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Foreign Investment Policy
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.