VIETNAM Law and Practice Contributed by: Tran Thai Binh and Duong Thi Minh Han, LNT & Partners
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 com - pany or “SPV” (share deal). For each, certain mandatory conditions apply. Transactions can only be lawfully concluded if these conditions are fully satisfied. Asset Deal In an asset deal, the sale and purchase transac - tion must comply with the laws of land and real estate trading, particularly for an estate project where additional conditions must be met. Any transaction relating to land must be in writing and notarised by the competent notary office for effectiveness unless one of the contractual par - ties 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 Reg - istry 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 transac - tions relating to property attached to land), income tax, notarisation fees, an LURC issu - ance 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 (cur - rently 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 registration. Share Deal 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 purchase. The share transfer procedure is then mostly carried out under the Law on Invest - ment and Enterprises Law rather than the Land Law or the Residential Housing Law (if the prop - erty 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, par - ticularly 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 con - ducted by foreign investors or a foreign-invested entity leading to: • 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 • an increase (at any rate) in the foreign owner - ship ratio in the SPV if the SPV is operating in conditional businesses to foreign buyers (real estate trading is included); then the investors must obtain approval from an investment management body (the provincial department of planning and investment, or DPI) for the transaction. A share or equity transfer contract is prepared in writing without having to be notarised. Any
1358 CHAMBERS.COM
Powered by FlippingBook