VIETNAM Law and Practice Contributed by: Tran Thai Binh and Duong Thi Minh Han, LNT & Partners
• an increase (at any rate) in the foreign ownership ratio in the SPV if the SPV is operating in condition - al businesses to foreign buyers (real estate trading is included); then the investors must obtain approval from an investment management body (the provincial depart - ment of finance) for the transaction. If the project is located within a national defence and security zone, the approval is further subject to official opinion of provincial department of national defence and public security. A share or equity transfer contract is prepared in writing without having to be notarised. Any change in corporate ownership is subject to registration with the Business Registration Office of the competent authority. Income tax may be incurred by the seller of the shares at 20% on taxable income for resident individuals or corporations, and sometimes at 0.01% of the share value for joint stock companies. However, this should be carefully reviewed since the tax authori - ties have differing views on this matter. The distribution of transaction costs can be negoti - ated and agreed by the transactional parties. 2.11 Legal Restrictions on Foreign Investors There are several requirements and restrictions for for - eign investors in acquisition transactions related to real estate under Vietnamese law. Foreign investors are categorised in two groups: corporate entities and individuals. Corporate foreign investors are not per - mitted to acquire real estate properties directly unless the purchase is for employee accommodation or to serve their business operations. Therefore, corporate structuring is necessary for foreign corporate entities seeking to engage in the real estate trading business in Vietnam. Individual foreign investors are only permitted to buy housing real estate properties (mostly condominiums or apartments) in developed property projects, and only if the following conditions are met: • the foreign investor holds a valid passport with immigration stamps from when they entered Viet - nam;
• the property is in a commercial residential housing development project by a licensed developer; or • the property is not in a national security and defence area. The developer is allowed to sell its units to foreign buyers, but no more than 30% of the total units in the project. Foreign homeowners have ownership over the housing real estate for the term of 50 years, and this is renewable upon expiry for further 50 years com - pared to “long-term” ownership by local homeowners. Foreign owners can sell their unit to a foreign or local buyer. If selling to a local buyer, then that local buyer is entitled to restore “long-term” ownership to the unit. Foreign individual owners have the same ownership rights as a Vietnamese homeowner (sell, lease, lend, gift, mortgage, etc). However, foreign-owned com - panies incorporated under Vietnam law have limited ownership rights over purchased apartment units – eg, for the owner’s use only (not leasing to others). Foreign-invested companies can develop real estate development projects (residential, commercial, indus - trial, hotels and offices, etc) under Vietnam law by obtaining land from the authorities or acquiring it from Vietnamese corporate landholders subject to fulfil - ments of mandatory conditions. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate An individual homebuyer may use the purchased property as collateral for obtaining a loan to finance a purchase (even a property under construction). How - ever, as a market practice, lenders usually accept a loan at around 70% of the property value. The lending interest rate is normally the long-term interbank lend - ing rate plus a margin of 3% to 4%. In acquiring commercial real estate, finance is more complex because the lenders assess the loan repay - ment capacity of the borrower in addition to the real estate value. However, the same principle in lending is applied – ie, the borrower must have funds available of at least 30% of the real estate value and a loan for the remaining amount, subject to conditions assessed
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