Law on land use rights of foreign-invested economic organizations in Vietnam

in agricultural, forestry and aquaculture production) with the corresponding prices being:

+ Communes adjacent to urban areas of group 1: minimum price is 0.18 and maximum is 1.08 (USD/m2 / m);

+ Communes adjacent to urban areas of group 2: minimum price is 0.10 and maximum price is 0.60 (USD/m2 / year);

+ Plain communes in areas with especially difficult socio-economic conditions and areas with difficult socio-economic conditions are subject to the price level of midland communes.

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- The location coefficient is determined:

Positions (1) - (2) - (3); correspond to coefficients (3) - (2) - (1).

- Infrastructure coefficient: The conditions of the infrastructure stipulate:

+ Convenient transportation;

+ There is a power supply facility near the project site that can meet the project's needs;

+ There is a water supply system near the fence, the construction can be used for the project.

Coefficient (2) applies to land lots that meet all 3 conditions; coefficient (1.5) applies to land lots that lack 1 to 2 conditions; and coefficient (1) applies to land lots that lack 3 conditions.

For non-urban land, currently not residential, not specialized land, but if the land is invested in and renovated, it can be used for agricultural, forestry and aquaculture production , the land rental price is calculated from 50 to 600 USD/ha/year and the specific land rental price of each project is determined according to the above regulations. Particularly for land in rocky mountainous areas,

Barren hills, poor land that is difficult to use, if used for projects other than industrial production, tourism services, trade, mineral exploitation, the land rental price is calculated from 30 to 100 USD/ha/year. In case of using land for agricultural, forestry, aquaculture production projects, the land rental price is calculated at 50% of this regulated price.

Land rental price in industrial parks, export processing zones, and high-tech parks: is calculated at 80% of the prescribed level mentioned above.

Land rental price is calculated according to the minimum price prescribed for each type of land, excluding the following coefficients:

+ The project does not use the ground (does not affect production activities on the ground) but uses space above the ground, such as building overpasses, conveyor belts...

+ Mineral exploration and survey projects that use land regularly;

+ Projects using land to build housing for workers (including foreign workers), schools, hospitals, scientific research facilities and other infrastructure works outside the industrial park fence...

Adjustment of land rental price: Land rental price for each project is stable for at least 5 years. When adjusted to increase, the increase must not exceed 15% of the previous rental price of the joint venture company. If the project has not been rented for 5 years since the previous land rental price determination, the current land rental price will still be applied until 5 years have passed before recalculating according to the new price. The adjustment of land rental price increase does not apply to the following cases:

+ Pay once at the beginning for the entire project operation period, at which time the land rental price has been determined and the land rental fee has been paid in advance;

+ Pay land rent in advance once for each initial multi-year period of each land lease term, during which the land rent is adjusted to increase;

+ The Vietnamese party is permitted by the State to use land rental money to contribute capital to a joint venture with a foreign organization or individual, and at the time of adjustment, the land rental price has been determined.

Authority to determine land rental prices: Provincial People's Committees decide on land rental prices or adjust land rental prices for each project based on the proposal of the Director of the Department of Finance and Prices. In case of different opinions on land rental prices between the land lessee and the competent authority deciding on land rental prices, the final decision is made by the Ministry of Finance. When the land is handed over for use, it is the time to calculate land tax.

Land rent exemption: Land rent exemption is carefully considered according to Government regulations, specifically:

+ Investment projects under BOT, BTO, BT regulations according to Government regulations;

+ Projects during basic construction period (calculated for each item or construction phase if independent, if not calculated separately then calculated according to the item with the largest investment capital ratio);

+ For afforestation projects, during the business period, the land rent payable is also reduced by 90%;

+ Exemption from land rent payable from the date of construction completion and project operation;

+ For projects facing difficulties and having to temporarily suspend operations/fundamental construction, land rent is exempted; (vi) In case of paying land rent in advance for many years in the first year. Implementation of tax reduction and exemption

Land use levy is applied to all projects with foreign investment capital in Vietnam. Details of exemption and reduction are stipulated in Article 8 - Decision 189/2000/QD-BTC, November 24, 2000.

Payment of land rent is regulated in Article 9, land rent for some special cases is regulated in Article 10 - Decision 189/2000/QD-BTC, November 24, 2000.

(b) Land rent of Vietnamese economic organizations allowed to contribute capital to joint ventures using the value of land use rights leased is guided by the Ministry of Finance in Circular No. 35/2002/TT-BTC, May 25, 2001, specifically as follows:

Land rental price is calculated according to the following formula:

Land rental price 1

year (USD/m2 / year)

Price of 1m2 of land by Provincial People's Committee

= Government land price framework

as prescribed

Land rental price coefficients applied to each business sector group are specified in Article 2 of the Land rental price framework regulations for domestic organizations leased land by the State, issued together with Decision No. 1357/TC/TCT, December 30, 1995.

of the Minister of Finance

- For investment projects in building infrastructure of industrial parks, export processing zones, and hi-tech parks, the rate is calculated at 80% of the land rental price according to the above formula;

- Land rent is calculated for the first and last years of the land lease term and is determined based on the actual number of rental months.

Regarding land lease area : is the entire area managed and used by the organization for production and business, determined in the land lease contract; for the area returned to the State, the land rent is calculated up to the time of handover.

Land rent payment: Land rent in any locality must be paid to the State Budget at the State Treasury of that locality according to the Budget Table of Contents.

Current state. Land rent is paid periodically twice a year (50%/time) no later than June 30 and October 30.

2.1.1.3. Land lease implementation

Land leasing for the implementation of foreign investment projects in Vietnam must always satisfy both requirements of ensuring the legal basis and meeting economic benefits. Ensuring the legal basis is to protect territorial sovereignty, affirming the State's supreme and sole ownership of land; while ensuring economic benefits is to exploit the available land potential, using land as an economic tool to attract foreign investment, while meeting the need to use land economically, reasonably and effectively. However, in practice, there are still many issues that need to be studied more carefully so that the law can reach life. This issue will be illustrated by some examples below (specific cases are referenced from information in the meeting to collect opinions on amending and supplementing the law on the rights and obligations of foreign organizations and individuals leasing land in Vietnam held at the Foreign Investment Enterprises Club).

Land lease by the State : According to the provisions of the law on land, foreign-invested enterprises are only allowed to lease land from the State (as presented above). Thus, leasing land from organizations, households, and individuals of foreign-invested enterprises is not allowed. This has in fact caused trouble in handling by local authorities, as well as concerns of foreign investors. The following example can be considered:

The expansion of production and business of Vietronic Giang Vo sanitary ware company requires renting 2 more hectares of land. The company has been operating for more than 4 years at the time of 2002 and wants to double its capacity. After surveying the neighboring company, there is abandoned land. The company wants to rent that land but is not sure.

What are the rental procedures (?). According to regulations, the procedures must be carried out from the beginning with the State agency and not directly with the company (although in reality, direct negotiations are still required when compensating for site clearance...). A certain amount of time must be spent waiting to complete the procedures (according to the experience of businesses, they say it takes 6-7 months). Thus, business opportunities may be missed.

In Long An province, a tea production enterprise (100% foreign invested capital) needs land to grow jasmine flowers to get the scent of tea to increase the value (suiting customer tastes). They rented sugarcane land from farmers for agricultural purposes (growing jasmine) during the land allocation period of the farmers. Farmers are very satisfied because the amount of money earned after selling products is not much, production is unstable compared to renting land at 50 million VND/ha/year, and at the same time there is an additional job growing jasmine. Thus, both farmers and foreigners benefit; but when it comes to government management, it is not simple. The same is true for renting residential land. To comply with the legal regulations on land rental for foreigners, the People's Committee of Ho Chi Minh City handles it by: households and individuals rent houses and collect money; foreigners must pay the land rental fee to the People's Committee of the city.

The issue of considering a policy allowing private individuals with legal land use rights to lease land to foreigners for investment projects has been officially proposed by Chuap Hua Group to our State. A pilot project on this issue has been built on the basis of Resolution No. 09/2001/NQ-CP, August 28, 2001 of the Government and Directive No. 19/2001/CT-TTg, August 28, 2001 of the Prime Minister on enhancing the attraction and improving the efficiency of foreign direct investment in the period 2001-2005.

Regarding the order and procedures for land lease application : According to statistics from an officer of a Department of Planning and Investment, the process and procedures for land lease are still following the old pattern (although the TCĐC has provided instructions), to complete the procedures for leasing a piece of land, it requires 15 signatures, 14 seals, 3 submissions, 3 decisions, the total time needed is at least 2 months (not including compensation and site clearance); while most foreign investors come to Vietnam for 7-10 days at most each time.

The issuance of investment licenses in Vietnam is currently very "open" according to the representative of VMEP Company (only about 15 days, sometimes only within 1 week), but land leasing is a problem. Once the investment license is issued, finding and carrying out procedures to obtain land for lease takes a lot of time. Especially for compensation and site clearance, in reality, foreign investors must directly negotiate with each household... This makes new foreign investors feel apprehensive and want to receive the transfer of land use rights from foreign investors who have completed the procedures to obtain land for lease but they do not use it all according to the original planning due to many objective reasons.

In short, the procedures related to land lease for foreign investment projects in Vietnam are quite fully regulated by law, but when asked, foreign investors are still unclear, and there are many answers like that. For example, the representative of Mercedes-Benz Vietnam Company (in the consultation conference to amend the Ordinance on October 14, 1994) suggested that it is necessary to include specific instructions on "what to do if you want land, procedures, rights,..." and "it is also necessary to clearly stipulate what State agencies do,... it is necessary to include in the law the obligations of State agencies, clearly stipulate the implementation procedures...". Is it possible that the implementation instructions in practice do not have an effective method to help foreign investors understand Vietnamese law (?). Moreover, the procedures for leasing additional land

To expand the production and business of foreign investors currently doing business has not been mentioned in legal regulations but in reality it has happened as in the above example of Vietronic Giang Vo Sanitary Ware Company as mentioned.

Regarding land lease term: according to the law, the term for foreign investors in Vietnam to lease land is calculated according to the project but not more than 50 years, in case of more than 50 years to 70 years, the Government will submit to the Standing Committee of the National Assembly for decision. In fact, foreign investors propose to keep the longest term at 99 years as for foreign entities building headquarters, diplomatic missions... Although there are provisions in the law for extension if foreign investors have a need... However, due to procedural issues in practice and partly due to the psychology of foreign investors when they are told to be encouraged, they feel more secure; Moreover, logically, it is easier to convince them to propose 2 maximum time frames (50 and 99 years) with specific regulations for each subject.

Land rent payment issue : Article 28 - Decree 04/2000/ND-CP, February 11, 2000 stipulates that for enterprises that are leased land by the State to contribute capital to joint ventures with foreign countries, the land rent value is considered as the State budget capital allocated to the enterprise, the enterprise does not have to record debt and does not have to repay the land rent but must pay property tax . Thus, if the Vietnamese partner participating in the joint venture contributing capital with the value of land use rights is a unit under local management (for example in Vinh Phuc), previously according to Decree 14/10/1994, the land rent paid to the province did not have any financial problem with the land rent for joint ventures. However, according to Decree 04/2000/ND-CP, if the partner is a unit not under the locality (in another province or in Hanoi for example), in essence, the land rent is paid to that province or Hanoi. For localities, this is a very important budget to solve rural infrastructure. When there is a need to build or upgrade infrastructure,

Law on land use rights of foreign-invested economic organizations in Vietnam - 9

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