What do foreign enterprises renting land in Vietnam need to know?, Land lease rights of foreign enterprises

What do foreign enterprises renting land in Vietnam need to know?

Foreign enterprises that want to implement investment projects in Vietnam need to apply for land first. A land lease is a common form of land use that foreign enterprises should pay attention to.

Land lease rights of foreign enterprises

According to Clause 22, Article 3 of the Investment Law 2020, a foreign-invested economic organization (FDI) is an economic organization with a foreign investor as a member or shareholder. When an FDI enterprise invests in Vietnam, it must have a head office or other facilities for business purposes. Clause 7, Article 5 of the 2013 Land Law stipulates the components that are allowed to use land, one of which is a foreign-invested enterprise, including:

“7. Foreign-invested enterprises include 100% foreign-invested enterprises, joint-venture enterprises, and Vietnamese enterprises in which foreign investors purchase shares, merge or repurchase in accordance with the law on foreign investment.”

Pursuant to Clause 3, Article 55, Point dd, Clause 1, Article 56, and Point b, Clause 1, Article 169 of the 2013 Land Law, foreign enterprises may use land in Vietnam through the following forms:

  • Land allocation;
  • Land lease;
  • Receive land use rights.

Particularly for the case of land lease, Point d Clause 1 Article 56 of the Land Law provides as follows:

“1. The State leases the land with an annual rental payment or collects one-off land rental for the entire lease period in the following cases:

e) Economic organizations, overseas Vietnamese, and foreign-invested enterprises using land to implement investment projects on agricultural production, forestry, aquaculture, and salt production; non-agricultural production and business land; land for construction of public works for business purposes; land for implementation of housing investment projects for lease;”

In summary, foreign-invested enterprises are subject to a land lease under the provisions of the 2013 Land Law.

The authority to lease land to foreign enterprises belongs to the Provincial People’s Committee according to Point d Clause 1 Article 59 of the 2013 Land Law:

“Provincial-level People’s Committees shall decide to allocate or lease land or permit the change of land use purpose in the following cases:

d) Leasing land to overseas Vietnamese or foreign-invested enterprises as prescribed at Points e and f, Clause 1, Article 56 of this Law.”

Can foreign enterprises lease land from individuals?

According to the provisions of point d, clause 1, Article 59 of the 2013 Land Law, only the State has the right to lease land to foreign enterprises. Therefore, foreign enterprises cannot directly lease land from households and individuals using the land.

In case a foreign enterprise has selected a land area suitable for investment needs and this land is currently being used by an individual or household as the lawful owner, it can still be rented through an agreement on compensation with that land user for the State to recover the land in the form of voluntary return of the land and then carry out the procedures for applying for a land lease at the competent authority.

In addition, Point d, Clause 2, Article 179 of the 2013 Land Law stipulates: Individuals have the right to lease properties under their ownership attached to the leased land in accordance with civil law. In this case, the foreign enterprise may collect the construction works on the individual’s land for headquarters.

Can foreign enterprises sublease land?

Clause 2, Article 149 of the Land Law 2013 provides for the lease of land in industrial parks, industrial clusters, and export processing zones:

“2. The State leases land to economic organizations, overseas Vietnamese, and foreign-invested enterprises to invest in the construction and business of infrastructure in industrial parks and industrial clusters. For the land leased area with annual land rental payment, the person who is leased the land by the State has the right to sublease the land in the form of an annual payment of land rent; for the land leased area, to pay annual rent. If the land rent is one-off for the entire lease period, the person to whom the land is leased by the State has the right to sublease the land in the form of a one-off payment of land rent for the entire lease period or annual payment of land rent.”

Point b, Clause 2, Article 174 of the 2013 Land Law also stipulates the rights and obligations of organizations that are allocated land with land use levy by the State, or leased land with one-off rental for the entire lease period as follows:

“2. Economic organizations that are allocated land by the State with land use levy, or leased land with one-off rental payment for the entire lease period, in addition to the rights and obligations specified in Clause 1 of this Article, also have the following rights:

b) Leasing land use rights and assets under their ownership attached to the land, in case they are allocated land with collection of land use levy by the State; sublease land use rights and assets under their ownership attached to land in case the State leases the land with one-off rental payment for the entire lease period”.

Thus, foreign enterprises can completely sublease land that has been leased by the State to other individuals and organizations.

ASL LAW is the top-tier Real Estate law firm in Vietnam. If you need any advice, please contact us for further information or collaboration.

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