Things you wish to know when buying the property in Vietnam as a foreignerNews
May 14, 2019
According to the General Statistics Office, Ministry of Planning and Investment, in the first 9 months of 2019, the total FDI (both newly and additionally registered capital) invested in Vietnam reached US $ 15,763 million. In particular, the field of real estate ranked second in attracting FDI with US $ 1,183 million, accounting for 10.8%. As a result, concerns about real estate situation as well as related issues of foreigners increasingly high. The following article will answer questions in detail about what you need to know to own real estate in Vietnam for foreigners.
A view of Techcombank Buildings and Bitexco Tower in District 1
1. Legal Statement
Article 159 of the 2014 Housing Law stipulates subjects entitled to own houses and forms of house ownership in Vietnam of foreign organizations and individuals as follows:
1. Foreign organizations and individuals that are entitled to own houses in Vietnam include:
a) Foreign organizations and individuals invest in the construction of houses under projects in Vietnam in accordance with this Law and relevant laws;
b) Foreign-invested enterprises, branches, representative offices of foreign enterprises, foreign investment funds and branches of foreign banks operating in Vietnam (hereinafter referred collectively to as organizations foreign);
c) Foreign individuals are allowed to enter Vietnam.
2. Foreign organizations and individuals may own houses in Vietnam in the following forms:
a) Investment in housing construction under projects in Vietnam in accordance with this Law and relevant laws;
b) Buy, lease-purchase, donate, inherit commercial apartments and detached houses in housing construction investment projects, except for areas where national defense and security are ensured by the Government regulations.
Foreigners are not allowed to own land. In fact, even citizens are not allowed to own land. In Vietnam, land is theoretically collectively owned by the people, but regulated by the State.
2. Vietnam’s Land Use Right (LUR)
LUR to foreign investors allows title holders to conduct real estate transactions, including mortgages.
There are three main regimes for investors to acquire LURs from the States:
- Allocation: The State can allocate LURs by administrative decision to national entities only. Allocated LURs can be subject to a land use fee or not, depending on the cases.
- Recognition: The State can "recognize" LURs to national entities only, in which case no fee is applicable.
- Leasing: The State can lease LURs on the basis of a contract to both national and foreign entities. leases are subject to a land use rent and are the only form of land ownership available to foreigners.
Foreign investors in Vietnam obtain LURs (a) by way of a JVC to which a local Vietnamese partner LUR as a capital contribution, or (b) by way of land leased directly from permitted lessors such as the State.
Land users typically receive a land use right certificate (LURC), which shows the land user’s rights on the property. There are different types of land usage rights which we discuss; however, it is important to note that under current law, foreigners can retain a LURC for 50 years, while locals can have one indefinitely.
The government can choose to grant a one-time extension of another 50 years or take the land back if the party has failed to use the land under the terms and conditions of the LURC.
3. Can foreigners buy houses in Vietnam?
Based on the Vietnamese Law on Residential Housing (LRH):
- Foreign organizations and individuals invest in the construction of houses under projects in Vietnam in accordance with the Housing Law and relevant laws.
- Foreign-invested enterprises, branches, representative offices of foreign enterprises, foreign investment funds and branches of foreign banks operating in Vietnam (called organizations).
- Foreign individuals are allowed to enter Vietnam.
The property which is allowed to purchase must be part of investment projects for the construction of housing, and not be located in national and security areas. The Provincial Department of Construction (“Provincial DOC”) shall provide a list of permitted commercial residential housing projects for foreigners.
Rights and obligations of house owners being foreign organizations and individuals are provided in Articles 161 and 162. Accordingly, foreign organizations and individuals have the rights and obligations of house owners like Vietnamese citizens but must comply with some provisions.
They may only purchase, rent-purchase or receive a donation or inheritance, and own no more than 30% of the number of apartments in a condominium or 250 separate houses in an area with a population equivalent to that of a ward-level administrative unit. They are required to pay for house purchase or rent-purchase via a credit institution operating in Vietnam.
Foreigners who are residents in Vietnam are permitted to purchase dwelling houses. They can own a not the land on which it is built. They have the option to lease the land from the State.
You will need a lawyer to advise on legal issues
4. House Ownership by foreigners in Vietnam
The number of private houses which foreign organizations and individuals may own in case there are one or more than one housing project in a locality with the above population size but the total number of private houses does not exceed 2,500.
Foreign individuals are allowed to own houses as agreed upon in purchase and sale contract transactions but for a maximum of not more than 50 years from the date of being granted the certificate and can be extended if needed.
In case a foreign individual marries to a Vietnamese citizen or a Vietnamese citizen residing overseas, he / she is entitled to own stable and long-term housing and the rights of the owner like Vietnamese citizen. (Point c, Clause 2, Article 161 of the Housing Law).
Foreigners have the same rights of residential house owners as Vietnamese citizens, subject to compliance with the regulations applying to foreigners. In principle, they have the following rights: selling (not for profit purposes), transferring the contract for sale and purchase, leasing out, granting hire purchase, donating, exchanging, bequeath, mortgaging, contributing as capital, lending, permitting others to reside rent-free in, or authorizing other persons to manage the residential house; in case of donation or bequeathal of a residential house to subjects not entitled to residential house ownership in Vietnam, such subjects may only enjoy the value of such residential house.
1. The Pink Book
This is a type of ownership certificate that purchaser receives after accomplishing necessary formality. In other words, the pink book officially represents your right to the property/ real estate and makes your utilisation on the house validation. You are permitted to lease your property or in case of affirm information related to inheritance, etc.
-Free to use the house for your personal intension.
-Rebuilt, demolish, renovate, retain are approved if it agreed by the law of construction.
-Allow to leasing, mortgaging or selling.
2. The Red Book
This book’s benefit verifies your property ownership longer than the pink one. It is typically referred to as the ownership of land instead of condominiums or houses. Nevertheless, foreigners are more familiar with the pink book, which is less regulated.
Ultimately, the pink book has equal legal effectiveness to the Selling and Purchasing Agreement (SPA). It is ideal to have both of them to protect your selling and leasing purposes on the house but the pink book has stronger power.
Foreigners can only buy 30% of the Project under the SPA contract and only can buy property in Project. There are 2 types of ownership for foreigners: SPA Contract (Sale Purchase Agreement) and LTL Contract (Long Term Lease).
Note: The SPA and LTL contracts are all valued at 50 years, after 50 years you will need to renew to continue using the apartment (with an expect fee is 2% of the purchase contract value).
- SPA Contract: The Developer will handover Pink Book to the owner (About 1 – 2 year after handing over the apartment). Currently, this issue is being approved, foreign investors directly named on the SPA contract can receive Pink Books in the future.
- LTL Contract: investors who buy projects under LTL contracts are considered to buy 50-year lease contracts. Values equivalent to SPA in all aspects, only pink books are not granted.
5. Payment Transactions
Surprisingly, Vietnam is different from the entire of the world because our property transaction ends up by pure (real) gold. The citizens may pay a part of the total price but cash assets are notably required. However, things become less complicated when the transaction gets done by VND or USD. In June, according to Thanhnien News, one tael (1.25 ounces) of gold is equivalent to VND11.45 million (US$510). It is very important to keep this in mind when looking for a property. The buyer must be aware of the prices and conversions at all times.
When signing a foreigner lease, the landlord must be aware of the taxes that must be paid. Because the lease contract with a foreigner is considered as a business activity, it is required to declare and pay all kinds of license tax, personal income tax and value added tax according to the State's regulations. The tax payable must be based on the capital registered in the business license of that individual business household.
In which, rental income tax is counted as personal income tax of 5% plus 5% of VAT which means the rate of 10% applies to your rental income.
The partially progressive personal income tax applies to income from production, business, salaries, wages and remuneration.
For example: Assessable income over 5 million / month:
5%, income from 5-10 million / month:
10%, from 10-18 million:
15%, from 18-32 million:
20%, from 32-52 million / months:
25%, from 52-80 million / month:
30%, over 80 million / month: 35%.
When buying and owning houses in Vietnam, foreigners shall be subject to the relevant taxes, taxes, fees and charges similar to Vietnamese in the country as follows:
- Maintenance fee or depreciation is 2% will be paid by the purchaser.
- Registration fee is 0.5% also required.
- Although the capital gains tax in on theory, it will be expected to pay 2% when you selling property.
- Land use fees
- Value-added tax (VAT): 10% of the selling price. When buying a home, your friend should ask if the sale price includes VAT. If not, must add VAT.
- In addition, you also have to pay fees such as cadastral mapping and administrative fees, measurement fees, etc.
You will need an estate agent or lawyer for more information when being asked for an extra cost if needed.
A large number of foreign investors are interested in real estate situation in Vietnam
Things you wish to know when buying the property in Vietnam as a foreigner