The Ins and Outs of Leasing Land in Vietnam
Can a foreign business lease land in Vietnam? Technically speaking, the government owns all the land in Vietnam; there are quite a few regulations and procedures in place for foreign investors who wish to lease anything. Before 2009, this was not possible, but since then there have been many legal modifications which now allow foreigners to access land for commercial business enterprises. These kinds of changes have resulted in positive economic gains for everyone, and there is much interest in what the future holds for interested parties.
However, legally leasing land from the government is quite a tricky process, and contains many grey areas. This has been the primary reason that many foreigners are still hesitating to do so. Despite the difficulties involved with the process, there are certainly ways to attain land legally and there are numerous businesses that are successfully operating within the current system.
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The first way for a foreign business to lease land is to establish a joint stock company (JSC) that is in accordance with Vietnamese laws and regulations. After this has been completed, business owners must use a parent-daughter company formation in order to acquire the lease. Keep in mind that this kind of model requires the foreign-owned business to use a Vietnamese private party who will transfer the land from the government to themselves, and then lease it to the business. This type of leaseback transaction is compulsory due to the fact that only the Vietnamese government can hold the rights to own the land.
For eligible businesses, the government may grant the business rights to lease the land for commercial purposes, and this is referred to as the Land Use Right (LUR). When this step has been completed the government may issue the party a LUR Certificate (LURC) which allows them to legally lease the land. This registration is the only way that an interested party may operate with accordance to Vietnamese law.
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Foreign owned and operated businesses must also have a license to operate in Vietnam before they can be considered for a LURC. Then, if given the lease, the business has the right to operate on that land for the duration of the LUR. Normally, these are issued for 50 year intervals and in special circumstances the Prime Minister may grant an additional 20 years. This kind of extension is not guaranteed and is only given if, upon expiration of the LURC, the business has complied with all the Vietnamese regulations in a suitable manner.
It is also important to note that the foreign investor may not legally sub-lease their land to a private individual, business or any other entity under any circumstance.
Another common way that foreigners can legally lease land is through a joint venture operation, where they team up with another business (usually Vietnamese-owned) that is certified and licensed to operate in Vietnam.
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Although there have been many ramifications to the law since 2009, it is still quite difficult to legally maneuverer within the parameters of the regulations, and this obstacle has significantly hindered foreign interest in the market. Experts expect that there may be further changes in the future. The current system is a challenging one.