New Land Law 2024 (Vietnam)

Land price table to be published yearly

Under the New Law, the land pricing system will comprise of “land price table” and “specific land price” instead of three types of land price as prescribed under the Current Law. The “land price bracket”, which is promulgated by the Government as a basis for the provincial People’s Council※1 to produce the “land price table”, will no longer be part of the land pricing system, and the land price table will be published on a yearly basis. According to the Current Law, the land price bracket (applicable to certain regions in the country) and the land price table (applicable to certain areas in a province) are published on a five-year basis, whereas the specific land price is determined and approved by the People’s Committee (“PC”) on a case-by-case basis. The abolition of the land price bracket and annual publication of the annual land price table are expected to give certain flexibility to the PCs in determining the land price in their provinces.

As the land price is used for various transactions between the land user and the State, the New Law will continue the current regime that the land price table will often be set to be lower than the specific land price (although the New Law stipulates that the fixing of land price (land price table and specific land price) must follow market principles. This regime is aimed at allowing the land users to pay less to the State in some special cases and pay full in other cases. In particular, the land price table and the specific land price will be used for the following different purposes:

Limitation on lump sum payment of land rent

Under the Current Law, a user of land leased from the State may choose to pay land rent either annually (annual payment) or fully upfront (lump sum payment), and in the case of annual payment, the land user may apply for a permission from the competent authority to convert to the lump sum payment. In respect of the annual payment, land rent is fixed for a period of five years and thereafter, the relevant authority shall adjust the land rent in accordance with the applicable regulations. The New Law will continue with this regime of five years stability however the cases eligible for making a lump sum payment will be limited to the following categories:

• using land to implement investment projects on agricultural production, forestry, aquaculture, salt production;
• using industrial zone land, industrial cluster land, export processing zone land, or high-tech zone land (including the purpose of construction of dormitory for workers);
• using commercial and service land for tourism activities and office leasing/selling business;
• using public land for business purposes; and
• using land for construction of social housing for lease.

The lump sum payment of land use fee (applicable to land allocated for residential development) will remain unchanged.

Clearer regime on extension of land use term

The New Law continues the principle for determining land use term as set out under the Current Law. The land use term is based on the operational duration of the project as approved by the competent authority. In any event, the land use term may not exceed 50 years; however, if the project requires a substantial amount of investment capital and needs a longer time to pay back, or otherwise is located in a location with difficult social-economic conditions, a longer land use term of up to 70 years may be granted.

Notably, the New Law, makes clear that the extension of land use term may be considered in the last year of the land use term provided the land user must submit an application for extension at least 6 months before the expiry. The New Law also indicates that the enterprises may be permitted to adjust their land use term before the expiry of the term as long as they obtain an approval for amendment of the operational duration of the project in accordance with the applicable law on investment (probably means amendment of investment policy approval (“IPA”) and/or investment registration certificate (“IRC”)). Additionally, the adjustment must be consistent with the land use planning and zoning of the relevant district and must satisfy the environmental conditions in accordance with the applicable law on environment protection. This new regulation is likely to be good news to those who wish to upgrade their factories but the remaining land use term is not long enough to pay back the upgrading costs and generating a reasonable profit.

Clearer regime for land auction and project tendering

Under the New Law, an investor may acquire land for his investment project by one of the following four methods:

• (i) land allocation or lease without land auction/project tendering,
• (ii) land auction,
• (iii) project tendering, or
• (iv) agreement with existing land user.

Compared to the Current Law, the New Law specifies conditions and procedures for each method, especially the land auction method and project tendering method. In respect of land auction, the New Law contemplates that the land must have been fully cleared and in respect of a housing development project, a 1/500 master plan covering the land must have been issued by the competent authority.

For project tendering, the land may not need to be fully cleared but the project must fall into the category where land recovery by the State is permitted by law and has a 1/2000 master plan. The relevant authority is required to complete land clearance within 36 months from the approval of the successful tendering.

The key conditions and typical cases of the four methods are summarized as follows:

The New Law also emphasizes that, instead of obtaining the land lease or allocation from the State (under method (i) through (iii) above), the enterprise may acquire land directly from the existing land users (method (iv) above). However, the enterprise must obtain a permission from the PC to acquire land directly from the existing land users and another permission to convert the land use purpose to be one that is suitable for the project and pay the additional land use fee/land rent to the State.

Land for commercial housing project

With respect to a commercial housing project, the enterprise may not acquire land other than residential land from the existing land users for developing the project. However, if the enterprise has already acquired land (whether 100% residential land or a certain portion of project area is residential land and the remainder is other types of land) before the effective date of the New Law, it may apply for a permission to use such land for development of the commercial housing project. And if there is no residential land, the enterprise may only acquire the land by way of either land auction or project tendering (as the case may be).

The above-mentioned regime is an affirmation of the current policy under the Law on Residential Housing 2013 (as amended) and puts an end to the expectations of residential development developers that there would be a new policy in the New Law to resolve the status of hundreds of township/residential development projects in the country that have been put on hold for many years due to lack of a concrete policy (consequently, they have not been able to obtain an IPA permitting them to develop the project) . The developers of these projects have acquired land from the existing land users but no portion of the acquired land is residential land. The possible options for these projects at this stage are to relinquish the land to the State with receiving certain compensation so that the State will organize a land auction or project tendering, or otherwise apply for an IPA from the PC for developing social housing (instead of commercial housing) or another non-residential project; but there is no doubt that the developers will continue to wait for the implementation regulations of the Government with a hope that there will be a feasible solution for these projects.

Land clearance by the State for socio-economic development purposes

The New Law lists out 32 groups of cases that can enjoy land recovery (land clearance by the State for socio-economic development purposes for national and public interest). Township projects and rural residential projects are included in these groups.

However, as noted above, the land clearance by the State will mean that the land must be put on public auction or project tendering, whereas under the Current Law, the State may clear the land and allocate/lease such land to the developer without needing to go through the land auction or project tendering process.

As for commercial housing project the State will not clear land for the developer unless it is part of the township project.

Mortgage and transfer of land use right and assets on land

The New Law permits domestic enterprises to mortgage land use rights and assets on land with credit institutions operating in Vietnam or other organizations or individuals; however, foreign invested enterprise may only mortgage such land use rights and assets on land with credit institutions operating in Vietnam. Currently, both domestic organizations and foreign invested enterprises may mortgage land use rights and associated assets with credit institutions operating in Vietnam only.

In addition to the concept of transfer of “land use rights” as currently contemplated under the Current Law (i.e. land leased with lump sum payment of land rent (or allocated land with lump sum payment of land use fee)), the New Law introduces a new concept of transfer of “leasing right under land lease contract”, provided this right will be exercised together with sale of the assets on the land. To enjoy this right, the land user must have (i) completed the construction of assets on land and (ii) advanced money for the land compensation/clearance cost (which has not been fully deducted against land rent payable to the State). To some extent, the new concept appears to reduce the adverse effect from the limitation on lump sum payment of land rent (as discussed above).

Dispute settlement

The New Land makes clear that disputes arising from commercial activities relating to land may be referred to either a competent court or arbitration. Otherwise, the disputes relating to land or assets on land shall be settled in the same ways as set out under the Current Law. Currently, the dispute settlement body is subject to whether the land user has a land use right certificate (“LURC”) or not. If there is a LURC for the land, the dispute must be referred to a competent court, whereas if there is no LURC for the disputed land, a party may request either a competent court or competent PC to settle the case.