VIETNAM Law and Practice Contributed by: Tran Thai Binh and Duong Thi Minh Han, LNT & Partners
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 authorities have differing views on this matter. The distribution of transaction costs can be negotiated and agreed by the transactional par - ties. 2.11 Legal Restrictions on Foreign Investors There are several requirements and restrictions for foreign investors in acquisition transactions related to real estate under Vietnamese law. For - eign investors are categorised in two groups: corporate entities and individuals. Corporate for - eign investors are not permitted to acquire real estate properties directly unless the purchase is for employee accommodation or to serve their business operations. Therefore, corporate struc - turing is necessary for foreign corporate entities seeking to engage in the real estate trading busi - ness in Vietnam. Individual foreign investors are only permitted to buy housing real estate properties (mostly con - dominiums or apartments) in developed prop - erty projects, and only if the following conditions are met: • the foreign investor holds a valid passport with immigration stamps from when they entered Vietnam; • 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 for - eign 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 compared 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” owner- ship to the unit. Foreign individual owners have the same ownership rights as a Vietnamese homeowner (sell, lease, lend, gift, mortgage, etc). However, foreign-owned companies incor - porated under Vietnam law have limited owner - ship 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, com - mercial, industrial, hotels and offices, etc) under Vietnam law by obtaining land from the authori - ties or acquiring it from Vietnamese corporate landholders subject to fulfilments 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 con - struction). However, as a market practice, lend - ers usually accept a loan at around 70% of the property value. The lending interest rate is nor - mally the long-term interbank lending rate plus a margin of 2% to 3%.
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