There is a common misconception that foreign citizens or companies cannot own property in Vietnam. In reality, it is possible, but there are certain conditions that you need to bear in mind in order to do so. This guide sheds light on the ways that foreign investors can obtain property in Vietnam.
This article was last updated in October 2019.
There is a different form of land ownership in Vietnam than in most countries. In Vietnam land belongs collectively to all people, and the state is simply described as the one managing it.
In other words, even Vietnamese themselves cannot own land in the traditional sense. This alternate concept of public and private land ownership gave rise to a common belief that foreign citizens and companies cannot acquire property.
But this is not entirely correct. Foreign investors can obtain the right to use land, which is very similar to having ownership rights.
Who can lease?
Citizens of Vietnam, local organizations and foreign-owned companies can purchase the right to use land and to build on it. The length of a lease agreement and the terms of land use depends on the type of entity purchasing.
For individuals, the maximum length is 50 years with an option to renew the agreement for another 50 years.
Foreign-owned companies can hold lease agreements in Vietnam until the end of the duration of their investment license, which the Department of Planning and Investment grants for ten years. This investment license is also renewable. However, it’s important to keep your company in compliance and report your taxes in Vietnam in a timely manner to ensure that there will be no issues with the extension.
How to buy
#1 Set up a 100% foreign-owned company
The first option in order to make a purchase is to set up a fully foreign-owned company. By establishing a foreign-invested company (“FIC”), you can purchase either homes or apartments for the purpose of providing housing to company founders, members, and employees.
You have the option to construct commercial buildings, factories and warehouses on leased land, but not the right to buy and sell property in the sense that a real estate business might.
Specifically registered real-estate trading companies can construct residential and commercial property for sale and lease to third parties.
An alternative path is to lease land directly from the government or an industrial park. In these cases, your FIC will be able to build for commercial use.
This still requires your commercial activity to adhere to the business line of your company. For example, as a trading company, you will be permitted to build a warehouse. As a manufacturing company, you can build a manufacturing facility.
The process of foreign-owned company registration in Vietnam
The process of company registration in Vietnam is generally the same for all foreign investment companies and takes approximately 4-6 weeks without additional licenses.
During this time you will first acquire an Investment Registration License from the Department of Planning and Investment (DPI). This certificate allows you to start doing business in Vietnam.
The second step of incorporation in Vietnam is to obtain a Business Registration Certificate. Note that once you have received a business registration certificate from the DPI, you have 90 days to make the initial capital contribution.
Depending on your business line, you may also need additional licenses. For example, if you plan to sublease your property, you need a separate permit for engaging in real estate business in Vietnam. However, note that it will add some additional time to the company registration.
For more detailed information, have a look at our complete guide to company registration in Vietnam.
If your company is planning on buying property in Vietnam, get in touch with us via [email protected]. We will assist you in processing the extension and help you keep your company in compliance.
#2 Form a joint venture in Vietnam
Another option to buy property in Vietnam is to form a joint venture with a Vietnamese shareholder.
Locally-owned companies and Vietnamese citizens can purchase:
- Buildings for sale, lease, or lease-purchase
- All or part of a real estate project to construct buildings for sale, lease, or lease-purchase
The term of the agreement for Vietnamese citizens is indefinite. Local Vietnamese companies can hold ownership of the property until the termination of the company.
If forming a joint venture, it’s important to use a trustworthy and capable nominee, as choosing an unreliable one can lead to serious later consequences.
#3 Buy as an individual
Foreign citizens in Vietnam can acquire homes for dwelling without forming a legal entity. The term of ownership will be set in a housing sale agreement, but it can not be for longer than 50 years on first contract.
This type of an agreement is a common practice in Vietnam as it is the closest available arrangement to the concept of private ownership.
Such an individual purchase agreement is renewable with an extension clause that allows you to renew the agreement for another 50 years. It is recommended to negotiate terms in the agreement with the seller that protect the precise renewal terms, such as:
- Renewal of the contract does not come with additional charges or advance rent collection for the next lease period
- Processing of the extension is not subject to additional fees
- If the law on foreign ownership changes, the transfer of ownership to you will not incur additional charges
As an individual, you can also sub-lease your house or an apartment, however, you need to register it with the local tax authority.
Neither a foreign individual nor a company can buy, rent, purchase, receive, inherit or own more than 30% of the units in an apartment building, or more than 250 separate housing units in total.
The definition of a unit as a separate house includes villas, as well as row houses in areas where the population is organized by a traditional ward system.
Setting up a real estate business in Vietnam
It is important to remember that if you haven’t registered your company as a real estate entity, you can only buy property for your company’s use, such as accommodating your employees.
If you also plan on subleasing the property you will have to develop and build on the land you leased from the state, and you will need to have a company that is registered as a real estate business.
As a foreign-owned real estate company in Vietnam, the scope of activities is limited to:
- renting a residential property and subleasing to third parties
- renting out residential property constructed by the LLC on land leased from the State
- selling or renting out non-residential property constructed by the LLC on land leased from the State
- Purchasing all or part of an ongoing real estate development project and listing developed property for sale or rent
- Selling real estate constructed by the LLC on land leased within industrial parks, industrial complexes, export-processing zones, hi-tech zones, and economic zones
Allowed foreign ownership of real estate companies
There is no limitation on foreign ownership of real estate companies. Therefore, foreign investors can own up to 100% of a foreign-owned company in Vietnam.
Minimum capital requirement for real estate businesses
Unlike in most business types in Vietnam where you can register a company without an official requirement on minimum capital, the real estate trading classification does have minimum capital requirements.
To set up such a real estate business you need to have at least 20 billion VND (approximately USD $880,000). This investment can be non-monetary, meaning that you can also register property and other assets that will count towards this capital.