Rights of Foreign Invested Companies to Real Estate in Vietnam

1.     Definition of foreign invested economic organization in Vietnam

Under the Investment Law 2020, an economic enterprise establishing in Vietnam with foreign investors as members or shareholders is regarded as “foreign-invested company”[1] (“FIC”). The term “foreign-invested company” was not used in the Land Law 2013, Law on Housing Law 2014, or Law on Real Estate Business 2014, leading to inconsistent interpretation between these real estate laws and investment law.

To overcome this shortcoming, the Law on Real Estate Business 2023 (“LOREB 2023”), the Law on Housing 2023 (“LOH 2023”) and Land Law 2024 uniformly adapt the concept of FIC in accordance with the law on investment and enterprises, with some notable points as follows:

·  According to Land Law 2024, FIC is “an economic organization that have to meet the requirements and conduct the investment procedures applicable to foreign investors in accordance with regulations of the Law on Investment to carry out land-using projects”[2].

Based on the relevant provisions of the Law on Investment 2020, it can be understood that the FIC as defined by the Land Law 2024 only includes: the FIC in which over 50% of its charter capital held by (i) foreign investors; (ii) economic organizations where foreign investors hold more than 50% of charter capital; or (iii) foreign investors and economic organizations stated in Item (ii) here[3]. Additionally, under the Land Law 2024, “domestic organizations” include economic organizations as prescribed by the Law on Investment 2020 but excluding FIC[4]. Thus, as per the Land Law 2024, a FIC is not required to carry out investment procedures applicable to foreign investors according to the provisions of the Law on Investment 2020 will still being considered as domestic organizations. As a result, it has the same rights and obligations as domestic organizations and individuals.

·  The LOREB 2023 does not define the FIC. However, this law stipulates that FICs that are not required to meet the conditions and carry out investment procedures applicable to foreign investors according to the provisions of the Investment Law 2020 can do real estate business in the same forms applicable for domestic organizations and individuals[5]. For FICs subject to meeting the conditions and carry out investment procedures applicable to foreign investors according to the provisions of the Law on Investment 2020, they can only do real estate business in the same forms as applicable for Vietnamese residing abroad who no longer have Vietnamese nationality[6]. Thus, similar to the Land Law 2024, economic organizations, even though they have foreign investment capital but not subject to the investment procedures requiring for foreign investors under Law on Investment Law 2020, will still be considered a domestic organization, and will be able to conduct real estate business activities similar to domestic organizations and individuals.

·  According to the LOH 2023, FIC is considered a “foreign corporation” according to the content of this law. Accordingly, the LOH 2023 has regarded the concepts of FIC, branches or representative offices of foreign enterprises, foreign investment funds and branches of foreign bank, that are operating in Vietnam, collectively as “Foreign Organizations”[7]. Thus, unlike the Land Law 2024 and the LOREB 2023, the LOH 2023 does not distinguish and consider whether FIC must meet the conditions and carry out investment procedures applicable to foreign investors under the Law on Investment or not. Accordingly, FIC can be understood in a broad sense as prescribed by the Law on Investment 2020, including economic organizations with foreign investors as members or shareholders.

2.     Land use rights of FICs

As mentioned above, a FIC which is not subject to the investment procedures for foreign investors as stipulated in the Law on Investment 2020, when implementing projects using land, will be regarded as domestic organizations. Accordingly, they will have the same rights and obligations concerning land as domestic organizations.

The following section will outline the scope of land use right (LUR) for FIC that must meet the conditions and follow the investment procedures for foreign investors according to the Law on Investment 2020.

Firstly, it must be affirmed that FICs are recognized as “land users” under the Land Law 2024[8]. Therefore, in principle, FICs have land use rights in Vietnam within certain scopes and conditions as stipulated by law.

a. Methods of accessing lands for FICs

FICs can acquire LUR in the following cases[9]:

(i)  Acquiring LURs from the State:

• Being allocated land by the State for implementing investment projects for housing construction for sale or for sale combined with leasing[10];
• Being compensated with land when the State recovers land[11]; and
• Being leased land by the State with annual rent payment or one-time rent payment for the entire lease period in cases where land allocation (with or without land use fees) does not apply, as stipulated by the Land Law 2024[12];

(ii) Acquiring LURs from the market:

• FICs acquire land use rights through the transfer of land use rights within industrial zones, industrial clusters, and high-tech zones[13];
• FICs acquire investment capital in the form of land use rights value[14]; and
• FICs acquire capital contribution in the form of land use rights[15].

(iii) Acquiring LURs in other cases as stipulated by the Land Law 2024.[16]

In addition to the aforementioned forms, for commercial land, service land, and non-agricultural production base land, FICs may also utilize land through methods such as (i) leasing land, re-leasing land from economic organizations, individuals of Vietnamese origin residing abroad; (ii) re-leasing land attached to FIC’s infrastructure[17].

b.  Scope of LURs of FICs

As a “land user” recognized by the State of Vietnam, FICs will have the common rights of land users, similar to other entities such as[18]: (i) issuance of Certificate when meeting legal conditions regarding land; (ii) enjoyment of labor results, investment results on lawfully used land; (iii) entitlement to benefits when the State invests in protecting, renovating, and developing agricultural land; (iv) State protection against infringement by others on their lawful land rights, interests, and other common rights.

Additionally, corresponding to the forms of receiving LURs, purposes of use, FICs will have rights and obligations in specific cases as follows:

(i)  For group of land leased by the State where annual rent is paid, entities including (i) FICs using land for investment projects[19], and (ii) FICs currently using land received through capital contribution by LURs not previously used for residential investment projects for sale[20] will have the following rights:

• FIC’s ownership of property attached to leased land from the State is recognized, thereby having decision-making rights over their property attached to leased land such as (i) mortgaging assets at licensed credit institutions in Vietnam; (ii) contributing capital by assets, selling owed assets attached to land. In this case, the person receiving the capital contribution by assets or the purchaser of the assets will continue to be leased the land by the State. In the case of selling owned assets attached to the land, the assets must be lawfully established, registered in accordance with legal regulations, and constructed in accordance with the approved detailed construction planning and investment project (if any)[21].
• FIC also has the right to lease (i) assets under their ownership attached to land, and (ii) land lease rights under lease contracts with the State.
• If the land is located in industrial zones, industrial clusters, high-tech zones and has completed infrastructure construction in cases allowed to invest in infrastructure construction, FIC will have the right to sublease the land use rights with annually rental fees.

(ii) For group of land leased by the State where one-time rent is paid for the entire lease period, entities including (i) FICs using land for investment projects[22], (ii) FIC receiving capital contribution by land use rights[23], (iii) FICs converted from joint ventures where Vietnamese parties contributed land use rights not previously used for residential investment projects for sale[24]: the rights of these subjects are expanded compared to cases where the State leases land with annual rental payment, including rights over LURs and property attached to land. Accordingly, FICs have the right to:

• Transfer, lease, sublease LURs, assets under their ownership attached to land during the land use period;
• Mortgage LURs, assets under their ownership attached to land at credit institutions permitted to operate in Vietnam;
• Contribute capital by LURs and assets under their ownership attached to land.

(iii) For group of land allocated by the State with land use fees collected, entities including (i) FICs using land for investment projects[25], (ii) FICs receiving capital contribution by LURs[26], and (iii) FICs converted from joint ventures where Vietnamese parties contributed land use rights previously used for residential investment projects for sale [27], FIC’s rights are similar to those for group of land leased by the State with one-time rent is paid for the entire lease period as analyzed above.

(iv) For group of land in industrial zones, industrial clusters, high-tech zones (collectively “Industrial Zone Land”) leased by FICs with one-time land use fees for the entire lease period[28], FICs will have the following rights:

• Transferring LURs and owned property attached to land;
• Re-leasing LURs and owned property attached to land;
• Mortgaging LURs, owned property attached to land at credit institutions permitted to operate in Vietnam, other economic organizations, or individuals as stipulated by law;
• Contributing capital by LURs and assets under their ownership attached to land with domestic organizations, individuals, Vietnamese nationals residing abroad and FICs as stipulated by the laws; and
• Donating LURs to the State, community for common interests, charitable homes, house of great unity as regulated by the law.

(v)  For Industrial Zone Land leased by FIC with annual rent payment, FIC primarily has the right to make decisions regarding its owned assets attached to the land, such as mortgaging assets at credit institutions permitted to operate in Vietnam, other economic organizations, or individuals as prescribed by law. Compared to non-industrial zone land leased by the State with one-time rent payment as analyzed above, it can be seen that the entities receiving mortgages of assets attached to FIC’s land in Industrial Zone Land are broader, including other economic organizations or individuals as prescribed by law.

Furthermore, in this case, FIC is also entitled to sell assets, contribute capital by its owned assets, and lease its owned assets attached to the leasehold rights in the land lease contract during the lease period. The purchaser of assets attached to the land and the leasehold rights in the land lease contract will continue to lease the land for the determined purpose and remaining usage period, while the recipient of capital contribution will also continue to be leased the land by the State for the confirmed purpose within the remaining lease period.

3.   Ownership of houses

FIC is one of the entities eligible to own residential property in Vietnam under the forms and conditions stipulated by housing laws.

Under the LOH 2023, FIC can be understood similarly to the definition provided in the Law on Investment 2020, including economic organizations with foreign investors as members or shareholders, regardless of whether it is required to undergo investment procedures for foreign investors under the Law on Investment 2020. Additionally, branches or representative offices of foreign enterprises, foreign investment funds, and branches of foreign banks operating in Vietnam will also have housing rights similar to FICs[29] as outlined below.

a. Forms of house ownership

According to the LOH 2023, FICs are permitted to own residential property in Vietnam, including both apartments and private houses, in the following forms[30]:

(i)  Form 1: FICs invest in residential construction projects in Vietnam and owns residential property through the implementation of such investment projects;

Regarding the subject condition, to execute a residential construction investment project, the LOH 2023 requires FICs to be the project developer of the residential construction investment project according to the provisions of this Law and law on real estate business.

(ii) Form 2: FICs can (i) purchase, (ii) lease-purchase commercial houses from the project developer of residential construction investment projects, (iii) receive donations, and (iv) inherit commercial houses within residential construction investment projects not located in areas requiring national defense and security assurance; and

(iii) Form 3: FICs can (i) purchase, and (ii) lease-purchase commercial houses from foreign individuals and FIC owns residential property under Form 2.

Regarding the subject conditions, the LOH 2023 stipulates that for FIC to own residential property in Vietnam under Form 2 and Form 3, it must have an “Investment Certificate, Investment Registration Certificate, or other relevant documents permitting the operation or establishment in Vietnam that are valid at the time of signing the housing transaction, issued by the competent state authorities of Vietnam according to legal regulations”[31]. The “Investment Registration Certificate” or “Investment Certificate” (collectively referred to as “IRC”) is a certificate clearly defined in the Law on Investment 2020[32], and is typically issued to FICs in the form of investment for establishing economic organizations under the Law on Investment. Thus, FICs with IRC will meet the entity conditions for owning residential properties in Vietnam.

However, the regulation “other relevant documents permitting the operation or establishment in Vietnam” remains ambiguous. Specifically, for domestic economic organizations established under the Law on Enterprise (without foreign capital at the time of establishment), where foreign investors subsequently invest in the form of capital contribution/share purchase/equity purchase, an IRC is not mandatory. The LOH 2023 lacks specific guidance on whether the “Enterprise Registration Certificate” (“ERC”) recording the information of the foreign investor after foreign investor becomes a member is considered as a document permitting the operation or establishment in Vietnam. Furthermore, unlike the ERC for limited liability companies, the ERC for joint-stock companies currently does not explicitly record shareholder information (including domestic or foreign investors) on the certificate. Instead, when there is a new shareholder being foreign investor, the economic organization without IRC must notify the foreign shareholder under the Law on Enterprise[33]. Thus, the relevant documents permitting the operation or establishment in Vietnam in this case are not clearly defined by the LOH 2023, and whether the ERC along with the “Confirmation of Change in Enterprise Registration Information – Confirmation of Notification of Shareholder Information as Foreign Investor” is considered appropriate is yet to be determined. Therefore, we need to wait for the Government to issue guiding documents for the LOH 2023 to have a precise and consistent understanding of this matter.

b. Limits on residential property ownership in Vietnam by FIC

Similar to the case of foreign individuals owning residential property in Vietnam as discussed in previous article, due to national defense and security issues related to land sovereignty and residence, FICs that meet the conditions for owning residential property in Vietnam are also subject to certain restrictions regarding the areas, quantity, and duration of ownership as follows:

(i)  Regarding the area: FICs are only permitted to own residential property within residential construction investment projects, and such projects must not be located in areas designated for national defense and security protection according to Vietnamese law[34].

(ii) Regarding the quantity of houses ownership: For FICs owning residential property under Forms 2 and 3 as mentioned in Section 3.a.(ii) and (iii), FICs is restricted to purchasing, lease-purchasing, receiving as donations, inheriting, and owning no more than 30% of the total number of apartments in a single apartment building. For separate houses, including villas and terraced houses, FICs are limited to purchasing, lease-purchasing, receiving as donations, inheriting, and owning no more than 250 houses [35]. This limit also applies to areas with a population equivalent to that of a ward that have multiple apartment buildings, or for separate houses on the same street.

The LOH 2023 does not specify a limit on the ownership of residential property by FICs that are project developers of residential construction investment projects under Form 1 as outlined in Section 3.a.(i). Thus, it can be understood that FICs are allowed to build and own houses without limit, aiming to attract foreign investment in the housing sector in Vietnam.

(iii) Regarding the duration of residential property ownership: Unlike foreign individuals who have the right to own a house for no more than 50 years, with a one-time extension not exceeding 50 years, FICs may own residential property according to the terms agreed upon in transactions for purchase, lease-purchase, donation or inheritance, but not exceeding the duration stated in their Investment Certificate, including any extensions[36]. According to the Law on Investment 2020, typically, an investment project outside economic zone will have a term not exceeding 50 years. Investment projects within an economic zone, or outside an economic zone but in areas with difficult or especially difficult socio-economic conditions, or large investment projects with slow capital recovery, may have a term longer but not exceeding 70 years[37]. The IRC is generally issued for the duration of the project’s operation; therefore, the duration of residential property ownership by FICs will also not exceed this period.

Moreover, as analyzed above, many FICs may not have an IRC. Documents like the Enterprise Registration Certificate (ERC) usually do not specify the operational term of the certified economic entities. Consequently, the LOH 2023 currently lacks specific guidance on the duration of residential property ownership for FICs in such cases. Whether these organizations will be permitted to own property for a term similar to that of foreign individuals or for a long-term and stable period like Vietnamese citizens? It is hoped that the Government’s implementing regulations for the LOH 2023 will provide specific guidance for these scenarios.

(iv) Regarding the obligations of FIC as residential property owner: FICs have the obligations of residential property owners similar to Vietnamese citizens; however, they may only use the residential property to accommodate individuals working for those FICs[38].

4.  Real estate business rights

As analyzed above, the LOREB 2023 has specifically classified two types of FICs corresponding to different conditions, scopes, and forms of real estate business.

a. For FIC falling under the conditions and investment procedures required for foreign investors under the Law on Investment 2020, they are entitled to engage in real estate business activities similar to individuals of Vietnamese origin residing abroad[39], including the following forms:

(i) Investing in the construction of residential houses, construction works attached to LURs for sale, lease, lease-purchase through real estate projects implemented in accordance with the forms, purposes, and land use duration as stipulated by land laws;

(ii) Investing in the construction of technical infrastructure within real estate projects to transfer, lease, sublease LURs with completed technical infrastructure in accordance with the forms, purposes, and land use duration as stipulated by land laws;

(iii) Leasing residential houses, construction works or portions of construction floor area within the construction works for subleasing; and

(iv) Acquiring the transfer of the entire or a part of a real estate project to continue construction and business activities.

Additionally, the LOREB 2023 specifies clearly the entities eligible to purchase, lease, lease-purchase residential houses and existing construction works from real estate business entities. Specifically, these entities are allowed to purchase or lease residential houses for personal use; lease residential houses for business purposes as regulated by this Law; purchase or lease construction works, or portions of construction floor area within construction works of real estate project investors, real estate business entities for use according to the intended function of the construction works serving their activities; lease construction works or portions of construction floor area within construction works for subleasing to use according to the intended function of the construction works[40].

Furthermore, when conducting real estate business activities, these entities must adhere to certain restrictions, including:

• When engaging in the sale and purchase of future houses, payments must not exceed 50% of the contract value before handover[41]; and
• When acquiring the transfer of all or part of a project, after obtaining approval from the investment authority and signing the project transfer contract, all parties must proceed with land procedures in accordance with land laws[42].

b. For FICs not falling under the above cases, they are entitled to engage in real estate business activities similar to domestic organizations and individuals, including[43]:

• Investing in residential houses, construction works for sale, lease, lease-purchase;
• Investing in technical infrastructure within real estate projects for transfer, lease, sublease of land use rights with existing technical infrastructure;
• Purchasing, lease-purchasing residential houses, construction works, or portions of construction floor area within construction works for sale, lease, lease-purchase;
• Acquiring the transfer of land use rights with existing technical infrastructure within real estate projects for transfer, lease;
• Leasing residential houses, construction works, or portions of constructed floor area within construction works for subleasing;
• Leasing land use rights with existing technical infrastructure within real estate projects for subleasing; and
• Acquiring the transfer of the entire or a part of a real estate project to continue construction and business activities.

Furthermore, this group of entities also has the right to purchase, lease, or lease-purchase existing residential houses and construction works from real estate business entities. Therefore, these entities have full authority to purchase, lease, or lease-purchase residential houses, construction works, or portions of construction floor area within construction works for use and business purposes similar to domestic individuals and organizations[44].

[1] Article 3.22 of the Law on Investment Law 2020
[2] Article 3.46 of the Land Law 2024
[3] Article 23.1 of Law on Investment Law 2020
[4]Article 4.1 of the Land Law 2024
[5] Article 10.5 of the LOREB 2023
[6] Article 10.4 of the LOREB 2023
[7] Article 17.1.b of the LOH 2023
[8] Article 4.7 of the Land Law 2024
[9] Article 28 of the Land Law 2024
[10] Article 28.1(i)) and Article 119.3 of the Land Law 2024
[11] Article 119.4 and Article 98 of the Land Law 2024
[12] Article 28.1(k) and Article 120 of the Land Law 2024
[13] Article 28.1(c) of the Land Law 2024
[14] Article 28.1(d) of the Land Law 2024
[15] Article 28.1(dd) of the Land Law 2024
[16] Article 28.1.(m) of the Land Law 2024
[17] Article 206.3 of the Land Law 2024
[18] Article 26 of the Land Law 2024
[19] Article 41.2 of the Land Law 2024
[20] Article 42.2.a of the Land Law 2024
[21] Article 46 of the Land Law 2024
[22] Article 41.3 of the Land Law 2024
[23] Article 42.1 of the Land Law 2024
[24] Article 42.2.b of the Land Law 2024
[25] Article 41.3 of the Land Law 2024
[26] Article 42.1 of the Land Law 2024
[27] Article 42.2.c of the Land Law 2024
[28] Article 43.2.a), Article 33.1 and Article 33.3 of the Land Law 2024
[29] Article 17.1.b) of the LOH 2023
[30] Article 17.2 of the LOH 2023
[31] Article 18.2 of the LOH 2023
[32] Article 3.11 and Article 77 of the Law on Investment 2020
[33] Article 58 of Decree 01/2021/ND-CP
[34] Article 16.1 of the LOH 2023
[35] Article 19 of the LOH 2023
[36]Article 20.2.(d) of the LOH 2023
[37] Article 44.2 of the Law on Investment 2020
[38] Article 21.2(b) of the LOH 2023
[39] Article 10.3 of the LOREB 2023
[40] Article 15.3 of the LOREB 2023
[41] Article 25.1 of  the LOREB 2023
[42] Article 42.1 of the LOREB 2023
[43] Article 10.5 of the LOREB 2023
[44] Article 15.1 of the LOREB 2023