It seems one of the first questions asked by foreigners coming into Vietnam, can I, as a foreign, own land in Vietnam? The answer, by and large, is no, but it is still worth a look to understand the nuances and the possibilities for a foreigner to come into the country and impose his philosophies of private land ownership on a country steeped in a history of communal land ownership. Reminiscent, really, of what the Europeans did to the Indians in America, but that’s a personal pique that I won’t explore here.
According to the Constitution of Vietnam, land is a “public property” that comes under the “ownership of the entire people represented and uniformly managed by the State.” It’s in the Constitution. Individual land ownership isn’t part of the plan here, and anyone looking to come in and own their slice of the country simply has to resolve themselves to that fact. Even Vietnamese citizens don’t “own” land, rather they are allowed “land use rights” which give them the right to occupy and develop the land as well as a right of inheritance that passes to their heirs. It is, in essence, fee simple though the State retains the right to repossess the land for purposes of national security, national defense, and socio-economic development so long as the repossession is done publicly, transparently, and accompanied by compensation to those who currently enjoy the land use rights.
That’s the primary right, then, the land use right, that gives the holder a sort of perpetual use of the land for which she possesses such rights. She can develop and use that land for whatever legal purpose she so desires, including the lease of land to foreigners, within limits, though not the free transfer of all her land use rights. What, then, can foreigners own?
Foreigners can lease land from the Government or from individuals possessing land use rights. Such leases are limited to fifty years in duration, a term which may be renewed upon agreement, but not automatically. This is, essentially, the form taken by the home “ownership” scheme which was announced a few years ago that allows for foreigners to have a fifty year interest in an apartment or villa. (More on this next week.) Foreign individuals cannot, in their own capacity, enjoy land use rights other than for lease.
The situation is slightly different for investors, however. For investors who are seeking to develop investment projects, the term can be extended to seventy years if their project requires a large capital investment and recoupment of which is termed slow, or the investment is in areas that have socio-economic difficulties.
Except for in cases of infrastructure development and a few other large scale development projects, most investment projects involving land use rights also involve the establishment of an enterprise of some sort. If a foreigner owns part or all of that enterprise, then the enterprise is deemed a Foreign Invested Enterprise, or FIE.
Under the old laws–revised in the last few years–a domestic investor could contribute his or her land use rights to a company as a form of capital contribution. That contribution would then be converted into a shareholding position in the enterprise. If the enterprise is a joint venture then the enterprise will be limited in its uses.
In essence, such an enterprise would be allowed to:
- To transfer land use lights and land-attached assets under their ownership;
- To lease land use rights and land-attached assets under their ownership in case of being allocated with land use levy by the State and to sublease land use rights and land-attached assets under their ownership in case of being leased land with full one-off rental payment for the entire lease period by the State;
- To donate land use rights to the State and communities for construction of facilities for common public interests of the communities and donate land-attached gratitude houses in accordance with law;
- To mortgage with land use right and land-attached assets under their ownership at credit institutions which are licensed to operate in Vietnam;
- To contribute land use rights and land-attached assets under their ownership as capital for cooperation in production and business with organizations, individuals, overseas Vietnamese or foreign-invested enterprises in accordance with law.
If the enterprise becomes a 100% foreign owned enterprise through conversion by share purchase or M&A, then the rights of that enterprise will become as follows:
- The rights to use and enjoy the land and legal obligations attached to such use;
- To transfer land use rights and land-attached assets under their ownership during the land use term;
- To lease and sublease land use rights and land-attached assets under their ownership within the land use term;
- To mortgage land use rights and land-attached assets under their ownership at credit institutions which are licensed to operate in Vietnam within the land use term;
- To contribute land use rights and land-attached assets under their ownership as capital for cooperation in production and business within the land use term.
FIEs, then, have a limited right to control a portion of the land use rights allowable to citizens. Though previous versions of law allowed a more liberal transfer of land use rights, the current laws are clear. FIEs cannot fully control land use rights. This land control philosophy is understood if one comprehends the idea of communal land ownership. The people own the land and it is the State that manages it. Not even locals “own” land individually, and for foreigners to have the same rights as the citizens in land use would be to violate the idea that the citizens of Vietnam are the ones who actually own the land.
So, know this, neither foreign individuals nor FIEs can own land in Vietnam. That is the end all truth of the matter. They may possess many of the land use rights that citizens and domestic enterprises possess, but even in the case of a conversion from a joint venture to a 100% foreign owned enterprise, the land ownership does not fully convert in favor of the foreign owners.