including:
- foreigners who invest directly in Vietnam under the IL or
are employed by enterprises doing business activities in Vietnam under EL,
including domestic enterprises and foreign invested companies
- foreigners who have made contributions to Vietnam and have
received medals awarded by the President of Vietnam, or foreigners who have
made great contributions to Vietnam and as decided by the Prime Minister
- foreigners who are working in eco-social fields and hold
bachelor degrees or higher degrees and foreigners who have special knowledge or
skill that meet Vietnam’s requirements
- foreigners who are married to Vietnamese nationals
- foreign invested enterprises doing business in Vietnam
under the IL which are not operating in the real estate business, who have the
need to purchase apartments for housing their employees.
Foreign organizations and individuals investing in the
construction of residential properties for lease in Vietnam are issued with
Certificate of Land Use Right, Ownership of Residential Housing and other
Property attached to the Land with respect to such houses by the competent
State body. The duration of ownership of the residential house is the duration
specified in the investment certificate. The duration of ownership is recorded
in the Certificate. Foreign organizations and individuals investing in the
construction of residential houses for sale, after completion of the
construction pursuant to a project, are entitled to sell such residential
houses to purchasers permitted to own residential houses in Vietnam. Purchasers
of residential houses are issued with Certificate of Land Use Right, Ownership
of Residential Housing and other Property attached to the Land.
The Law on Real Estate Business 2006 was passed on 29 June
2006 and came into force as of 1 January 2007. Based on this Law, foreign
organizations and individuals, and Vietnamese persons residing overseas are
permitted to conduct real estate business and real estate business services
within the following scopes:
- investment in the creation of houses and buildings for
sale, lease out or grant of hire purchase
- investment in upgrading land and to invest in
infrastructure works on the leased land in order to lease out land with
completed infrastructure
- provision of real estate business services, such as real
estate: — brokerage services — valuation services — trading floor
services — consultancy services — auctioning services — advertising services —
management services.