Mr. Tran Thai BinhPartner 

LNT & Partners

The real estate market in Vietnam has seen a quite lot of growth in the last two years, with foreign investors returning, and many busy M&A transactions in real estate.  Some local developers have sought to transfer their incomplete projects in order to do internal re-structuring for better growth.

For foreign investors, investing in Vietnam is challenging, especially in real estate investment due to differences in the legal framework for land and real estate, as well as transaction practices and other factors.

Below are some notes for property project buyers (especially foreign buyers) to overcome challenges in acquiring real estate projects in Vietnam.

Deal Structure

Acquiring a real estate project may be done one of two ways: by a “project transfer deal” where the project is transferred to the buyer, or through a “share transfer deal” where the buyer would acquire the shares held by the sellers in the company that owns the real estate project. The Law on Real Estate Business now allows for a partial or whole of transfer of the real estate project. With regards to the “the project transfer deal”, under the applicable law, the transferor is required to complete their project infrastructure development as a condition precedent for transferring the project. The assessment of the completion of infrastructure development is a lengthy process and somewhat subjective. It may be time consuming to get the getting necessary approvals for a project transfer, and many business opportunities may pass by in the mean time.

Therefore, another way for the parties to get to the desired outcome is for the buyer to acquire all shares and/or equity held by the sellers in the company that owns the real estate project. The Law on Investment now sets out a clear legal framework to allow foreign buyers to acquire shares or equity in local companies. Accordingly, a foreign buyer may directly acquire shares or equity from the sellers. This approach is more favorable for acquisition in certain cases.

 Buyers often prefer to use a “project transfer deal” rather a “shares transfer deal”. However, things are not always as accessible in reality due to legal limitations and restrictions.

Due Diligence of the project company or the real estate project

Either way, a due diligence report, which is a process of checking and finding out any legal and financial issues of the project and project company (or the developer), is always essential. The due diligence process is designed to find out any legal or financial liabilities that the sellers may have with respect to the real estate project and/or of the developers. The process vets any risks in the business operation of the developer or with implementing the project, the possibility of licenses being revoked, as well as any other factors that mayimpact on the transaction.

As for legal liabilities, the buyer is required to review all approvals, permits or licenses for the project, for example: the issuance of the land use rights certificate, the suitability of the land use purpose for the development of the project, licenses and permits relating to the designs and construction of the project, the developer’s legal compliance in implementing the project and/or in corporate operations, and so on.

As for financial liabilities, the buyer needs to review the performance of all financial obligations to the Government and/or to third parties by the developer with respect to land use rights, rights of third parties in the land use rights and/or the company, encumbrances to the land use rights and/or the project and/or the company’s assets, current liabilities or debts by the developer, as well as undertakings and commitments by the developer, and so on.


Illustrating image

Negotiations on the terms and conditions of the deal

Based on the findings from the due diligence report of the project and/or the project company, the buyer needs to define the conditions precedent for entering into or completing the transaction. Setting such conditions requires skill and tact in order to limit them to a reasonable but sufficient extent. This helps to avoid difficulties and controversies in negotiations that may become deal-breakers to the sellers feelings of distrust from the buyers.

Foreign buyers are usually familiar with using lengthy agreements that are tens or hundreds of pages long, but not with local sellers. Therefore, a lengthy agreement with unnecessary terms or clauses may lead to an end of the transaction due to long negotiations (which may sometimes be unnecessary), as well as concerns from the sellers. The agreement may use precedents from the common-law system. However, a simple copy of the terms and conditions of the transaction documents for deals in Vietnam is sometimes not only legally impractical, but can also cause difficulties to the parties when completing the deal.

Deal Closing

The buyers need to agree on a payment schedule that is proper for closing the deal. In practice, the seller usually requests the buyer to deposit an amount to secure the buyers’ performance of the deal. The buyer may have concerns on legal and financial liabilities arising from the deal due to inadequate awareness by the sellers. Therefore, a bank will be engaged as an agent to manage the deposit amounts. The parties may agree on the release of payment by the bank upon the seller’s fulfillment of certain conditions. Therefore, an agreement on payment must also be strict, and requires a local insight on the assessment of the closing to mitigate the buyers’ risks.

As for the “share transfer deal”, the buyer will want to hold a reasonable retention amount to cover obligations or financial liabilities of the enterprise or of the project, and the seller usually wants to receive all payments upon the transfer of the project to the buyer. In practice, it is not so easy for the parties to reach such an agreement.

When buyers are foreign investors, attention should also be paid to Vietnamese regulations and requirements on foreign exchange controls. Specifically, the buyer should require the project company to open a direct investment capital account through which the payments can be made. This will ensure the investor’s capital withdrawal at a later stage. Although it is the seller’s obligation, the buyers should request for documentation of the seller’s income tax fulfillment for filing and submitting to the authority later.

Completing the deal requires registration with the authority. As such, foreign investors must apply for approval from the competent authority for the transfer deal with respect to real estate projects, and will be granted M&A approval.

Regardless of the closing of the deal, some seller’s representations and warranties still live on. What if the buyers, after taking-over of the project, discover these representations and warranties are inaccurate or noncompliant? This issue should be foreseen by the buyers to ensure that security measurements (e.g. right to sell back or or claim for damages) are in place.

Other issues

It is necessary for the parties to agree on a legal regime to settle disputes or conflicts arising during the deal, and in case of failure, on the competent jurisdiction. According to Vietnamese commercial law, the parties may choose either the court or arbitration for settlement. In practice, the parties often prefer arbitration due to its simple and non-public procedures.  Arbitration awards are as binding and enforceable as a court decision, even though arbitration fees are higher than that of a court’s.

The buyer must pay attention to the handover of project documents as well as to the rights to control and run the company. Some buyers, after taking over the company, have faced difficulties in operating the company due to a lack of corporate documentation.

Sellers may also have promises to favor the buyers’ financial interest in the acquisition such as possible adjustment of the planning and construction criteria. However, in some cases, such adjustments are impossible due to the requirements of the master plan. Foreign investors therefore, should pay attention to these requirements.


#Legal #Insight #RealEstate #Merge #Acquisition #Projects #Vietnam

Roadmap to tighten the real estate: Credit is “loosen” until 2018

State Bank of Vietnam (“SBV”) has officially issued Circular 06/2016 to amend some articles of the previous Circular  36/2014, which will ease the real estate credit-tightening roadmap till 2018. However, many enterprises in HCMC have repeatedly sought for foreign capital to reduce the dependence on bank loans.

Credit-tightening on real estate has not been executed this year.

Circular 06/2016 was officially issued by SBV on 27th May 2016. It is the result of several suggestions, positive arguments from experts and the relevant authorities. This Circular will not immediately tighten the credit flowing into the real estate market, but it will stretch out the implementation.

According to Circular 06/2016, the ratio for short-term capital use of commercial banks for medium and long term loans is still at 60%. That ratio will remain at 50% in 2017 and will go to 40% in the beginning of 2018. The period of credit-tightening is delayed a year in comparison with the former draft. The risk index of receivables for real estate business will increase from 150% to 200% in the next year (instead of the increasing the rate of 250% as stated in the former draft).

Mr. Dinh Duy Trinh, CEO at Ban Viet Land, stressed that fact that the SBV has received opinions from the association, as well as from professionals is remarkable. Not only enterprises,  but buyers are also getting more confident to make investments.To respond to the petition of the HCMC Real Estate Association (HoREA), concerning  proposals to amend Circular 36/2014, SBV’s HCM City branch has also confirmed that the purpose of the amendment is to ensure the safety of bank credit activity and limit risks due to the enormous credit growth in real estate. However, there should be a roadmap to deploy the plan (1- 2 years) to prevent risks arising from the policy and affecting to bank activities negatively.

 The acceleration of foreign capital

In HCMC, from the beginning of this year, there are at least six foreign investment funds that have announced their new investment cooperation in several projects. Other signed projects have already been deployed.

Phat Dat, An Gia Investment and Creed Group (Japan) signed a joint investment in River City project with the scale of US$500 million, which is a typical case. Nam Long signed with Nishi Nippon Railroad and Hankyu Realty (Japan) to invest in the Fuji Residence investment projects. Tien Phat Corp and Sanyo Homes Corporation (Japan) have joined in a strategic cooperation project with their first product being the Ascent Lakeside project. Thu Duc House has cooperated with Pavo – the investment fund to invest in more than five projects in the near future. SynGience (Singaporean Investment Fund) poured 400 billion VND into Tham Luong Depot Metro project.

Mr. Pham Le Tuan, General Director of JSC Real Estate Investment Hung Loc Phat shared thatwhen the SBV began sending out their first message of credit-tightening, many enterprises worried about seeking for new sources of funding. In particular, investment capital from foreign funds is the most attractive channel to enterprises.

“Those enterprises that have not found a reliable source in replacement when banks starts to tighten the credit are forced to be more cautious in their business plan. As for our company, the ultimate criterion is to guarantee the stable development in our business. The proportion of loans in different projects is only 15% – 20%, so we are assured to implement several projects without considering seeking foreign capital “– Mr. Tuan Pham shared.

Besides the fact that domestic enterprises want to reduce their dependence on domestic banks through  foreign capital, Partner Thai Binh Tran at LNT & Partners Law Firm said that there are many reasons that lead to increasing foreign investment. Particularly, it is due to the openness of regulations on investment,  and capacity to own local real estate for foreigners. Savings rates in some countries, such as Japan and Singapore, are less attractive compared to the interest rate expectations in Vietnam’s real estate market.

Credit: VietnamNet

#Legal #RealEstate #Circular #Amendent

How to select the right real estate investor?

Mr. Tran Thai Binh – Partner heading the real estate practice group at LNT & Partners gave his comments regarding how to choose a reliable investor when investing in real estate. Here is what recorded on Tuoitre online:

Various solutions have been stipulated in Housing Law and Real Estate Law to protect the rights of home buyers. For example, one investor must accomplish the legal procedures to establish the project. Then foundation has to be built up and notification of the local housing authority must be obtained. Only then is the investor permitted to sign the upcoming sales contract and mobilize the deposit from home buyers.

In addition, the real estate projects must be qualified and guaranteed by the commercial bank. In case the investor does not handover the sold houses as promised, the bank will organize a refund to the buyer.


(Source: Internet)

The remaining problem lies in whether the implementation of this provision is serious or not. For example, the authority checks to ensure the investor follows their commitments, or timely “blow the whistle” if the investor executes the illegal house sale without guarantying the legality. However, buyers themselves should conduct research about the investor and the legality of the project.

As a rule, when investors want to sign a sales contract with buyers, they must be certified by the local construction department that they are eligible to sell houses. Home buyers should remember to ask investors to present such certification. It is more difficult for the project to raise capital when all the necessary conditions are lacking and it is not certified by the authority, which makes the project hard to complete with the given timelines and commitments.

Meanwhile, the qualified investors are in a better position to accomplish the project. Those investors who have had many qualified products on the market rarely violate the legislation or hands over products late.

If investors want to earn buyers’ trust, they have to present evidence, such as: the right of land use certificate of the project, the design approval, the construction approval, the guarantee letter from the commercial bank, the acceptance document to execute the project from the construction department, and allowance of investors to mobilize capital from buyers.

In general, buyers will recognize reliable investors.


Partner Binh Tran gave comments on the “Harmona Apartment purchasing” case

Disputes over out of the “Harmona apartment in Tan Binh district, Ho Chi Minh city” case  has got the community’s attention recently. To build a finance basement for the project, the investor mortgaged the right of land use and the property forming in the future at North Branch BIDV Saigon. After the implementation period of the project, the investor signed a sale contract for home buyers, did handover and home buyers also moved in. The main point is that home buyers have  fully paid for the investor. However, in May, the Bank announced that it will handle the mortgaged property as the mortgagor is an investor has violated the obligation to repay the debt. This made the resident there feel very nervous. Therefore, how is the rights of  people in the apartment protected ?

Let’s watch the video to see that how Mr. Binh Tran – Partner in charge of Real Estate practice group at LNT & Partners comments on this case along with FBNC:


Vietnam: Real Estate Investment Luncheon

Mr. Binh Tran (Partner at LNT & Partners) was at the “Real Estate Investment Luncheon” to deliver a speech on May 18th 2016, which is regarding to the insight of investing in real estate in Vietnam and how to utilize the legal framework to leverage the real estate business up .


Mr. Binh Tran is delivering his speech.

Mr. Binh Tran and General Director at Colliers International Vietnam did successfully share about:

  • Operating a real estate firm in Vietnam: How far foreign investors can go under the current legal framework?
  • What you as a foreign developer should pay attention in developing a Residential project or large real estate project in Vietnam?
  • Acquiring a real estate project, what specifics and details should you be aware of?

The audiences

We would like to say the warmest thank-you for the cooperation of BBGV and our partner from Colliers International Vietnam.

#RealEstate #Vietnam #Legal

Legal briefing February, 2016

Please click here to download our report: Legal Briefing October _ LNTpartners

I. Circular No. 20/2015/TT-BTP giving details and providing guidelines for implementation of a number of articles of the Decree 23/2015/ND-CP dated 16 February 2015 issuing copies from masters registers, certification of true copies from originals, authentication of signatures and contracts (Circular 20)

Sector: Administrative

Effective date: 15 February 2016


Circular 20 has provided the guidelines for implementation of a number of articles on certification of true copies from originals, authentication of signatures, notarization of contracts, transactions, in particular:

Decree 23 has simplified the procedure on notarization of contracts. However, due to the unfamiliarity with new administrative procedures, some of local authorities themselves invent additional provisions or require additional documents in the notarization dossier. The Circular 20 has addressed this shortcoming: in receipt and settlement of the notarization requests, the notary is not allowed to invent any additional step, or request for more documents other than those stipulated in the Decree 23. Circular 20 also regulates that if the notary fails to settle the notarization requests within 15 hours and fails in producing results within one day or having to extend the settlement schedule under Article 21, 33, 37 of Decree 23, a clear appointment letter is required to be sent to the requester.

Besides the cumbersome in notarization, Decree 23 has not also detailed the template of testimonies on document of legacy inheritance, document of legacy refusal.  Consequently, the competent authorities were confused and even refused to authenticate. Therefore, Circular 20 has given details for this matter in Article 3.1 and issued a template attached with the Circular. In addition, Circular 20 also attached a sample of authentication testimony of signatures to ensure the consistency of application of the Circular.


Circular 20 expectedly settles the problems arising from implementation of Decree 23 such as the lack of templates and inconsistency of required dossier.

II. Circular No. 59/2015/TT-BLDTBXH detailing and guiding the implementation of some articles of the Law on Social Insurance on compulsory social insurance (Circular 59)

Sector: Insurance

Effective date: 15 February 2016


Circular 59 has various remarkable points as follows:

(i) Circular 59 supplements the provision on the payment of compulsory social insurance drawing from the monthly wage, allowances (from 1st January 2016 to 31th 2017), in which such allowances are the ones to offset the factors of working conditions, the complexity of work, activity conditions, level of labor attraction for which the agreed wage in labor contract is not calculated or incompletely calculated such as allowances of position, title, responsibility, heaviness, hazardousness, dangerousness, seniority, region, mobility, attraction and the like. Besides, the monthly wage paid for compulsory social insurance shall not include the other benefits and welfare, initiative bonus, meals between shifts, gasoline, telephone, travel, accommodation and child care allowances; assistance upon the death of employees’ relatives, the marriage of employees’ relatives, employees’ birthday, subsidy to the employees in difficult situation in case of work accident, occupational disease and other allowances and assistance recorded in separate items in the labor contract.

(ii) Circular 59 provides conditions to enjoy an one-time subsidy upon birth giving as follows: (a) In case only the father participates in the social insurance, the time of payment must be from full 06 months or more within the period of 12 months before birth giving; (b) For the husband of the mother requesting surrogacy, the social insurance payment must be from full 06 months or more within a period of 12 months to the time of child receipt.

(iii) Under Circular 59, when applying monthly pension, a rate of 2% of monthly pension shall be reduced for each year of retirement prior to the prescribed age, which is higher than the rate of 1% under Circular 03/2007//TT-BLDTBXH.

(iv) The rate of entitlement to enjoy one-time social insurance of the employees having the time of social insurance payment of less than 01 year is equal to 22% of the rates of monthly wage of social insurance payment; the maximum rate is equal to 02 months of the average monthly wage of social insurance payment.


Circular 59 has provided a means for realization of the Law on Social Insurance and Decree No. 115/2015/ND-CP. The Circular is expected to protect tens millions employees and financial resources of entities engaging in social insurance.

III. Circular No. 09/2015/TTLT-BCA-BYT-BTC guiding implementation of health care insurance applicable to employees, students, relations of solider of People’s Public Security of Vietnam (Circular 09)

Sector: Insurance

Effective date: 11 February 2016


Noticeably, Circular 09 details the scope of employees whose health insurance is contributed by the local Public Security and the employee themselves, and the ones whose health insurance is contributed by state budget. Accordingly, the relations of soldier, students of Public Security cultural school and foreign students who are granted scholarship at Public Security school shall enjoy the health insurance covered by the state budget.

Regarding the contribution responsibility in special cases, Circular 09 prescribes that within the time of sick leave from 14 days onward, in which the sick leave benefit is applicable, employees and their employers are not required to contribute into the health insurance while the health insurance benefit is still applicable.

Circular 09 provides that within the time of detention, in custody or temporarily suspended from their work before being investigated or judged guilty or not guilty of their offences, ratio applicable to health care insurance contribution shall be 4.5% of 50% of the monthly salary subject to social insurance contributions as stipulated by laws. The remaining contribution shall be contributed in case it is concluded that there is no violation accordingly.

Employees who are currently living and working abroad are not subject to health care insurance contribution within the period of being aboard. The period of being abroad shall be counted as uninterrupted in application of health care insurance contribution.


This Circular has come into effect from 11 February 2016. However, the provisions on contribution level, contribution liability, and contribution method in respect of health insurance have been effective since 1 January 2015.

IV. Decree No. 11/2016/ND-CP providing guidelines for implementation of Labor Code on foreigners working in Vietnam (Decree 11)

Sector: Labor

Effective date: 1 April 2016


The scope of foreigners who are exempted from work permit is extended to include experts, individuals being the chief executive officials or those holding management positions or technicians who work in Vietnam for less than 30 days per period and the total accumulated working day in Vietnam is no more than 90 days per year. Further, method for determination of an expert, a chief executive official and management positions is also detailed in this Decree.

Confirmation of demand for use of foreign employees by Chairman of provincial people’s committee is not required in particular cases, noticeably for foreign employees with abovementioned working period in Vietnam.


With respect to the application for obtaining work permit, in case a foreigner has been residing in Vietnam, only criminal record issued by competent authority in Vietnam is required. However, there is still no further clarification for applying this provision, i.e. how to determine that a foreigner has been residing in Vietnam. In addition, processing time for the issuance of work permit is shortened from 10 to 7 working days from full submission.


Decree 11 simplifies the process of work permit and facilitates favorable conditions for foreigners working in Vietnam.

V. Circular No. 36/2015/TT-NHNN on restructuring of credit institutions (Circular 36)

Sector: Banking and Finance

Effective date: 1 March 2016


Inheriting positive points of Circular 04 and being amended, supplemented to qualify requirements on restructuring of bank system and sustainable development of credit institutions system, Circular 36 has the following notable points:

  • The Circular 36 applies to credit institutions being commercial banks and finance companies only.
  • In addition to merger and consolidation, conversion of legal form of credit institutions is also be governed as one of restructuring form. Accordingly,
  • a commercial bank or finance company may convert from a limited liability company into a shareholding company, or vice versa; and a commercial bank or finance company may convert from a single member LLC into a multiple member LLC, or vice versa.
  • In case of conversion, the credit institution must have a conversion plan approved by its competent body and satisfy other requirements in accordance with laws.

It is strictly prohibited to disperse assets in any form.


Circular 36 is expected, by supplementing regulations regarding conversion of legal form of credit institution and improving regulations regarding merge and consolidation of credit institution, to create a bank system fully complying with current market principles.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at

Important Notes for Foreigners in Buying Residential Houses in Vietnam

Housing Law 2014 of Vietnam has created more favorable conditions for foreigners to own houses in Vietnam. However, buying a residential house in Vietnam is not actually an easy matter to foreigners given its legal complexity in real estate.   The following notes from Mr. Tran Thai Binh, a partner from LNT & Partners, may be useful to a foreign buyer who is thinking of possessing a residential house in Vietnam.

Firstly, the buyer must be qualified under the applicable laws. According to the Housing Law, the condition is now so relaxed that a foreigner who lawfully enters Vietnam can be eligible to own residential houses. As such, the buyer needs to prove that his entrance is permitted.

Secondly, it is advisable that the buyer should keep a track record for the money he brings to Vietnam for buying the house.  This would be better for the buyer in remitting the money back after selling the house later on.  For this purpose, he should open an account at a bank in Vietnam to which the money will be transferred and from which the payments for the house should be made. In case the money is his salary or income earned from working or doing business in Vietnam, he should keep document supporting for the money.

Thirdly, the buyer should get to know which property projects that he or she is permitted or not permitted to buy in order to avoid future risks.  Please note that foreign buyers are only permitted to buy houses from new housing development projects, not in existing residential quarters. This job is not difficult to foreign buyers if he or she consults with a reputable property agent such as Savills or Collier.

Fourthly, on contracting with the property developers, the foreign buyers should make sure that the property developers are qualified for signing housing sale and purchase agreements with the buyers.  In principle, the property developers are allowed to enter into housing sale and purchase agreements once (i) the housing project is properly approved; (ii) the foundation work of the house is completed, and (iii) the terms and conditions of the agreement for selling  a condo have been registered at Vietnam Competition Authority (under the Ministry of Trade and Industry).  An agreement may be void if failing to meet one of these conditions, and thus, the interests of the buyer may not be properly protected.

Fifthly, it should be noted with the implementation of a housing sale agreement with housing development projects since this may be not similar to the transaction practice in the buyer’s country.  For example, in Vietnam the housing developers usually do not give notice to the buyer of making the payments under the contract. It is the obligation of the buyer to follow the payment schedule as contracted. This ambiguity may lead to late payments by the buyers which may result in late payment penalty and/or early termination of contract by the seller (housing developer).  The buyers may get advice from lawyers to avoid these risks.

Sixthly, according to the Housing Law, foreigner housing owners have full rights as Vietnamese have over the house, such as the right to lease, donation or capital contribution, inheriting to others, etc. with their house. However, it should be noted that the foreign owner can exercise these rights only after he or she has obtained a “land use right certificate and/or property ownership” to the real estate. Therefore, in the respective contract, the obligation to apply for the certificate of ownership and/or the land use rights by the seller should be clearly stipulated. Also, when leasing the real estate, the foreigner owners must register the lease agreements with the local government (district-level administration committees), and properly declare his income tax for the earned rents. By complying these requirements, the foreign buyers’ incomes will be treated as legitimate income which can be remitted abroad. In addition, when renting or a house, it is also required that the owners must register temporary residence of the tenants with the relevant local authorities. Currently, it is still not clear how foreigners, as house-owners, carry out this registration procedure. Some foreigners are afraid that if they do not regularly live in Vietnam, how can this obligation be implemented? Actually, this difficult task may become easier if the foreign owners can engage a real estate management company to take care of these, and on behalf of the foreign owners, to perform the management and administrative procedures involved.

Seventhly, if the foreign owners no longer want to own the house, what can they do? Can they sell it to other foreigners or Vietnamese? Yes, they can according to the Housing Law.  However, currently there is no clear guidance from the State Bank of Vietnam that how the foreign owners can remit abroad the sale proceeds from selling the house.  However, my opinion is that if they can prove the money that they used to buy the house is of legal sources and relevant taxes have been fully paid, he or she is surely permitted to transfer their gains abroad.  Again, this should be consulted with a lawyer in real estate for getting through the procedure.

By Vietnam Law Insight

The article contributed by Mr. Tran Thai Binh, Head of Real Estate Practice Group of LNT & Partners with more than 15 years in real estate practice. Its contents do not constitute legal advice. For more information, please contact the  lawyers via email: Thank you.

Conditions and Steps for Foreigners Buying a House under the New Laws and Regulations

Conditions and Steps for Foreigners Buying a House under the New Laws and Regulations


Conditions for foreign individuals that wish to buy a house in Vietnam:

A foreigner must comply with the conditions for foreign individuals to own residential housing in Vietnam. In particular, foreign individuals must be permitted to enter into Vietnam and not fall into the category that entitles them to preferential treatment rights, diplomatic or consulate immunities in accordance with the law[1].

After satisfying all the conditions under the law, foreign individuals are required to undertake the following procedures to own a house in Vietnam

I. Step 1: Foreign individuals enter into housing purchase and sale contracts (“PSC’) with developers under an investment project.

Prior to the execution of the purchase of housing and individual residential houses, the developer may require the foreign individual to make a deposit of an amount of money for a period of time in writing as agreed by both developer and the foreign individual as security for entering into, and performance of the PSC.

In this context, the term “residential housing” refers to apartments and individual residential houses developed in investment projects for the construction of residential housing[2].

The PSC must be made in writing and contain the following items[3]:

  1. Full name of the individual, name of the developer and addresses of the parties;
  1. Description of house’s characteristics, and characteristics of the parcel of residential land attached to such residential house;

In respect to a contract for the sale and purchase of an apartment, the parties must specify the areas that are under common use and under common ownership; the areas for use under private ownership; the floor area of the apartment; and the use purpose of the areas under common use and under common ownership in the apartment building in accordance with the originally approved design purposes.

  1. Value of the residential house transaction if it is agreed in the contract;
  1. Time and method of payment;
  1. Time of delivery and receipt of the residential house; period of warranty of the residential house;
  1. Rights and obligations of the parties;
  1. Undertakings of the parties;
  1. Other agreements;
  1. Effective time of the PSC;
  1. Date of signing of the PSC; and
  1. Signatures and full names of the parties.

II. Step 2: Foreign individuals making payment for the residential housing.

Foreign individuals shall make payment for the residential housing as agreed in the PSC.

For payments under which the foreign individual will purchase residential housing to be built in the future may be made in instalments, in which, the 1st payment must not exceed 30% of the value of the PSC, and subsequent payments must comply with the schedule for construction of the residential house, but the total amount must not exceed 70% of the value of the PSC of the house that has not been handed over to the client yet. In case foreign individuals have not been issued with the Certificate of land use rights and ownership of residential house and other assets attached to land, the maximum payment shall be 95% of the value of the PSC, the remainder of the PSC shall be paid when the competent authority has issued such Certificate for the foreign individual[4].

III. Step 3: Developers hand-over the residential house as agreed in the PSC for foreign individuals.

The time of transfer of ownership of the residential house is the time when the developer hands over the residential house to the foreign individuals, or when the foreign individual has made full payment to the developer, except when otherwise agreed by the parties[5].

IV. Step 4: Obtain Certificate of land use right and ownership of residential house and other assets attached to land.

The developers have the obligation to conduct procedures for the issuance of Certificate of land use right, ownership of the residential house and other assets attached to land, and deliver such certificate to foreign individuals within 50 days from the handover date of the residential house to foreign individuals[6].


Term of ownership of residential house of foreign individuals: 50 years from the date of issuance of the Certificate of land use right and ownership of residential house and other assets attached to land which may be extended in accordance with Government regulations[7] (the extended period shall be 50 years according to latest draft of Decree providing guidance on the implementation of the Law on Residential housing 2014).

Foreign individuals married to Vietnamese citizens or to Vietnamese residing overseas may own residential houses on a stable, long-term basis, and have the same rights as residential house owners that are Vietnamese citizens.

Limit on the residential houses in which the foreign individuals are entitled to buy: the residential houses which foreign individuals have entitled to own shall not be more than 30% of the number of apartments in case purchasing residential houses in apartment building and no more than 250 houses, comprising of villas and terraced houses, in one area with the population size equivalent to that of an administrative unit at the ward level in case purchasing individual residential houses.

[1] Art 160.3, Law on Residential housing 2014

[2] Art 159.2(b), Law on Residential housing 2014

[3] Art 121, Law on Residential housing 2014

[4] Art. 57, Law on Real Estate Business 2014

[5] Art. 19.5, Law on Real Estate Business 2014

[6] Art. 16.7 Decree 71/2010/NĐ-CP. Note: This old guidance on Law on Residential housing 2005 is still in effect until the issuance of new guidance on Law on Residential housing 2014.

[7] Art 161.2(c), Law on Residential housing 2014

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact Mr Binh Tran at:

The Most Important Documents Regulating Bank Guarantee

Circular No. 07/2015/TT-NHNN on Bank guarantee

On 25 June 2015, the State Bank of Vietnam issued Circular No. 07/2015/TT-NHNN on bank guarantee which is considered as one of the most important documents regulating bank guarantee applied to domestic credit organizations, branches of foreign banks for foreign customers. The Circular is to replace the previous one, namely Circular No. 28/2012/TT-NHNN on 03 October 2012 issued by the State Bank of Vietnam on bank guarantee.

The Circular No. 07 has formulated a full and basic legal framework on procedures for, and dossiers on activities of bank guarantee of credit organizations and branches of foreign banks.

The Circular is also expected to create a new legal framework to ensure that the international standards on bank guarantee are met as well as to help appropriately synchronize with other relevant laws and to minimize limitations and weaknesses of the current operations on bank guarantee. Furthermore, the Circular is to enhance the effectiveness, safety and smooth operations of bank guarantee activities of credit organizations and branches of foreign banks operating in Vietnam.

The Circular has a number of progressive contents. First of all, it supplements the definition of “symmetry guarantee party” and “guarantee confirming party” in order to specifically regulate those parties, including foreign credit organizations. In addition, the Circular gives the definition of “customer” to determine clearly which party customers are in guarantee relationship. From that, it is easier to calculate guarantee issuing balance, symmetry guarantee, guarantee confirming and as basis for considering conditions and requirements to customers for accepting bank guarantee.

Secondly, the Circular abolishes the provision that required the acceptance by the State Bank of Vietnam in bank guarantee.

Relating to supplying forex services, in order to conform to Circular No. 21/2014/TT-NHNN, Circular No. 07 has amended the relevant content. Accordingly, branches of foreign banks are not allowed to give guarantees in foreign currencies for customers operating overseas, except in case of that customers are guaranteeing party and symmetry guaranteeing party that are overseas credit organizations and guaranteed party doing business in Vietnam.

In real estate business, the Circular has clarified the Law on real estate business and Law on residential housing in terms of bank guarantee that are assigned the authority for detailing to the State Bank. To be more specific, the Circular requires the investor of a real estate project to undertake that the guarantee for selling, leasing future residential houses will be effective at least 30 additional days since the date of the delivery of the houses, basing on the agreement between the investor and customer. However, Mr. Tran Thai Binh, Lawyer of LNT & Partners, on an article published on Vietnamnet Online Newspaper, believes that many questions are not appropriately answered. For instance, such questions are; whether banks pay penalties for customers, if the housing sales and purchase agreement mentions; Or according to the Circular No. 07, guarantee agreement comes into effect to the time of at least ending 30 days since the date of the delivery of housing, but the customer is still awaiting (or not bewaring), leading to that those 30 days are overdue, then, this customer loses his/her rights for claiming guarantee. Many people say that a period of 30 days is short.[1]

In light of this Circular, there are a number of side-effects arising. Therefore, understanding provisions are necessary to avoid unfavorable consequences in doing business in general.

The Circular will come into effect on 09 August 2015 and replaces the Circular No. 28/2012/TT-NHNN granted on 03 October 2012. Hopefully, after its promulgation, the Circular will establish a solid legal framework for all domestic credit organizations, branches of foreign banks and customers in bank guarantee activities.

[1] Real Estate Guarantee: Questions awaiting guidance,–ban-khoan-cho-huong-dan.html, retrieved on 25 August 2015.

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Conditional Acceptance of the Construction Works for Commissioning

The Law

On 15 May 2015 the Government issued Decree No. 46/2015/ND-CP (Decree 46) to provide further guidance on the Law on Construction 2015 with respect to quality management and maintenance of construction works, pointing out:

“The responsibility for the quality of the works remains with the survey construction contractors, design contractors, and supply contractors, even after their work has been inspected and accepted by the employer, or after the defect liability period has expired. This means that these contractors may be held liable for damages evidenced to be caused by the quality of their works.”

What does it mean for businesses?

Under Decree 15/2013/ND-CP, acceptance of construction works for commissioning into use when they have not satisfied all requirements of the design, of national technical regulations, of standards applicable to the construction works, and the technical specifications and other requirements of the employers specified in the agreements is generally not allowed.

However, Decree 46 entitles the employer to conditionally accept the construction works for commissioning into use, if the issues with respect to quality of construction works do not affect the weight-bearing capacity, the life cycle and the functions of the works and if the construction works conform to the safety requirements.

Decree 15/2013/ND-CP allows the employer and contractor to freely agree on the minimum amount of the warranty fee retained by the employer. However, to the extent of State owned works, this has been restricted by Decree 46. Accordingly, the warranty fee for State owned works must not be less than 3% of the contract value for works of grade 1 or special grade, and 5% of contract value for the works of other grades.

Decree 46 stipulates that survey contractors should pay significant attention to the quality of their works. Therefore, we suggest that survey contractors to provide sufficient and eligible resources to ensure their works are compliant with the technical plan, as this is required by Decree 46. We would also warn that the Decree also entitles the employer to completely suspend the construction survey works upon finding them not compliant with the technical plan, or the construction survey agreement.

Decree 46 will take effect from 01 July 2015

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Construction Master Planning: More Defined Procedures

Decree No. 44/2015/ND-CP Clarifies Construction Master Planning

What does the law say?

On 6 May 2015, Government issued Decree No. 44/2015/ND-CP, providing guidance for a number of regulations on construction master planning (“Decree 44”). This Decree provides detailed regulations on a number of articles in the Law on Construction No. 50/2014/QH13, including the formulation, evaluation and approval of construction master planning, as well as master planning implementation and planning permits.

What does this mean for businesses?

More defined procedures for construction industry and investors

Firstly, specific functional areas with the scale over 500 ha shall be put under the general planning category, to ensure the suitability for provincial planning, urban planning, and to form a basis for zoning, and detailed planning.

Secondly, areas (over and below 500 ha) inside specific functional areas shall be put under the general planning category, ensuring its suitability for provincial planning, urban planning, and again to form a basis for zoning planning and detailed planning.

Thirdly, Areas inside specific functional areas upon instruction shall be placed under the detailed planning category, in order to ensure that the general planning framework, and zoning planning is more rigid, and to form a basis for issuance of the construction permit.

Fourthly, in the event that a single investor undertakes a construction project of less than 5 ha, (or under 2 ha if it is an apartment building project), the project must be created without the formulation of a detailed construction planning. Drawings of the general site plan, architectural plan, solutions to technical infrastructure in the fundamental design must comply with zoning plans or planning permits, ensuring the connection with technical infrastructure and compliance with architectural space in the area.

Finally, the planning permit shall be issued to investors who are qualified for implementing the investment in the construction project. The maximum period of a planning permit with respect to a concentrated construction project is 24 months from the date of issuance, until the detailed planning is approved. The maximum period for a planning permit with respect to a separate construction project is 12 months from the date of issuance until the construction project is approved.

Streamlined instruction on planning permits

The following functional areas directly related to the issuance of the planning permit are detailed in Decree 44: (i) procedures for the issuance of planning permit; (ii) application for obtaining planning permit; and (iii) contents of the planning permit. For any construction planning project with the planning tasks being approved before the effective date of this Decree, the formulation, evaluation and approval shall be conducted under the Government’s Decree No. 08/2005/NĐ-CP dated 24 January 2005 on construction planning.

Decree 44 shall take effect from 30 June 2015.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Receiving Advance Payments from Home Buyers: Correct Interpretation and Clarification is Necessary

Law on Residential Housing stipulates that generally, developers shall not be entitled to receive any advance payments from home buyers who purchase residential houses to be developed in the future before the foundation work of the property is completed.

This provision has been interpreted by competent authroties that any amount received by developers from their home buyers prior to the completion of the foundation, shall be deemed illegal and such transactions may be invalid.

However, the business in practice is very various by nature, the developers, in some cases, expect to know how many purchases have committed to buy houses in their projects. Therefore, deposit agreement is a method to secure the housing purchase and sales contracts. The amounts received from such deposit agreements may be at the risk of being regarded as a violation of the aforementioned provision.

In reality, some developers who collected payments from their potential buyers in the form of a “deposit”, or “goodwill amount”, and etc were imposed with administrative sanctions.

Deposits or Advance Payments?

From a legal perspective, there are some aspects that need to be considered in relation to this issue as follows:

Pursuant to regulations stipulated in the Civil Code, a deposit agreement means an amount of money delivered by one party to another party as a security for its performance of the further steps of the contemplated transaction. In the mentioned case, the transaction between the developer and a home buyer is the execution of a housing purchase and sales contract. Therefore, the deposit agreement between developers and its potential buyers prior to the completion of the foundations contains the provision that potential buyers pay a deposit amount to secure their performance commitments. Such buyers shall enter into the housing purchase and sales contracts with the developers when the projects have met the required conditions; in case the buyers do not fulfill their commitments, they shall forfeit their deposits…In our opinion, such agreements is in compliance with the Civil Code regarding deposit agreements.

The Law on Residential Housing provides that developers shall not be entitled to receive an “advance payment” from the buyers prior to the completion of the foundation. This intended provision is justified in avoiding the possibility that developers do not have the sufficient financial capacity to complete the property projects, which may adversely affect the interests of buyers ultimately. This provision is intended for the protection of buyer’s interests, but how should it be interpreted correctly?

In our opinion, the fact that developers receive deposit amounts from their home buyers is not supposed that they have received “advance payment” because the two transactions are different in legal nature: one is the deposit transaction, while the other is the housing purchase transaction. Indeed, from an accounting perspective, deposit amounts cannot  be entered to the accounts as the payments from buyers, because the developers always have an obligation to return deposits (including deposit penalties as agreed) to buyers in the event of any breach of agreement by the developers. Therefore, up to this point, the developers and the potential buyers have still not conducted in house purchase transactions. If such advance payments are supposed to be payments according to housing purchase and sale contracts, such payments shall accounted as revenue of the developers.

A unified interpretation by authorities needed

Relevant competent authorities usually suppose that “receiving deposits” and “receiving advance payments” are the same, and consequently presuming that the developers have breached regulations if receiving deposit amounts, and the related transactions are likely to be canceled due to its invalidity.

The provision of Law on Residential Housing mentioned above for the purpose of protection for interests of buyers is essential and justified. However, the assurance required to enable developers (as businesses) to be advantageous in their doing business within the legal framework is also necessary.

Currently, Law on Residential Housing 2014 and Law on Real Estate Business 2014 provides quite sufficiently regulations in order to remove incapable developers. For example, Law on Real estate requires a developer’s performance of housing project must be guaranteed by a reputable bank.  And furthermore, the developers are entitled to receive advance payments from the buyers up to 50 % or 70% of the housing sale price, and etc. All of these regulations, in our view,  secure enough the interests of home buyers.

Therefore, the further expanded interpretation of competent authorities is neither consistent with the spirit of the Civil Code, nor necessary in practice. Furthermore, such interpretations may adversely affect trading transactions between parties.

It is necessary to have guidance, or a specific confirmation from the Ministry of Construction regarding the fact that developers can receive deposit amounts (prior to the completion of the foundation) is consistent with applicable laws, in order to remove the “hanging verdict” for developers due to different interpretations of the relevant authorities at the local level.

By Vietnam Law Insight.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

The article contributed by Mr. Tran Thai Binh, LNT & Partners. Its contents do not constitute legal advice. For more information, please contact lawyers via email:

Kỳ 3: Những lưu ý khi mua nhà trả góp

( Mua Bán Nhà Đất đã bắt đầu phối hợp với Vision21 và kênh truyền hình HTV7 phát sóng các chương trình tư vấn bất động sản. Luật sư Trần Thái Bình với 15 năm kinh nghiệm chuyên môn, đặc biệt ở lĩnh vực bất động sản, thuộc công ty luật LNT & Partners, đã tham gia tư vấn về vấn đề Mua Nhà Góp Vốn.

BTV Phi Yến: Giả sử như hai vợ chồng quyết định sẽ mua dự án đang xây dựng thì anh có thể nói gì về những rủi ro mà họ có thể gặp phải?

Luật sư Trần Thái Bình: Quả thật tình huống trên vẫn xảy ra hàng ngày. Đa phần đối với những căn hộ đang hình thành, nghĩa là chủ đầu tư đang xây dựng, dĩ nhiên những căn hộ như vậy sẽ không có giấy tờ pháp lý hoàn chỉnh. Thật ra, luật pháp đã cho phép chủ đầu tư bán nhà đang hình thành trong tương lai. Người mua nhà thường chỉ hiểu đơn giản rằng họ phải ứng tiền trước cho chủ đầu tư xây nhà rồi sau đó mới bàn giao nhà cho họ. Tuy nhiên, về mặt pháp lý thì có hai khác biệt cơ bản giữa việc góp vốn đầu tư và mua bán nhà hình thành trong tương lai.

Cẩn thận “tiền mất tật mang” với chủ đầu tư không uy tín.

Đối với trường hợp góp vốn đầu tư, người mua nhà sẽ cùng đầu tư với chủ dự án. Trái lại, với trường hợp mua bán nhà hình thành trong tương lai, chủ đầu tư sẽ ký hợp đồng mua bán nhà đối với căn nhà đang xây và người mua nhà sẽ thanh toán theo tiến độ xây dựng. Điểm khác biệt giữa hai hình thức này là đối với hình thức góp vốn đầu tư, chủ đầu tư chỉ cần được phê duyệt dự án đó là có thể tiến hành kêu gọi góp vốn đầu tư; đối với trường hợp ký hợp đồng mua bán nhà thì chủ đầu tư phải khởi công xây dựng dự án, phải hoàn thành phần móng của công trình rồi thì mới được phép ký hợp đồng và nhận tiền. Như vậy, đối với trường hợp góp vốn đầu tư, sẽ có nhiều rủi ro hơn so với trường hợp ký hợp đồng mua bán nhà. Những người mua nhà nên cân nhắc điều này.

Chậm tiến độ dự án là một rủi ro không hiếm gặp.

BTV Phi Yến: Như vậy, liệu có thể hiểu rằng đối với một dự án đang xây dựng, có đầy đủ giấy tờ và tính pháp lý thì người mua nhà có thể hoàn toàn yên tâm không?

Luật sư Trần Thái Bình: Sẽ vẫn có những rủi ro khác. Ví dụ, chủ đầu tư không có kinh nghiệm, uy tín và năng lực thực hiện dự án theo đúng tiến độ, khiến cho việc hoàn thành dự án kéo dài. Một rủi ro khác là mặc dù đúng là họ có dự án đó, nhưng khi huy động vốn rồi lại sử dụng vốn cho những mục đích khác, khiến cho sau đó họ lại không có khả năng hoàn thành dự án ban đầu. Rủi ro thứ ba là khi chủ đầu tư không có kinh nghiệm dẫn đến việc thực hiện dự án không đúng quy định pháp luật và dự án bị thu hồi bởi cơ quan nhà nước.

Người mua cần tìm hiểu kỹ về uy tín và năng lực của chủ đầu tư.

BTV Phi Yến: Tuy nhiên, cũng không thể phủ nhận một số ưu điểm của phương án này so với việc chọn mua căn hộ đã hoàn thành rồi, ví dụ như phương thức thanh toán chẳng hạn. Rõ rang là số tiền phải bỏ ra đầu tư với hình thức này sẽ thấp hơn nhiều. Phải có lý do giải thích việc những dự án thế này rất thu hút người mua nhà hiện nay. Vậy nếu cặp vợ chồng ở trên quyết định chọn mua dự án thì luật sư có lời khuyên nào dành cho họ cũng như quý vị khán giả?

Tính pháp lý của chủ đầu tư và dự án rất quan trọng khi tìm thông tin mua nhà.

Luật sư Trần Thái Bình: Dĩ nhiên, việc mua nhà đã có giấy tờ hoàn thiện cũng có những thuận lợi riêng. Tuy vậy, việc ký hợp đồng mua bán, giao dịch với cá nhân bán nhà sẽ có nhiều bất lợi so với giao dịch với công ty bất động sản. Người mua cũng sẽ phải kiểm tra xem nhà đó có thế chấp chưa, có ràng buộc, tranh chấp với bên thứ ba hay không. Không phải chỉ cần có giấy tờ nhà là đã thuận lợi rồi. Ngược lại, khi mua nhà đang hình thành trong dự án cũng không chỉ toàn rủi ro. Vẫn có những thuận lợi như lịch thanh toán kéo dài theo tiến độ xây dựng của dự án (khoảng 2 – 3 năm) sẽ giúp cân bằng khả năng tài chính của người mua tốt hơn, giảm áp lực thanh toán một lần. Vấn đề là người mua nhà có biết phải tìm hiểu để yêu cầu chủ đầu tư tuân thủ hay không. Ví dụ, pháp luật quy định chủ đầu tư chỉ được phép ký hợp đồng mua bán nhà đang hình thành khi dự án đã hoàn thành phần móng. Nếu người mua nhà không biết mà vẫn đưa tiền cho chủ đầu tư trước khi phần móng hoàn thành thì giao dịch đó sẽ không có giá trị và pháp luật không thể lấy lại tiền cho người mua. Vì vậy, người mua nhà cần phải hiểu rõ quyền lợi của mình để đảm bảo chủ đầu tư đáp ứng đúng theo như vậy.

BTV Phi Yến: Cảm ơn anh. Như vậy, rõ ràng là mặc dù nhận được sự hỗ trợ hay có quyết định như thế nào trong việc mua nhà thì vai trò nắm bắt thông tin của chính người tiêu dùng cũng đặc biệt quan trọng. Một lần nữa, xin cảm ơn anh đã tham gia chương trình.

New rules ease Public-Private Partnerships (PPP) implementation

The government recently released Decree 15 to provide a comprehensive legal framework for public-private partnership projects, replacing the old regulations. Net Le and Loi Huynh of LNT & Partners took a closer look.

In November 2010, a pilot scheme of public-private partnerships (PPP) was introduced (Decision 71), which was expected to boost PPP projects in Vietnam. As of 2014, there were 38 PPP infrastructure development projects proposed to the government. However, none of them were implemented. From a legal perspective, Decision 71 seems to have failed in providing a realistic framework for the operation of PPP projects. It also confused investors with a dizzying array of government decrees on build-operate-transfer (BOT), build-transfer-operate (BTO), and build-transfer (BT) models, outlined in Decree 108 (November 2009) which provided several amendments. Indeed, most of the infrastructure projects in Vietnam have been carried out in accordance with Decree 108 rather than Decision 71. As such, the government issued Decree 15 on 14 February to finally provide a comprehensive legal framework for PPP projects, replacing Decision 71 and Decree 108. Apart from regulations that remain unchanged, Decree 15 introduces new regulations which may encourage the development of PPPs.

Eligible projects for PPP

The list of the eligible projects for PPP under Decree 15 emphasises the need for the government to develop an integrated infrastructure which has the potential to foster national economic development. Decree 15 describes PPP as an investment arrangement between an authority, investor, and project company to perform, manage, and operate infrastructure and public service projects including:

– Transport infrastructure works and related services;

– Lighting systems; clean water supply systems; drainage systems; waste and waste water collection and treatment systems; social housing; resettlement housing and cemeteries;

– Power plants, transmission lines;

– Health, education, vocational training, culture, sports infrastructure works and related services; offices of state agencies;

– Science and technology, weather forcasting, economic zones, industrial parks, hi-tech zones, information technology parks; the application of information technology;

– Agriculture and rural development infrastructure and services associated with processing and consumption of agricultural products; and

– Other areas as decided by the prime minister.

The government has released Decree 15, intended to clean up sometimes perplexing and contradictory regulations

Financial structure

Excluding operate-manage (OM) projects and projects mentioned above, a PPP project shall have a minimum total investment capital of VND20 billion. Decree 15 allows the investors and the state to allocate financial resources and share the financial risks without a cap, whilst each stakeholder shall be subject to statutory conditions.

Private participation

Private participation shall comprise of the investor’s equity capital and other funding sources which the investor is responsible for raising.

The investor’s equity capital shall be not lower than 15 per cent of the total investment capital. In case the total investment capital is higher than VND1,500 billion ($71 million), the equity capital shall not be lower than 15 per cent for the portion under 1,500 billion Vietnam dong, and for the portion above 1,500 billion Vietnam dong, it shall not be lower than 10 per cent.

Regarding the loan capital, Decree 15 is unclear as to whether the investor may  receive a state guarantee. Previous legislation specifically set out that any loaned capital shall be raised without increasing the burden of public debt. Article 57 of Decree 15 reads that the government may mandate an agency on behalf of the government to guarantee the material supply, product, and service consumption as well as other obligations of the investor, the project company, or other companies participating in the PPP project.

State funding

Before Decree 15, state participation in a PPP projects was capped at 30 per cent under Decision 71, and 49 per cent under Decree 108. These caps had the effect of rendering PPP projects less attractive to investors, as they will have to shoulder a higher risk burden than the state. Decree 15 removes these caps. However, state funding is limited to the following purposes:

– Capital contributions for construction works of projects with business and fee collection from end-users, yet the collection is not sufficient for return on investment and profit;

– Payment for investors providing services in accordance with build-transfer-lease (BTL), build-lease-transfer (BLT), and similar contracts; and

– Support for construction of auxiliary works, site clearance, compensation, and resettlement.

State funding shall include funds from the state budget, central government bonds, local government bonds, official development assistance, and incentive loans from foreign sponsors.

Legal Perspective

Forms of PPP contract

Decree 15 expands on the number of PPP forms available, laying the legal foundation for contracts of build-operate-transfer (BOT); build-transfer-operate (BTO); build-transfer (BT); build-operate-own (BOO); build-transfer-lease (BTL); build-lease-transfer (BLT); and operate-manage (O&M) models. Subject to these forms of contract, the authority that has the power to sign and implement a PPP contract may propose other similar contracts for the review and approval of the prime minister. Previously, Decree 108 only governed BOT, BTO, and BT models, while Decision 71 was silent on the forms of PPP contract.

Governing law

Decree 15 allows parties to choose applicable foreign laws to govern project contracts and contracts guaranteed by the government. Under either scenario, the choice of foreign governing law will not have jurisdiction over Vietnamese regulations on the application of foreign law.

From this perspective, it is possibly the first time that domestic legislation refers to a specific regulation rather than the general term “fundamental principle of Vietnamese laws” which has no definition under the law.

Dispute Resolution

Disputes in a PPP project may be resolved by court or via arbitration subject to agreement by the parties. Decree 15 makes it clear that disputes which are resolved by arbitration in accordance with the project contract and related contracts are commercial disputes. Vietnamese laws only have regulations on commercial arbitration, thus, if the dispute is not commercial, the choice of arbitration would be null and void. Under Decree 15, the resolution schemes are different depending on if the state agency is disputing with a local or a foreign investor.

Protection of lender

Decree 15 provides the lender with the authority to designate a capable organisation to take over all or part of rights and obligations of the investor or the project company in case the investor or the project company fails to perform on its obligations under the PPP project contract or loan agreement. An agreement on such a takeover shall be made between lender and the competent authority or parties of the PPP contract. Decree 15 also allows the investor to assign all or part of its rights and obligations under the PPP project contract to the lender or another investor. In this case, an assignment agreement shall also be made between the assignee and the parties to the PPP project contract.

PPP flow chart

Below is a general flow chart showing the process from initiative to execution of the PPP project contract. It is still a lengthy process for an investor to pursue. Decree 15 allows a conversion from a public project into a PPP project provided that it satisfies the requirements under Decree 15. However, further guidance is expected since it is not yet clear whether such a conversion would require stakeholders to perform all the processes shown below.

This Legal Alert is not a Legal Advice. For more information about this article, please contact the author: Dr. Net Le, Tel: +84909759 699 Email:

LNT & Partners is a leading full-service independent local law firm based in Vietnam with offices in Ho Chi Minh City, Hanoi, San Francisco and an affiliated presence in Hong Kong. The firm is among Vietnam’s most prominent, representing a wide range of multinational and domestic clients, including Fortune Global 500 companies as well as well-known Vietnamese listed companies on a variety of business and investment matters

By Vietnam Law Insight, LNT & Partners

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

One-size-fits-all contracts may not resolve disputes

LNT’s Thai Binh Tran and Quang Dao Nguyen look at some of the issues raised by the Ministry of Construction’s Circular 03 which insists on a standardised approach to property contracts between individuals and real estate developers.

In apartment sales and purchase transactions, the individual purchaser is often in a weaker position since they often have to accept entering into a standard form contract drafted by a real estate developer. Such contracts generally contain terms favourable to the developer, and may impair the buyer’s interests. This is one of the major causes of disputes arising between developers and individual purchasers.

To address that issue, the Ministry of Construction (MoC) has issued a standard form contract on apartment sales and purchases as a basis for individual purchasers to follow. The guidelines and regulations by the MoC detailing the terms in sale and purchase of apartments are necessary, because they provide clarity and transparency in apartment sale and purchase transactions, as well as protecting the individual’s interests, thereby mitigating disputes between the parties, and facilitating the development of the real estate market in general.

However, recent regulations provided for in Circular 03/2014/TT-BXD (Circular 03) requiring parties to “comply with contents and strictly apply the standard form contract” have caused many difficulties and adverse consequences in practice.

So, what does “non-applying standard form contract” mean?

Prior to Circular 03, the standard form contract for an apartment sale and purchase was prescribed in Circular 01/2009/TT-BXD, later known as Circular 16/2010/TT-BXD. However, these guidelines did not strictly require parties to apply the standard form contract, and also did not provide serious consequences for non-compliance therewith (the invalidity of these contracts). Therefore, in practice, the standard form contract is for reference only.

According to Circular 03, apartment purchase and sale transactions between a developer and an individual purchaser must be in strict accordance with the standard form (issued in conjunction with this Circular). More importantly, a contract signed between the developer and individual purchaser “shall not be recognised and not qualified for issuance of ownership certificate” of ownership to the individual purchaser, if it does not “conform and/or accord with the standard contract”.

The unclear provision of “complying with the standard contract” that real estate developers, when carrying out the registration of sample contract for apartment sale and purchase, are required to amend the sample contract in a way that all words, structure, and order of clauses in the standard contract issued by the MoC must be used and applied.  As such, although the sample contract submitted by the developer is in accordance with principles set forth in the standard contract by the MoC, the registration will still be rejected if the contract has not used the words or the structure of the standard contract.

In our opinion, such interpretation is unreasonable and inflexible, resulting in many problems for both the developers and the individual buyers. The MoC should clarify these issues and if the MoC’s opinion is as interpreted above, then our interpretation results in the legal consequences as discussed below.

Administration of civil transactions

It is clear that an apartment sale and purchase contract between a developer and a individual purchaser must adhere to principles and regulations of the law on the subject matter, however, this does not mean that it is necessary that such a contract need be strictly copied for every sentence, word, or order set forth in the standard contract.

The mandatory use of the wording mentioned above clearly goes against the principle of freedom in entering into an agreement – the key principle of civil transactions. According to this principle, the developer and the individual purchaser have the right to freely agree on the content, and the rights and obligations of each party. Provided that such agreements are not contrary to the laws, it must be recognised by the state. Among various options to address an issue of apartment purchase transactions (such as payment, dispute resolution, etc.), the developer and the individual purchaser may negotiate and agree with the most favourable option. The mandatory use of the standard contract has taken away the freedom in agreements, seriously affecting the interests of both parties. For example, disputes between the developer and the individual purchaser, can be resolved either in a people’s court or in commercial arbitration at the parties’ discretion. However, in a standard form contract, dispute resolution by the court is the only option for parties even though the option of a commercial arbitration may be more appropriate.

Interference in the court’s jurisdiction

According to the Circular 03, the signed contract will be invalid if it is not in compliance with the standard form contract. As such, an agreement (dispute to be resolved by commercial arbitration), despite its full compliance with the law (Law on Commercial Arbitration), may still be invalid if it is not subject to the provision of the standard contract (dispute resolution by the court). However, according to the Civil Code, if the form and content of a contract is in conformity with legal regulations, that contract is valid. This begs the question, is the effectiveness of Circular 03 higher than the Civil Code? Furthermore, this shows that the regulations of the MoC has somewhat interfered in the jurisdiction of the court.


Without a clear explanation from the MoC regarding the requirement of compliance with the standard contract, the parties have been obstructed in their performance, if the aforementioned interpretation is consistent with the opinion of the MoC, those regulations are contrary to the fundamental principles of civil transactions. Therefore, in order to ensure freedom in negotiation, regulations in Circular 03 should only be construed as a requirement for complying with rules and principles of transaction, not necessarily a requirement to comply with every sentence and word of the standard contract.

By Vietnam Law Insight, LNT & Partners

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Legal changes bolster market economy reform_Dec 2013

The National Assembly concluded a busy year which included the ratification of a revised Constitution, the Land Law and the Law on Public Procurement. It is expected the new laws will help develop a more liberal economy.

Le Net at LNT & Partners law firm takes a look at the developments and their anticipated effects.

Revised and Restated Constitution

The 1992 Constitution was revised after more than 20 years of Vietnam’s economic reform process. Once again, it underlines the leading role of the Communist Party, the state sector as the foundation of the economy and the notion that land belongs to the whole nation and is administered by the state. The new constitution states that private and foreign-invested sectors are granted equal rights to set up and run their businesses. The state sector is supported and maintained only in core industries.

The Constitution allocated more powers to the National Assembly and president. The National Assembly is now vested with the right to decide on national fiscal and monetary policy. The president has the power to appoint deputy prime ministers or ministers as proposed by the National Assembly, appoint high-ranking officials and high court judges. The Constitution also clarifies the power of the People’s Procuracy and establishes the State Auditing Agency.

The Constitution stipulates that any “unconstitutional” acts shall be resolved. The Constitution can be seen as a positive move towards the constitutional rule of law.

Three major legal changes should help liberalise the economy further

New Land Law

The new Land Law, which replaces the 2003 legislation, addressed concepts of landed property and compulsory purchases or seizures – a huge source of dispute in the last decade – particularly after notorious cases in Haiphong and Hung Yen. The new Land Law specifies the instances in which such compulsory seizures may occur, which mainly relate to ODA projects, infrastructure development or social housing projects. Moreover, the land price or land pricing method shall be decided by the state with an aim to limit its affect on the real estate market. In addition to land prices and compensation, the new Land Law reduces the scope for amended land zoning planning. The law clearly states that once zoning has been approved, it cannot be changed except under special cases. It is hoped that this strict rule will avoid unplanned urbanisation and the exploitation of those that control land allocations before real investors with fiancial capacity have an opportunity to invest.

The law introduces two concepts: a land price table and particular land price. While the land price table is introduced once every five years, the particular land price will be determined on a case-by-case basis, by a land valuation committee based on the land price table and market price. The land price table is used to calculate land compensation and land use fees for individuals or households, whereas the particular land price is used for land compensation and land use fees for economic organisations or foreign-invested enterprises.

An important part of the Land Law is devoted to land compensation payments and clearances. The law allows provincial people’s committees to determine land prices for compensation and provides a timeline for voluntary land compensation in the case of land recovery, following which the state could apply for a forced land clearance. The compensation is prioritised in the form of land compensation and, only when there is no land available, would monetary compensation be applied. The law also requires the land developer to propose a relocation project before implementing land compensation.

Foreigners and overseas Vietnamese are now allowed to receive land use right certificates if they are allowed to buy houses or apartments adjacent to land pursuant to the Law on Housing. It does not affect the right of foreign-invested enterprises to obtain land use right certificates for industrial land or residential land projects. The new law also maintains the status quo for projects that have already been granted freehold or leasehold status before the introduction of the new law on July 1, 2014.

New Public Procurement Law

The Law of Public Procurement, also effective from July 1, 2014, is introduced with the aim of reducing waste and corruption in public procurement, as well as encouraging private-public partnerships. The new law supplements new methods in the assessment of bids, including bidding concentration and tendering in specialist industries such as pharmaceuticals and medical equipment. Bid concentration is a new feature of this Law on Public Procurement, which authorises the project owner to organise bids for a single professional purchaser instead of multiple suppliers. This process may expedite the public procurement process while maintaining control over cost over-runs and co-ordination among the suppliers. The law implements and combines widely recognised international public procurement principles with local experience in relation to public procurement issues.

To enhance the efficiency of public procurement, the law hands bid appointments down to ministries or provincial people’s committees, rather than the prime minister. The decision-maker will also have to answer to supervisory authorities, to the public, and project owners.

To reduce the price adjustments or project cost over-run problems, the Law on Public Procurement prioritises fixed price methods. If other methods are used, such as lump sum unit price or adjusted unit price, then the bid decision-maker must explain why the selected method of public procurement is preferred vis-à-vis fixed price contracts.

In short, the three laws earmarked by the National Assembly mark a bold step towards stronger reforms to confer more supervisory powers and reduce the abuse of power, waste and corruption, while recognising the importance of professional and uniform executors.

All eyes are now on how the new laws will be implemented.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

“Create” or “import”?

At a recent conference of the Vietnam Chamber of Commerce and Industry (VCCI), a review was made over the practicality of 16 law codes.

When mentioning some of the insufficiencies of the Law on Investment and other laws, Dr. Le Net, LNT & Partners Law Firm, said: “Where will it go if we continue making laws through patchwork and groping around? The wheels have been made – is it necessary to “re-create” something? Do we have enough time to do that?”

Keep being amended

Dr. Le Net’s concern is a common one regarding the quality of law and practices, as well as the current lawmaking methods. It has been said that laws have never been issued as much as in recent years. Each year, dozens of laws and thousands of by-laws are produced, contributing to the adjustment of social relations. Simultaneously, the law has never been continuously modified to the extent as is currently experienced now.

Perhaps the first example to which this can be drawn is the legal system regulating land. The Law on Land has been amended six times (1987, 1993, 1998, 2001, 2003 and 2009), meaning that it takes 3.6 years on average for one modification. After each amendment, millions of people suffer “a cold sweat” due to a change, especially changes related to pink books and red books, which have caused controversy during the years. As expected of the National Assembly, this law is going to be amended and supplemented again!

In relation to foreign investment, in 18 years, 6 issues and amendments of the law were made (1987, 1990, 1992, 1996, 2000 and 2005). The current Law on Investment (2005), which was considered as a “breakthrough innovation” to form the mutual space for domestic and foreign investment enterprises, also faces the pressing proposal for amendments or abolishment. The longevity of the law, according to experts, is only 4-5 years or even lower. For instance, the Law on Complaints and Denunciations was issued in 1998 and amended in 2004, then immediately amended once again in 2005.

Similarly, the Ordinance on Public Employees was produced in 1998, amended in 2000, amended again in 2003 and by 2008, it was replaced by the Law on Cadres and Civil Servants. There are even some cases where the law has just been enacted, but then immediately becomes obsolete and unenforceable because of “encroachments” against other laws. The Law on Intellectual Property (contrary to Vietnam – U.S. Bilateral Agreement on Term of Copyright Protection) and the Law on Housing (contrary to Law on Land regarding housing documents) are just come examples. In order to be implemented, these laws must be amended again.

With by-laws, the situation is more tragic. “A lot of Government decrees or circulars and decisions of ministries have to be modified, replaced only after one or two years, or even several months. We, the lawyers, cannot update them all”, lawyer Nguyen Thanh Tam said.


According to Dr. Le Net, the current manner of making law in our country is like “changing horses in midstream”. We grope around and create laws “in accordance with the Vietnamese circumstances”. However, as mentioned, most of the laws have problems in the implementation. The laws are then amended, “to be carved” through time and “peculiar” final products are finally made.

Experts suppose that the fastest and most cost-effective way to improve the legal system is to absorb the legal achievements of the world. Even in some cases, it is acceptable to “import” a particular law for application. “Previously, Cambodia was laughed at due to their entire application of the U.S. Corporate Law excepting the red seal of the National Assembly of Cambodia. However, not only Cambodia but also Singapore, Malaysia, Japan, Korea did it”, Dr. Le Net demonstrated.

Dr. Nguyen Van Nam stated that the famous Civil Code of Germany (Bürgerliches Gesetzbuch – BGB) has been voluntarily acquired by many Asian countries such as Japan, South Korea and Thailand, because they acknowledge the enormous benefits of this code. “Particularly, Japan has acquired a nearly complete draft of BGB. They just slightly modified it to accommodate its national identity based on saving the nation’s philosophy”, said Mr. Nam. According to Mr. Nam, Vietnam is building its market economy and integration to the world, there is no reason to “create” one that were preceded for hundreds of years on. “Most of the legal issues and problems we are experiencing nowadays have been settled by laws of many countries long time ago”, said Mr. Nam.

In agreement to the comments as above, Dr. Nguyen Quoc Vinh, who used to work at a legislative drafting agency, also warned of a possibility of failure if we only acquire without a thorough understanding about the spirit and roots of the law. “Japan had built its Civil Code on the basis of the French one, and then had to throw it away shortly afterwards. Likewise, during the Asian financial crisis 1997-1998, under pressure from the IMF, Indonesia built a new Law on Bankruptcy with foreign expert consultancy only in a few dozen days. Consequently, this law also fell into “bankruptcy”.

Dr. Vinh said that in legislative activity, Vietnam actually acquires legal documents of the world. However, for various reasons, this acquisition is unsystematic and lacks an obvious philosophy. For instance, the Civil Code is influenced by Soviet law (in connection with the administrative rules in the code), has some details of the French Civil Code and has a bit influence from Japan and Germany. The patchwork causes not only conflict among the laws but also the self-destruction of different provisions in the same law.

According to Mr. Vinh, it cannot be said that Vietnam has no competent and dedicated professionals in making law. However, there are many cases where their drafts could not retain the “soul” of legal thought due to being cut and modified through a number of layers of submission and approval procedures. Vietnam should avoid administrative interference in professional work. Apart from this, taking the experience from Japan, in the formulation of law, Vietnam should change from a passive to active status. That means, Vietnam should take the initiative to invite Vietnamese and foreign experts to be drafters for practice. We should avoid making and amending laws as proposed by foreign donors. Finally, when the law is enacted, it must be enforced, not be regarded as ornaments.

Do not assume that it is “creative”!

Another example of the patchy and halfway acquisition was offered by Dr. Nguyen Van Nam, commenting on the Law on Competition.

For example, the Act Against Unfair Competition of Germany and many European countries makes regulations of unfair competition as follows: “Everyone in business transactions for the purpose of competition that makes unmoral acts may be forced to cease such acts and to indemnify for damages”.

Our Law on Competition also contains similar provisions but with additional conditions that such acts of competition must “cause damage or have the possibility to cause damage”. “We think of this as creativity, but it turned out to encourage acts of unfair competition, since the acts of unfair competition are settled only when the damage is proved. In other words, the acts of unfair competition are allowed if damage has not occurred or has not been determined yet”, said Mr. Nam.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Levy on houses and lands

Levy on houses and lands should be imposed on speculators

In experts’ opinions, collecting tax on houses and land is not only an economic but also a social issue. When the country’s economy and the citizens’ livelihood have seen little improvement, applying another type of tax may cause negative reactions.

Dr. Tran Du Lich, Deputy Group Leader of HCMC National Assembly Delegation who is also an economic expert, in a talk show regarding “Draft law on house and land tax” held on 19 January at the Southern National Assembly Office, HCMC, asserted that the imposition of tax on houses may not be implemented for the time being, even in 10 more years, since the annual average income of the citizens still remains low at approximately US$1,000. The Government should collect only tax on houses from the business sector to restrict speculation, which has created a “bubble in the real estate market.

Having the same opinion, Dr. Le Net, Founding Partner of LNT & Partners Law Firm, recommended that heavy taxes should be imposed on those who buy and sell houses repeatedly. The closer the period between selling and buying, the higher the tax rate should be. For example, the Government should impose a heavy levy on the first transfer of houses or lands within 1 year (i.e., 50% of the discrepancy between selling and buying prices). The rate will be 30% for the second year’s transaction and will be reduced on a yearly basis.The higher the frequency of house and land trading, the higher the tax rate for this activity

If this succeeds, trading in houses and land in such a “sliding” manner will certainly be decreased. The Government may impose tax on land possession. If a land owner cannot use such land in an effective way, he/she must sell it due to an inability to pay tax imposed on it. If the land owner leases such land, the lessee will pay the relevant tax accordingly.

Ms. Nguyen Thi Tuyet Nhu, Deputy Director of Tan Vu Minh Real Estate Company, said that: levy on houses should not be imposed on those who own only 1 house but on those having 2 or more houses to restrict speculation. Controlling housing areas and valuation for tax calculation is quite complicated. For this reason, it is better to collect taxes on land first, not on houses.

Tax rate should be based on the specific location of each house

According to Dr. Nguyen Thi Thuy, Head of the Department in charge of Law on Finance and Banking of University of Law, Ho Chi Minh City, if a tax on houses is considered a type of tax on property to be collected when the houses are in use, this will be unreasonable. This is because houses for living will depreciate over time and owners will have to spend money on repairing or re-building. To avoid complexities of collecting housing, Ms. Thuy suggested that tax calculation should not be based on housing areas but on particular location of each house.

As for houses in Vietnam in general, especially those in urban areas, the location of a house will decide its value. Therefore, imposing tax on house cannot be “founded on” the house’s size but on the house’s location. For instance, a 100-square meter house on Nguyen Hue Street (District 1, HCMC) may certainly cost a hundred times more compared to one in Binh Chanh District. Moreover, houses in District 1 can make a hundred times more profit than those in Binh Chanh District. For this reason, many experts asserted that the particular location of each house is the main factor to be considered in order for an appropriate tax rate to be applied.

Mr. Trinh Minh Tan, Ho Chi Minh City Bar Association, proposed another solution: tax calculation should be founded on housing size, not on number of houses owned by one person. This is because someone may have only 1 house with an area of up to thousands of square meters while someone may have up to 3 houses with total area of only less than 200 square meters.

In addition, only houses of Levels I and II should be subject to tax, whereas Levels III and IV houses should be entitled to tax exemption (since houses of Levels III and IV have yet been considered standard houses). “Many houses, especially those in urban areas, are used for living and doing business too; therefore, these houses cannot be listed as houses for business because they may be used as a store in the day and a normal house at night,” said Mr. Tan.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Is it time to impose a levy on house?

As planned, Law on House and Land Tax will be reviewed and adopted by the National Assembly at its 7th Meeting (held in May 2010) and will be effective from 1 January 2012.

However, according to Head of Economy Committee of the National Assembly, Mr. Ha Van Hien, many delegates of the National Assembly have yet to “agree” on the levy on houses. From Mr. Hien’s explanation, during the construction of a house, construction materials have to be levied, and an amount of money has to be paid for the use of the land; therefore, the levy on houses will lead to an overlap against multiple taxes.

The authorities in charge of drafting and verifying the law in question maintain their viewpoint

Notwithstanding Mr. Hien’s explanation, the National Assembly’s Budget and Finance Committee (the one verifying the draft Law on House and Land Law) and the authority drafting such law maintain their viewpoint that houses should be levied on the reason that imposing a levy on houses will help to enhance management work as well as gradually and reasonably control and regulate payments into the state budget. The collection of taxes on houses also helps to limit speculation in houses, especially condominiums. Since the tax rate proposed in the draft law is not high, and subjects on which the levy will be imposed are narrowed, the majority of citizens have yet been affected by such law. In addition, the application of tax on houses will not result in an overlap among tax types for taxes on houses, and land is considered as a tax on property which is independent from other tax types.

The National Assembly’s Budget and Finance Committee has proposed two solutions: the first solution is only collecting house taxes against second houses or houses thereon owned by the same person at the rate of 0.03%. This solution helps to assure each citizen a house. The second solution is to impose a levy on the first house but the house’s value subject to house tax will be increased up to 1 billion dong instead of 500 million dong as proposed in the draft Law on House and Land Tax submitted to the National Assembly. With this solution and from the calculation of the Minister of the Ministry of Finance, Mr. Vu Van Ninh, the majority of people having houses in rural and urban areas of 400m2 for Level I houses or more or Level II houses will be excluded from paying this tax.

Concerns still remain

Nevertheless, the Standing Deputy Head of the Bar Association of Ha Noi City, Mr. Nguyen Hong Tuyen, following careful review of the 15 articles in this draft law, commented that the drafters have not taken today’s citizens’ living standards and conditions into consideration. One of the purposes of constructing this law is to restrict the speculation in houses and land, yet there are few provisions that “target” speculators as opposed to citizens. Agreeing with this opinion, Dr. Tran Du Lich, Deputy Group Leader of the National Assembly’s delegation of Ho Chi Minh City and economic expert, asserted that imposing tax on houses may not be implemented for the time being – perhaps not even in 10 years’ time – since the annual average income of citizens still stands low at approximately US$1,000.

Following analysis of these two solutions proposed by the National Assembly’s Budget and Finance Committee, Head of the Committee for People’s Aspiration, Mr. Tran The Vuong, still has many concerns. In his opinion, the first solution will soon show its impracticality when some people only own one house but its value is ten times the value of other houses. Regarding the second solution, a housing tax based on house values will lead to many complicated problems. For example, “what will happen if House A is valued at 1 billion dong early that year but its value drops down to 700 million dong later in the same year due to the then frozen real estate market? My concern is that there will be a lot of complaints when this law is applied.”

The National Assembly’s Head of Economy Committee, Mr. Ha Van Hien, expressed: “Our people’s livelihood is still low and officers’ incomes are low too; therefore, it is essential to limit payments…”

In order to reasonably settle the collection of tax on houses and lands, Dr. Le Net, Founding Partner of LNT & Partners Law Firm, recommended that the State should only collect housing tax from the commercial realm to restrict the speculation in houses and lands. Particularly, heavy taxes should be imposed on those who buy and sell houses repeatedly. The closer the period between selling and buying, the higher the tax rate should be. For example, someone owns land and wants to sell it immediately for profit. To limit these types of purely commercial transactions, the State may possibly impose a heavy levy on the first transfer thereof within 1 year (i.e., 50% of the discrepancy between selling and buying prices). The rate shall be 30% for the second year’s transaction and shall be reduced on a yearly basis. If this succeeds, trading in houses and lands in such a “sliding” manner will certainly be decreased. The collection of tax on houses on a large scale from the second house or more should only be carried out in the future when the citizens’ livelihood has been improved. Upon application of the Law on Personal Income Tax (PIT), houses have become a type of property made from the disposable income of each individual after PIT. If any levy is imposed on the only house, “the overlap among tax types” is inevitable. For the collection of tax from the second house or more, however, the houses’ areas should not be used for tax calculation. Instead, such collection should be based on a particular location of each house. This is because for houses in Vietnam in general, especially those in urban areas, the location of a house will decide its value. A 100-square meter house on Hang Dao Street, Hoan Kiem District, Ha Noi will certainly cost approximately similar to ten similar houses in Dong Anh district.

Issues about houses and land as property are sensitive as they directly affect every citizen. Therefore, the application of an additional tax will probably causes disagreements. What is more, it is a proven fact that controlling housing areas and valuation for tax calculation is quite complicated, while conditions for implementing them are not available. For this reason, it is preferable to collect tax on land first, not houses. This also reflects the opinion of the Vice President of Vietnam Fatherland Front Committee of Ha Noi City, Mr. Dang Viet Quan.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://