Tran Quang Huy, LL.D. Hanoi Law University
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| Bac Dong Phu industrial park in Binh Phuoc province__Photo: Sy Tuyen/VNA |
The land law contains three particularly important institutions of land ownership, land management and land use. While various forms of land ownership[1] used to exist in Vietnam, since 1980 there has only been the official regime of public ownership of land under the State’s uniform management. The 1992 and 2013 Constitutions have inherited and developed the foundation of public land ownership, stressing that land belongs to the entire people with the State acting as the owner’s representative performing the uniform management. The issue of owner’s representative has been clearly defined in the 2013 Constitution and the 2013 Land Law.[2] So far, after nearly 43 years’ applying the regime of public land ownership, the land use has proved inefficient here and there, now and then, failing to bring into full play this resource for socio-economic development and having resulted in social consequences on disputes, complaints and denunciations related to land policies of the State. However, since the enforcement of the public land ownership regime, the State, under its land policies, has always respected and protected the people’s ownership of property associated to land if such ownership is infringed upon or when the State needs to recover the land for defense, security and development purposes.
Participating in the land use relationship are multiple entities with diverse legal status, rights and interests. Entities involving foreign elements using land in Vietnam include overseas Vietnamese, foreign organizations with diplomatic functions, foreign-invested economic organizations participating in investment, production and business activities in Vietnam and being allocated land liable to land use levy or being leased land by the State with the annual or whole-term land rent payment. In addition, these investors, including foreigners permanently or temporarily residing in Vietnam, can buy and own residential houses in Vietnam under the specific conditions set out in the 2014 Housing Law.
Comparing the provisions of the 2013 Land Law with the provisions of Articles 43 thru 48 of the draft revised Land Law made public on January 3, 2023, there are almost no big changes in dealing with the rights and obligations of entities involving foreign elements using land in Vietnam. However, the draft adds new regulations and new ideas on overseas Vietnamese and foreign-invested economic organizations in some aspects.
Regarding overseas Vietnamese
As compared to the 2003 Land Law, the 2013 Land Law shows big progresses. Vietnamese overseas are entitled to: (1) be allocated land with the collection of land use levy to build residential houses for sale or sale-cum-rent; (2) be transferred partly or fully land-using investment projects to build residential houses for sale or rent; (3) leased land by the State with the annual rent collection or the lump-sum payment for the entire lease term for business investment; (4) allowed by the State to change from annual rent payment to lump-sum payment for the entire lease term; (5) allowed to receive the land use rights transfer or to lease land in industrial parks, cottage industry clusters, hi-tech parks or economic zones for business investment suitable to the prescribed land use right purposes; (6) permitted by the State to buy and own residential houses in Vietnam in an unrestricted quantity for residence, but not for business purposes. The residential house-related civil rights of overseas Vietnamese have been guaranteed in the same way as Vietnamese citizens residing in the country. They have been granted the land use rights certificates, the rights to own residential houses and assets stably attached to land, permitted to sell houses when no longer needing them, to mortgage, donate or bequeath them in accordance with law.
It can be affirmed that under the 2013 Land Law, the rights and interests of overseas Vietnamese, including the right in their capacity as entities being allocated or leased land for business investment and legitimate interests from the valid purchase of ownership of residential houses in Vietnam, have been fully protected. Hence, legislators should redress problems related to overseas Vietnamese investors and residential house owners.
First, in their capacity as investors, overseas Vietnamese with economic organization status can be allocated land with the collection of land use levy in the country. However, it is a big inadequacy that the 2013 Land Law has not yet allowed overseas Vietnamese to receive the land use rights transfer from economic organizations, households and/or individuals for construction of residential houses. They may only rent land for business investment. It is regrettable that the land use right transfer transactions are restricted with regard to overseas Vietnamese. This is unfair between overseas Vietnamese and domestic investors in land-related civil transactions. Hence, the draft revised Land Law should allow overseas Vietnamese to be transferred the land use rights with regard to not only non-agricultural land but also agricultural land and rice-growing land for business investment. The provision of Point b, Clause 2, Article 44 of the draft law on receipt of land use rights permitting overseas Vietnamese to be transferred land use rights[3] is a big step forward for them to be equal to domestic investors in land-related civil transactions. It would provide them with more opportunities to access land not through the State but through the secondary market for business investment, given that they meet the conditions on receipt of land use rights transfer under the land law for identified types of land.
Second, in their capacity as investors, overseas Vietnamese would be leased land by the State with the annual rent collection, and entitled to use the leased land rights for land use right-related transactions (Point b, Clause 2, Article 44 of the draft revised Land Law)[4]. This is a difference from Clause 2. Article 183 of the 2013 Land Law. Therefore, in the spirit of considering land as resource promoted from the process of exploitation and use by all land users, the rights to use leased land and pay annual rents officially become a commodity which the holders consider their capital amounts already contributed to the state budget and can in turn use them for land use rights-related transactions in business investment. This regulation officially expands the rights for investors, particularly those facing financial difficulties, who now have more resources for business. It also constitutes a new “revolutionary” thinking in expanding the rights and interests of investors, including overseas Vietnamese.
Third, in the capacity as overseas Vietnamese, they are permitted by the State to buy and own residential houses in Vietnam without restriction in quantity, but not allowed to use them for real estate business. Permitting them to buy residential houses is a preferential policy for overseas Vietnamese, aiming to create conditions for them to have stable residence and business[5]. On the other hand, under Article 11.2 of the Law on Real Estate Business, overseas Vietnamese may not purchase houses or construction works for sale, rent, rent-cum-purchase as a real estate business transaction. This restriction is not only irrational because these are normal activities of property owners but also incompatible with the current international integration policy of Vietnam. Therefore, in the upcoming revision of the Land Law, the Real Estate Business Law, and the Housing Law, legislators should synchronize the regulations permitting overseas Vietnamese to conduct real estate transactions when buying residential houses and construction works for sale, rent, and rent-purchase like domestic real estate dealers.
For foreigners residing in Vietnam
Under Article 5 of the 2013 Land Law, foreign individuals are not land-using entities; hence, they cannot act as investors building residential houses like Vietnamese citizens. This also means that they may not be allocated land with the collection of land use levy or leased land by the Vietnamese State for investment in the construction of residential houses, and may not do real estate business in Vietnam. Yet, under Clause 3, Article 7 of the 2014 Housing Law, house owners, including foreigners, are entitled to own residential houses associated with the land use rights in Vietnam. That is totally conformable with Clause 1, Article 19 of the 2014 Real Estate Business Law, which upholds the principle that house or construction work trading must be associated with the land use rights. So, when foreigners purchase residential houses in Vietnam without the land use rights, how can they purchase houses associated with the land use rights as stipulated by the Real Estate Business Law? In principle, the right to own residential houses must be associated with the rights to use residential land. The residential house trading must be closely associated with the rights to use residential land though, as explained by Minister of Resources and Environment Tran Hong Ha that Vietnam has never opened the “land use rights” for foreigners due to defense, security and social management requirements[6]. However, from the jurisprudent perspective, we are for the opinion that the future Land Law should be added with the provisions on foreigners’ land use rights in synchrony with the regulations permitting foreigners to buy residential houses in Vietnam. They should be entitled to the residential land use rights[7]. The real estate business law says that the sale of houses must be associated with the land use right transfer. Residential houses and the land use rights are closely intertwined in a unique form. Hence, the sale of houses must be associated with the transfer of the housing land use right[8]. Hence, Article 6 of the draft revised Land Law should also cover one entity being foreigners with the residential house ownership associated with the residential land use rights. At the same time, Article 47 of the draft should be added with a clause defining the land use rights and obligations of foreigners when owning residential houses in Vietnam.
Foreign diplomatic organizations using land in Vietnam
Comparing Clause 5, Article 5 of the 2013 Land Law with Clause 4, Article 6 of the draft revised Land Law, legislators are highly unanimous on the issues related to foreign organizations with diplomatic functions. They include diplomatic missions, consulates and other representative offices with diplomatic functions, recognized by the Vietnamese Government; representative offices of the United Nations, intergovernmental offices or organizations, representative offices of intergovernmental organizations. Besides, there is almost no difference between Article 182 of the 2013 Land Law and Article 43 of the draft revised Land Law on the rights and obligations of foreign organizations with diplomatic functions. They are entitled to build facilities on the leased land according to licenses of competent Vietnamese state bodies; entitled to own the facilities they have built on leased land in the land lease duration; unless it is otherwise prescribed by international treaties to which Vietnam is a member, foreign organizations with diplomatic functions must comply with such treaties.
However, the 2013 Land Law and the draft revised Land Law fail to specify forms of land lease. Is there any difference in rights and obligations between the annual payment of land rents and the lump-sum payment of land rents for the entire land leasing terms? Hence, Article 43 of the draft revised Land Law defining in general the rights and obligations of land users being foreign organizations with diplomatic functions should clearly distinguish between their rights and obligations upon annual payment of land rents and the rights and obligations when they make lump-sum land rent payment for the whole land lease terms.
Foreign-invested economic organizations using land in Vietnam
Under the 2013 Land Law, foreign-invested economic organizations include wholly foreign-invested enterprises, joint-venture enterprises, Vietnamese enterprises bought or merged by foreign investors. Such definition is not compatible with the 2020 Investment Law that defines in Clause 22, Article 3: “Foreign-invested economic organizations are economic organizations where foreign investors are members or shareholders”.
The Investment Law and the Land Law contain regulations permitting foreign enterprises, joint-venture enterprises and foreign investors to buy shares of, merge or acquire Vietnamese enterprises. In principle, foreign-invested enterprises are permitted to conduct business investment in Vietnam if they obtain approval for investment projects as well as investment licenses. However, foreign companies formed through capital contribution to, or purchase of share of, domestic economic organizations are similar to domestic enterprises and become business entities with the land use rights without having to apply for investment licenses. This is a matter arising from reality, which Vietnamese legislators cannot anticipate or in other words, policies lag behind reality, which is a loophole taken advantage by foreigners through capital contribution, share purchase to acquire the rights to use land in Vietnam, particularly defense and security areas under a special protection regime.
According to a report on foreigners allowed under Vietnamese to buy residential houses and land in Vietnam, 160,000 ha lying in restricted defense and security areas are related to foreign-invested enterprises[9]. Foreign enterprises operate in the name of Vietnamese enterprises in the field of tourism, aquaculture and aquatic product processing. The number of foreigners using land illegally in Vietnam was recorded with 22 cases in Da Nang, 17 cases in Quang Ninh, 16 cases in Haiphong, 9 cases in Binh Dinh, 5 cases in Ha Tinh and Binh Thuan each. Though the 2020 Investment Law specified in Article 24 three conditions for the grant of land use rights: ensuring defense and security as provided by law; meeting the conditions on the use of land in coastal communes, wards and townships. This is a critical matter requiring a synchronous legal corridor for the protection of national sovereignty and border security.
In order to redress the inconsistency between the Land Law and the Investment Law in defining foreign-invested economic organizations, attention should be paid to the following:
First, foreign-invested economic organizations in the capacity as investors are guaranteed by the State with four options to access land, including: (i) land allocation with the collection of land use levy; (ii) land rent with annual land rent payment or lump-sum payment for the entire rent term; (iii) being permitted to change from annual land rent payment to lump-sum payment for the entire rent term; and (iv) receipt of partial or full real estate projects for business investment. Yet, they are not allowed by the 2013 Land Law to receive the land use rights from the secondary market for business investment. Meanwhile, under Point c, Clause 1, Article 30 of the draft revised Land Law, foreign-invested economic entities are permitted to be transferred with the rights to use land in industrial parks, industrial clusters, export-processing zones, hi-tech parks. And, according to Point d, Clause 1, Article 30, they are allowed to be transferred with investment capital being the land use right value under the regulations of the Government. So, with these proposed regulations, foreign-invested economic organizations have more rights to approach the land use right market.
Second, foreign-invested economic entities in the capacity as eligible residential house buyers must satisfy the conditions prescribed for every entity in Article 160 of the 2014 Housing Law. Specifically, (i) foreign organizations or individuals being business investors to construct residential houses in Vietnam must acquire investment certificates and have investment projects approved by competent state bodies; (ii) representative offices of foreign organizations, foreign investment funds, foreign banks’ branches in Vietnam operating under the Investment Law and the Law on Vietnamese Credit Institutions must have the investment certificates or relevant documents permitting their operation in Vietnam.
Foreign-invested enterprises in the field of real estate business have been granted investment certificates by competent Vietnamese state bodies and licensed to execute investment projects on construction of residential houses for sale or sale-cum rent, were partially or fully transferred with investment projects by Vietnamese enterprises[10]. Previously, they were allocated land with the collection of land use levy or leased land by competent Vietnamese state bodies for execution of investment projects to build residential houses for commercial purpose. In other words, they are investors creating fixed assets to supply for the Vietnamese market and naturally they have the right to own residential houses in Vietnam. However, the 2013 Land Law has not yet allowed foreign-invested entities to be transferred with the land use rights from domestic organizations, households or individuals for business and investment. Nguyen Quang Tuyen holds that foreign investors may also be transferred the rights to use agricultural land for business, and the rights to use land for construction of tourist and service facilities and of course for dealing in commercial houses[11].
Like domestic Vietnamese, foreign organizations and individuals, overseas Vietnamese permitted for investment in Vietnam may access land from the State for investment and business while the rights to own residential houses of entities involving foreign elements are recognized by the Vietnamese State and protected under the 2013 Constitution. Moreover, the provisions of the Land Law, the Real Estate Business Law and the 2014 Housing Law have provided a clear legal corridor for business investment and ownership of residential houses in Vietnam by foreigners permanently or temporarily residing in Vietnam. The provisions of the draft revised Land Law must permit entities involving foreign elements to additionally access land from the market, expand the rights on residential house transactions for overseas Vietnamese and foreign-invested economic entities in order to make the real estate market in Vietnam more competitive and integrate more deeply in the international economic life.-
[1] Under Articles 11 and 14 of the 1959 Constitution, there existed in the Democratic Republic of Vietnam the State ownership, the collective ownership and personal laborers’ ownership of land. The State protected the private ownership of land in accordance with law.
[2] Article 53 of the 2013 Constitution, Articles 4 and 21.3 of the 2013 Land Law provide land belongs to the entire-population ownership with the State acting as the owner’s representative and performing the unified management. Especially, the Government and People’s Committees at different levels represent the land owner according to competence.
[3] Article 44.1.b of the draft revised Land Law permits overseas Vietnamese to be transferred with land use rights. This is a step forward as compared with Article 160.1.b of the 2013 Land Law.
[4] Under Article 44.2.b of the draft revised Land Law, Vietnamese overseas and foreign-invested economic organizations, that are leased land by the Vietnamese State with the annual collection of land rents, have the following rights and obligations:
a/ The general rights and obligations provided in Articles 27 and 31 of this Law;
b/ To mortgage their own assets attached to land and lease rights in land rent contracts at credit organizations licensed for operation in Vietnam, to contribute capital with their own assets attached to land, the receivers of contributed capital with assets are leased land by the State according to the determined purposes in the remaining duration.
c/ To sell their own assets attached to land and the land rent rights in the land rent contracts when fully meeting the conditions specified in Article 50 of this Law.
[5] According to figures released by the Ministry of Construction, by July 2022, the number of foreign organizations and individuals buying residential houses in Vietnam reached 2,989 and the number of Vietnamese overseas buying residential houses in Vietnam reached 2,062.
[6] Minister of Resources and Environment Tran Hong Ha’s opinion at August 5, 2022 seminar in Hanoi on revision of the Land Law.
[7] Nguyen Thi Thanh Xuan and Tran Vang Phu on residential house ownership of foreigners, Legislative Review, Issue No.1 (377), January 2019, p. 43.
[8] Tran Quang Huy, Practical enforcement of law on tourism immoveable dealing and the revision of the 2013 Land Law. Summary records of international workshop “policy, law on tourism immoveable dealing- questions set for Vietnam”, jointly organized by Vietnam Real Estate Association and Hanoi Law University on November 16, 2021, Hanoi, p. 247.
[9] Tran Quang Huy, renewing the state management of land in new context, summary records of the national scientific workshop “continuing to renew the land policies in the spirit of resolutions of the 13th National Party Congress”, Hanoi, March 2022, p. 346.
[10] Projects transferred for investment in Japanese Garden (Sakura) of Japanese investors, or Miami, Florida zones, transferred from Vingroup through Vinhomes Smart City project are concrete examples for construction of real estate areas under architectures suitable to Japanese or US culture and traditions, thus increasing the attractiveness for real property projects of big Vietnamese real estate investors.
[11] Nguyen Quang Tuyen, Land law with the requirements of building and developing the market economy and international integration in Vietnam at present, in Vietnamese Law Studies, contemporary issues, Tu Phap Publishing House, Hanoi, p. 797.
