REGULATIONS ON THE LEASE OF LAND FOR INDUSTRIAL PARKS ACCORDING TO VIETNAMESE LAW
Currently, many domestic and foreign-invested enterprises choose to lease land in industrial parks with the purpose of developing products and business activities. So when leasing land in an industrial park, what should businesses, especially foreign ones, take into consideration? The News Letter hereof will clarify these issues.
1. Overview of land for industrial parks in Vietnam
Land for industrial parks is land reserved for the construction of industrial clusters, export processing zones, and concentrated production and business zones.
Despite the Covid-19 pandemic and travel restrictions, industrial real estate in Vietnam has experienced significant growth. This segment has obtained many advantages from Free Trade Agreements as well as the trend of moving factories and investment capital from China to Southeast Asian countries, including Vietnam. The prolonged Covid-19 pandemic is even expected to accelerate the relocation of production facilities of multinational companies out of China.
With the wave of investment moving into Vietnam, especially in the high-tech sector, the price of leased land in industrial parks has continuously increased. According to JLL's updated data by the end of Quarter 1st, 2021, leased land prices in many industrial parks have reached a "new peak" in Quarter 1st, 2021. Specifically, the average land rent in the Southern industrial zones remained at a high level of 111 USD/m2/term, while that in the Northern reached a new peak of 107 USD/m2/term. Hence, land rents in both regions increased by the same rate of 8.1% over the same period last year. This shows that Vietnam is being evaluated as an attractive investment environment for foreign investors.
Many domestic and foreign-invested enterprises choose to lease industrial land to obtain locations for production and business. Such type of real estate is specifically regulated by the Government. Therefore, investors intending to invest in industrial parks should understand the regulations on this type of land.
2. Conditions for leasing land for industrial zones
According to Article 149.2 of the Land Law No. 45/2013/QH13, the following entities are allowed to lease land in industrial parks:
- Economic organizations;
- Overseas Vietnamese;
- Foreign-invested enterprises.
The Government leases the land to the above subjects for the purpose of investing in the construction and commercial operation of infrastructure of industrial parks, industrial clusters and export processing zones. In addition, the subjects hereof may sublease land associated with the infrastructure of other economic organizations.
For the land area that is leased with annual rental payment, the lessee may sublease that land with an annual rental payment. For the land area that is leased with full one-off rental payment for the entire lease period, the lessee may sublease that land with full one-off rental payment for the entire lease period or annual rental payment.
Investors are entitled to exemption from land rental for the land used for the construction of infrastructure for common use in industrial parks, industrial clusters or export processing zones.
3. Rights and obligations of land tenants in industrial parks
According to Article 149.3 and Article 149.4 of the Land Law No. 45/2013/QH13, land tenants in industrial parks have the following rights and obligations:
- Economic organizations, overseas Vietnamese, and foreign-invested enterprises subleasing land with annual rental payment have the following rights and obligations:
- Having common rights and obligations of land users;
- Mortgage of assets under their ownership attached to leased land at credit institutions licensed to operate in Vietnam;
- When fully meeting the conditions prescribed by law, the lessee has the right to resell his/her property attached to the leased land;
- Contributing capital with their assets attached to the leased land;
- Sub-lease land use rights in the form of annual land rental payment.
- Economic organizations, overseas Vietnamese, foreign-invested enterprises subleasing land with full one-off rental payment for the entire lease period have the following rights and obligations:
- Having the general rights and obligations of land users;
- Transfer of land use rights and assets under their ownership attached to land;
- Leasing land use rights and assets under their ownership attached to land;
- Donating land use rights to the state, donating land use rights to residential communities;
- Mortgage with land use rights and assets under their ownership attached to land at credit institutions licensed to operate in Vietnam;
- Contributing capital with land use rights and assets under their ownership attached to land for production and business cooperation with organizations, individuals, overseas Vietnamese, and invested enterprises under the law.
4. Procedures for applying for land lease in industrial parks
Step 1. Submitting dossiers
Individuals and organizations applying for land lease shall submit appraisal dossiers to the Department of Natural Resources and Environment where the land is located.
Step 2. Reviewing the dossier
- The Department of Natural Resources and Environment is responsible for verifying and directing the Land Use Right Registration Office to make an extract of the cadastral map or cadastral measurement of the land area wherever there is no copy of the cadastral map;
- The Land Use Right Registration Office is responsible for sending cadastral data to the tax authority to determine financial obligations;
- The Department of Natural Resources and Environment is responsible for verifying the cadastral records; field verification; submitting to the People's Committees of the provinces for a decision on land lease and grant of certificates of land use rights; signing land lease contract; directing the Division of Natural Resources and Environment and the People's Committee of the commune, ward or town where the land is located to organize the handover of land.
Step 3. Pay tax and receive results
The duration to perform the above tasks is not exceed 20 working days (excluding the time of fulfilling financial obligations) from the date the Department of Natural Resources and Environment receives all valid documents.
5. Advantages and limitations when leasing land in industrial parks
Domestic enterprises and foreign-invested enterprises when leasing land for industrial parks should pay attention to advantages and limitations as follows:
The regulations on land leases in industrial parks are different from cases, times and investment projects. Therefore, the New letter hereof is for your reference only. Please liaise DHT Law Firm for a detailed consultation.
