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I. The Law on Housing

• Issued by the National Assembly of Vietnam on November 25, 2014.

Thanks to Vietnam’s Land Use Rights (LUR). Foreigners are allowed to use and control the land they lease with a leasehold period of up to 50-70 years.

• Foreigners now have the legal right to purchase property but are not allowed to purchase land in Vietnam.

• Freehold ownership is not permitted for foreigners unless a foreigner is married to a Vietnamese national.

• The leasehold period is renewable and extendable.

II. Who Is Eligible for Home Ownership in Vietnam?

• Individuals including foreign citizens, who permanently or temporarily reside in Vietnam and have valid documentation permitted to enter Vietnam, except diplomatic immunity and privilege, who have a valid passport, visa to enter Vietnam, and proof of marriage / single status.

• Overseas Vietnamese (Vietnamese citizens, original Vietnamese who are now residing or living for a long time in a foreign country).

• Foreign enterprises, branches, and representative offices of foreign enterprises, foreign investment funds, and branches of foreign banks that are operating in Vietnam.

• Foreign entities who invest in project-based housing construction in Vietnam as prescribed in this Law and corresponding regulations of law.

Types of home ownership of foreign entities in Vietnam

• • Invest in housing construction projects in Vietnam, as prescribed in this law and relevant legal regulations.
• • Buy, purchase, rent, receive, or inherit commercial houses including apartments and separate houses in housing construction projects, except for projects in the areas of national defense and security as prescribed by the Government.
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III. Conditions for Home Ownership, Rights, and Obligations of Foreign Entities When Owing Houses in Vietnam

• Foreigners buying houses in Vietnam must be:

• • Allowed to enter Vietnam legally.

• Not granted diplomatic immunity and privileges as prescribed by the law.

• Foreign entities investing in housing construction projects in Vietnam must have:

• •  The Certificate of Investment Registration.
• •  Houses are built in the projects as prescribed in this law and relevant legal regulations.
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• Foreign enterprises, branches and representative offices of foreign enterprises, foreign investment funds, and branches of foreign banks that are operating in Vietnam must have:

• • The Certificate of Investment Registration or other documents proving their legal operation in Vietnam (hereinafter referred to as the Certificate of Investment Registration) issued by competent agencies in Vietnam.
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IV. Ownership Methods Foreigners Can Own a House By

• • Investing in project-based housing construction in Vietnam, including the development of commercial housing invested by a real estate enterprise for lease, or lease purchase.
• • Sale, renovation, and reconstruction of old housing areas and/or apartment buildings.
• • Purchase, lease-purchase, receive or inherit commercial housing in the project for housing construction.
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• Investment in Project-Based Housing Construction

• First – Obtain a decision/approval on investment policies.

• Second – Planning appraisal, housing construction project approval.

• Third – Developing the housing construction project.

• Last – Contract for lease, lease purchase, or sale conduction.

1. WHAT ARE THE PROCEDURES?

Depending on the methods to own a house in Vietnam, foreigners shall have to choose either of the following procedures to comply with Buy, Rent, Purchase, Receive, or Inherit

Step 1 – Sign the contract at the notarized office or authenticated by competent authorities for the agreement on housing sale, lease, lease purchase, or gift.

Step 2 – Apply for a certificate for the change in ownership at a competent authority.

V. Rights and Obligations of Foreign Entities as Homeowners

• Foreign entities who invest in project-based housing construction in Vietnam

are entitled to exercise the rights of homeowners as prescribed in Article 10 of the Law on housing, if his/her house is built on a piece of leased land, he/she is only entitled to lease that house.

• Foreign individuals who are allowed to enter Vietnam are entitled to exercise the rights of homeowners similarly to Vietnam citizens provided that he/she complies with the following regulations:

1. The foreign individuals are eligible for homeownership as agreed in agreements on housing sale, lease purchase, gifting, or inheritance for not more than 50 years. From the day on which they are granted the Certificate, they may be also granted an extension as prescribed in the regulations of the Government. The duration of the homeownership must be stated in the Certificate.

2. If a foreign individual marries a Vietnamese citizen or an overseas Vietnamese, he/she qualifies for stable and long-term homeownership and has all the rights of a homeowner similar to Vietnamese citizens.

The foreign organizations are eligible for homeownership as agreed in agreements on housing sale, lease purchase, gifting, or inheritance for not longer than the duration stated in their Certificate of investment.

Including extension duration, the duration of the homeownership shall be determined from the day on which the organization is granted the Certificate and stated in such Certificate.

VI. Limitations or Restrictions

Several limitations and restrictions apply to foreigners if they intend to own a house in Vietnam which include the (total) number of houses to be entitled to, which is now.

• A building can allocate up to 30% of its total number of apartments.

• When it comes to separate houses, including villas or row houses, a limit of up to 250 units is permissible.

• In areas with a population equivalent to a ward-administrative division and less than 2500 houses, up to 10% of the houses in a project can be designated for specific purposes.

• Foreigners are unable to purchase or own a house that is within national defense areas and security requirements.
• In addition, a foreign individual is entitled to lease a property for lawful purposes provided that she/he notifies the relevant authorities.
• The term which is set as a 50-year lease can be extended or transferred before its expiration in the event of purchase, lease purchase, inheritance, or gifting.
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VII. Common Legal Terms

1. 1. SALES & PURCHASE AGREEMENT (“SPA”)

1.1. SPA

The SPA is a legally binding contract between the buyer and developer to prove that a house or apartment is sold to the buyer by the developer.

The SPA is also used as evidence of ownership of the house or apartment before the house ownership certificate has been granted to the owner. It is used for applying for house ownership certificate for the owner.

The template of the SPA is the standard template as provided by the Ministry of Construction and is to be registered with the Consumer Protection Bureau under the Ministry of Industry of Trade.

As such, the SPA is a standard template that is not to be changed or amended.

The owner of the apartment/house shall have the following legal rights:

• • The right to inviolability of houses under his/her lawful ownership.
• • To use houses for residential and other purposes is not legally banned.
• • To be granted certificates for houses under his/her lawful ownership.
• • To sell, transfer sales & and purchase contracts, lease, put for lease-purchase gift, exchange, bequeath, mortgage, contribute as capital, lend, permit stay at, or authorize management of, his/her houses.
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1.2. In the case of donation or bequeathal of houses to subjects ineligible to own houses in Vietnam, such subjects are only entitled to the value of such houses:

• • To use public facilities in the housing area under Housing laws and other relevant laws.
• • To maintain, renovate, demolish, or rebuild his/her house as prescribed in Housing Law and law on construction.
• • To receive the compensation as prescribed in regulations of law or payment according to fair market price when their house is demolished, imposed compulsory purchase order, or commandeered by the State for national defense and security purposes, for socio-economic development purposes, or in the state of war, state of emergency, or disaster situations.
• • Rights to file complaints, denunciation, or lawsuits over violations against his/her lawful ownership and other violations against the law.
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2. HOUSE OWNERSHIP CERTIFICATE

The “House Ownership Certificate”, which stands for “Certificate of and use rights or house and land-attached asset ownership” is the certificate granted by the State Authority to certify/recognize the ownership of an eligible individual/organization over his/her/their land or house.

It is commonly referred to as the “ownership certificate” or “pink book”.

The ownership term of foreigners is 50 YEARS from the day on which the ownership certificate is granted. However, under the new residential housing law, there are some restrictions for foreigners as per the following:

• He/she may not buy, rent purchase, receive, inherit, or own more than 30% of apartments in an apartment building; or more than 250 houses regarding separate houses including villas, or row houses in an area whose population is equivalent to a ward-administrative division.
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• In case the foreigners receive or inherit house(s) that exceed the number of houses prescribed above, he/she only receives the value of that house(s).
• The ownership term of foreigners is 50 years, from the day on which the ownership certificate is granted. They may apply to extend the term of ownership and it shall be subject to the approval of state authority.
• If a foreign individual marries a Vietnamese citizen or an overseas Vietnamese, he/she qualifies for stable and long-term home ownership and has all the rights of a homeowner similar to Vietnamese citizens.
• During the ownership term, the homeowner is entitled to gift or sell their house(s) to individuals /entities eligible for homeownership in Vietnam; if not, upon the expiry of the ownership term, their house(s) shall belong to the State.
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3. RED INVOICE / VALUE ADDED TAX (VAT) INVOICE

“Red invoice” is a legitimate invoice which is legally called a “Value Added Tax Invoice”.

It is issued by the seller to state that information on goods/services are sold/ provided following laws, for organizations/ individuals to declare and pay Value Added Tax.

Currently, the Value Added Tax (VAT) tariff is 10% of the house/apartment price.

In comparison, a receipt is a form of invoice showing a payment transaction has been completed for the amount issued by the seller to the buyer. It is to help both contractual parties record that a certain amount has been paid by the buyer to the seller which is lawful and recognized by laws. Later on, a red invoice shall still be issued by the seller to the buyer for taxation purposes.

4. MAINTENANCE FEE

The “maintenance fee”, commonly referred to as a “sinking fund”, is a fund contributed by buyers of development to maintain commonly owned areas of the development. It is used for maintenance, small repairs, medium repairs, and overhauls of commonly owned areas to preserve quality.

Currently, the sinking fund is 2% of the house/apartment price before VAT.

5. MANAGEMENT FEE

The “monthly management fee” is a fee contributed by residents to manage the operations of the development. Such as operating the elevator system, and generator and providing services for the building such as security, pest control, rubbish collection service, etc.

Management Fee is calculated per Net Salable Area (NSA).

VIII. Payment Schemes

1. 1. HOW DO I MAKE PAYMENTS FOR MY PROPERTY?

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Foreign investors are recommended to set up a local bank account to transfer payments for their property to the Developer’s bank account. Below are some international banks with branches in Vietnam:

• • Standard Chartered
• • Citibank Bank
• • ANZ
• • HSBC
• • Bank Of China
• • Shinhan bank
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2. WHAT ARE THE PAYMENT SCHEMES?

Generally, for projects under construction, the payment scheme is decided by developers and agreed upon with purchasers.

Housing laws limit the maximum collection before handover to be up to 70% for local Vietnamese developers, and up to 50% for foreign developers. The law also stipulates that 5% is to be collected upon issuance of the pink book.

A default interest shall be applied as agreed in the SPA (commonly the default interest rate is at 1.5% per month of the late amount).

If this violation exceeds the time given in the SPA, the developer has the right to unilaterally terminate the SPA and forfeit an amount. As a common practice, the forfeiture amount is roughly 20% to 30% of the property selling price.

A foreigner may either directly or authorize a third party (by power of attorney) to declare and pay Tax at a District level tax bureau in the district where the property is located.

2.1. The following taxes apply to property sales transactions.

• Letterpress Designs: 10% VAT is taxed on any sale of property by locals or foreigners.

• Administration fee: A minimal administration fee is to be granted ownership certificate at the current regulation.

• Registration tax for ownership: 0.5% registration tax for obtaining the house ownership certificate on the property value.

• Transaction fee when selling the property (2% on the selling price):

If personal income is earned through the assignment or resale of apartments or houses, a 2% transaction fee has to be paid on the transacted value (the selling price)

Please note that tax regulations are subject to change by the relevant authorities. For the most updated tax regulations, please consult a tax consultant.

2.2. The following taxes apply to property lease transactions:

If personal income is earned through the rental of a house/apartment, 5% VAT and 5% PIT have to be paid on revenue.

For rental income exceeding VND 1,500,000 per month, a business

A license tax of VND 1,000,000 per year applies.

IX. Developer Defaults, What Are My Rights?

1. 1. LATE HANDOVER

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If the developer does not hand over the unit as per the date agreed in the SPA, the developer has to pay default interest on the paid amounts to the purchasers.

This default interest rate will be equal to the default interest rate applied to the purchaser.

2. FAILURE TO COMPLETE

If the developer does not complete the project in the number of days from the agreed handover date as stated in the SPA, the buyer has the right to unilaterally terminate the SPA.

In such a case, the developer shall refund all paid amounts without interest to the buyers. Moreover, compensating a default amount to the buyers which is equal to the purchaser’s forfeited amount (commonly from 20% – 30% of the property selling price).

X. Taking Over My Property

1. 1. WHAT IS THE HANDOVER PROCESS?

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• • Upon the completion of the building, the developer shall serve a Handover Notice to the buyer to indicate the date of handover for the units and the outstanding amount to be paid before taking over the units.
• • The buyer pays the outstanding amount as per the Handover Notice.
• • On the handover date, the buyer will check the unit and take over the units by signing the Minutes of Handover. The buyer will also sign the application for a pink book, electricity, water, and telephone contracts with the supplier at the handover date.
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2. WILL THERE BE PROPERTY MANAGEMENT SERVICES?

Before establishing the Committee of Management for the building, the developer shall act on behalf of the Committee of Management to engage a qualified company to provide the property management services.

3. ARE THERE AFTER-SALES SERVICES PROVIDED?

After the unit is handed over, the developer is obliged to provide the following services:

• Warranty on the units under laws and agreed in the SPA.

• Apartment Fittings: up to 1 year

• Building Structure: up to 5 years from the date which the building is put into operation.

• Submitting the application file for obtaining pink book for buyers

•Additional after-sales services relating to assignment, rental, furnishing, etc. will be supported within the capabilities of the Developer and regulations on a case-by-case basis.

4. INSURANCE FOR MY PROPERTY

By law, the Developer is not obliged to provide insurance for private areas of the residential house/ apartment. As such, owners of the house/apartment/ are recommended to buy insurance for their house/ apartment following the law.

XI. Renting Out Your Property

1. 1. HOW DO I FIND A TENANT?

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• Under the new law, foreigners are entitled to enter into a lease contract with tenants in Vietnam.
• The lessor can contact the tax departments where the property is located. To purchase a red invoice for issuance to the tenant for collecting rent.
• While the Developer is not obliged to provide leasing services. Such consultancy can be advised to investors on a case-by-case basis.
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2. HOW DO I COLLECT RENTAL INCOME?

• The method of collecting rental income is a commercial decision agreeable to the Landlord and tenant.
• Typically, the Landlord will request 2 months of deposit.
• The landlord retains the right to instruct the management of the building to cut off water and electricity provision to the unit if the lessee fails to pay rent.