VIETNAM Law and Practice Contributed by: Tran Thai Binh and Duong Thi Minh Han, LNT & Partners
In the case of a purchase, the purchase price may be agreed with the owner or decided by the authorities. If agreement cannot be reached on a fair market price through consultation between the relevant bodies, the authorities may then proceed with the purchase and settlement, although the owner has the right to appeal the decision. If the purchase is ruled unfair at a later stage, the owner may receive compensation. In the event of expropriation due to violation of laws, no compensation may be granted to the land users. According to the master plan approved by the authori - ties, land can be retrieved by the authorities for eco - nomic development purposes (eg, industrial parks or infrastructure development), and the authorities will set up a compensation council to assess and apply compensation and damages to land users. In reality, land users tend not to agree with the compensation granted on account of differing views between them - selves and the authorities, but land compensation can still be enforced. Nevertheless, under the provisions of the Land Law 2024, project developers may be able to acquire land use rights (LURs) directly from land users or property owners without having to go through the formal land recovery and compensation procedures. In such cases, the parties involved can take a proac - tive approach to privately negotiate and reach agree - ment on purchase price, thereby expediting the overall land acquisition process. 2.10 Taxes Applicable to a Transaction In transferring real estate, there are two main types of deals: • sale and purchase of real estate assets (asset deal); or • transfer of shares in a property-owning company or “SPV” (share deal). For each, certain mandatory conditions apply. Trans - actions can only be lawfully concluded if these condi - tions are fully satisfied. Asset Deal In an asset deal, the sale and purchase transaction must comply with the laws of land and real estate trading, particularly for an estate project where addi - tional conditions must be met. Any transaction relating
to land must be in writing and notarised by the com - petent notary office for effectiveness unless one of the contractual parties is a real estate trading entity. Any change in the user of the land or ownership of the sold property must be registered with the Land Registry Office for recognition of the lawful title. From a tax perspective, asset deals may include the transfer of property on land, LUR and real estate investment projects. In general, taxes and charges incurred may include VAT (on transactions relating to property attached to land), income tax, notarisa - tion fees, an LURC issuance charge, LURC appraisal charges, stamp duty, etc. For individual transfer of real estate, personal income tax is applied at the rate of 2% of the transfer price to the individual seller; for corporate real estate owners, 20% of the income earned from the transfer incurred by corporate sellers applies, plus VAT on the sale price (currently 10%). By law, the buyer has to pay a stamp duty of 0.5% of the purchase price in title conveyancing registration. Taxes must be paid before the completion of the title An alternative to the asset deal is to structure the transaction as a share deal – ie, an acquisition of the SPV that owns the real estate through a share pur - chase. The share transfer procedure is then mostly carried out under the Law on Investment and Enter - prises Law rather than the Land Law or the Residential Housing Law (if the property is residential housing). Technically, there is a difference in cases of transfer of shares in an SPV (either minority or majority or total shares) because this is not treated as an asset deal. However, careful structuring is required, particularly when the SPV solely holds a single investment project, as the licensing authority may view this as a project transfer rather than a share transfer. If the acquisition of shares in the SPV is conducted by foreign investors or a foreign-invested entity lead - ing to: registration. Share Deal • the foreign ownership ratio in the SPV being more than 50% of its charter company by increasing the ratio from under 50% to above 50%, or increasing the ratio from 50% to above; or
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