Legal & Tax

This memo highlights certain Vietnam law considerations relating to the purchase of residential properties in Vietnam by foreign individuals. For the purchase of Vietnam properties by corporate purchasers or the purchase of Vietnam commercial properties (whether by individual or corporate purchasers), such purchases may be subject to other or additional considerations and/or requirements issues. 

Following the enactment of the Law on Housing No. 65/2014/QH13 (“Law on Housing”) by the National Assembly of Vietnam, which came into force on 1 July 2015, the purchase of residential units in Vietnam has become more accessible to foreign purchasers. Prior to 2015, the purchase of such residential units was only open primarily to foreign purchasers who are foreign individuals resident in Vietnam, and certain foreign invested entities established in Vietnam. 

Under Vietnam law, residential units available for purchase by a foreign individual comprise units in an apartment building (ie “condominium units”), which include multi-purpose apartment buildings, as well as terrace houses, bungalows or villas.

Article 159(1)(c) of the Law on Housing provides that only “foreign individuals who are allowed to enter Vietnam” are eligible to purchase residential units in Vietnam. This is further elaborated on in Article 74(1) of the Decree No. 99/2015/ND-CP on the Guidelines for the Law on Housing (“Decree 99”), which provides that “A foreign individual must have an unexpired passport bearing the entry seal of the Vietnam’s immigration authority”. 

Article 74(1) of the Decree 99 however provides that the foreign individual must not be given diplomatic immunity and privileges according to the Ordinance on diplomatic immunity and privileges of diplomatic missions, consular offices, and representative authorities of international organisations in Vietnam. 

Vietnam law imposes certain restrictions on the purchase of residential units by a foreign individual, and we discuss some of these restrictions below.

Under Article 76(2) of Decree 99, a foreign individual is only permitted to purchase residential units in Vietnam from a property developer (described as owner of a “housing construction project”) or from another foreign owner (whether individual or corporate). 

In addition, although the Law on Housing does not limit the number of Vietnam residential units that each foreign individual can buy, Vietnam law imposes a limit on the number of residential units in a particular real estate development or in an administrative ward (i.e. an urban sub-district) that may be sold to foreign entities (whether individuals or corporates).

In particular:

Apartment buildings: 

• Foreign entities are entitled to purchase up to 30% of the total residential apartment units in an apartment building.
• In an apartment building that consists of more than one block, foreign entities are entitled to purchase up to 30% of residential apartment units within each block.

Detached houses (such as terrace houses, bungalows or villas): 

• Where there is only 1 housing project for detached houses in an administrative ward, foreign entities are entitled to purchase up to 10% or 250 detached houses (whichever results in a smaller number of detached houses being purchased) in that housing project.
• Where there is more than 1 housing project for detached houses in an administrative ward, foreign entities are entitled to purchase up to 10% of the detached houses of each housing project and up to 250 detached houses of all the housing projects collectively.

Vietnam law also imposes restrictions on the areas in which foreign entities may purchase residential units. Foreign entities are not permitted to purchase residential units of housing construction projects in areas having national defense and security requirements (as prescribed by the Ministry of National Defense and the Ministry of Public Security). 

Upon the purchase of the residential unit, a qualifying foreign individual will be issued a Certificate of Land Use Right, Ownership of Residential House and Other Assets Attached on the Land (“LUR Certificate”) for the residential unit.  The LUR Certificate is issued either by the Land Registration Office or the Department of Natural Resources and Environment of the relevant province or city. The LUR Certificate provides recognition by the State of Vietnam, and serves as evidence, of the foreign purchaser’s land use rights to the residential unit purchased

By way of background, the system of land ownership in Vietnam is that of collective ownership, whereby all land in Vietnam belongs to all Vietnamese people collectively, with the State being responsible for the regulation and administration of the land in Vietnam. Instead of ownership rights, individuals and organisations that purchase land or real estate properties are granted the right to use land or “land use rights”. Land use rights are rights associated with the use of the land for a fixed or indefinite duration, and are subsets of land ownership rights.  Depending on the type of land, for residential units, the rights granted to the purchaser of the unit will in most cases include the right to assign (or sell), the right to lease and the right to mortgage the residential unit in question. 

For a foreign individual that purchases a residential unit in Vietnam, the maximum duration of his land use rights is 50 years from the date of the issue of the LUR Certificate.  The actual duration granted to the foreign individual buyer will depend on the duration of the land use rights granted to the developer of that particular housing development project and the terms in the sale and purchase agreement between the buyer and the developer/seller. The foreign individual may apply to extend the land use rights period of his residential unit for one additional extension not exceeding 50 years, provided this extension is not restricted under the terms of the original sale and purchase agreement for that particular residential unit.

During the foreign individual’s land use rights period of his residential unit, the foreign individual is permitted to sell his residential unit to another qualifying foreigner or to a local buyer. Where the new buyer is a qualifying foreigner, the duration of the land use rights over the residential unit acquired by the new buyer will be the remainder of the original land use rights period granted to the selling foreign individual. On the other hand, if the foreign individual sells his residential unit to a local buyer that is an individual, the individual may (depending on the rights of the developer to the project land and the terms of the original sale and purchase agreement) be granted long-term land use rights (ie, on a “freehold” basis) over the residential unit.

The taxes and other charges that are imposed under Vietnam law on the sale and purchase of a residential unit include the following:

• Value Added Tax (VAT): Vietnam’s VAT is 10% of the taxable price of the residential unit.
• Maintenance fee and sinking fund: 2% of the purchase price of the residential unit. This amount is collected upfront by the developer in the case of the sale of residential units in apartment buildings.
• Registration fee for the LUR Certificate: 0.5% of the purchase price of the residential unit.
• Notarisation fee for the sale and purchase agreement: The notarial fee payable will depend on the value of the residential unit, and is capped at VND 70 million (for a residential unit valued in excess of VND 100 billion). However, where the residential unit is sold by a property developer, notarisation is not mandatory under the law and is only required at the request of the parties.

In addition, where the seller is an individual, and unless the seller only has one residential unit which is used as a place of residence, real estate transfer tax will apply. The real estate transfer tax rate is 2% of the purchase price of the residential unit. In practice, the parties can agree that the purchaser is to make the payment for this tax on behalf of the seller. 

The information provided in this article is for general information purposes only and does not constitute legal advice. You should always seek specific legal advice from a lawyer which is relevant to your specific circumstances. This article is based on publicly available Vietnam laws and regulations as at August 2020 only, and may be superseded by subsequent changes to the laws or regulations.