The New Land Law makes some changes to land acquisition and use in Vietnam for foreign and domestic investors. Key changes include: 1. Land allocation is now based on the objective of land use (e.g. residential housing) rather than the identity of the land user. 2. Rights of land users are linked to whether they pay land rent annually or as a one-time fee. 3. There are still some differences between foreign invested enterprises and domestic entities, such as FIEs cannot lease land from individuals. 4. Conditions on transferring assets attached to land are more stringent under the New Land Law.

1. THE NEW LAND LAW
What’s ACTUALLY New?
Just one day after its passing of the milestone revised constitution, on 29 November 2013, the
National Assembly of Vietnam ratified a new law (the “New Land Law” or “NLL”) to replace the
current Law on Land1
Strictly speaking, the New Land Law is relatively closer to an overall correction of concepts and
terms which are not in line with other legislations, mainly, the Law on Enterprises
.
2 and the Law on
Investment.3
The New Land Law which has 15 chapters with 212 clauses will take effect as of 1 July 2014.
That is, differences between the New Land Law and the Old Land Law with respect to
major issues (i.e. - access to land, land revocation, land use/lease term, etc.) are not substantial. In
fact, the New Land Law compiles land-related issues which have arisen for the last ten years but
separately dealt with by numerous by-law documents.
For the purpose of this note, we briefly summarize issues which we think are of interest to foreign
investors and simultaneously highlight key changes in the New Land Law.
1. Overview of Land Use and Acquisition by Foreign Investors in Vietnam
It should be clear at the outset that Vietnamese law does not permit “ownership” of land in an
“absolute” sense as land is generally considered the Vietnamese people’s property. For that reason,
individuals and organizations are only granted with the rights to use land (“Land Use Rights” or
“LURs”) and regarded as “land users”. Even so, Vietnamese law does not allow foreign entities4
Generally, an FIE may acquire land by one of the following ways:
to
hold title of land in any event including the LURs. Hence, in case a foreign investor wishes to
“acquire” land in Vietnam, it has to go through an entity established under Vietnamese law (i.e. -
foreign invested enterprise or “FIE” for short) for such purposes.
1 The Law No. 13/2003/QH11 on Land passed by the National Assembly on 16 November 2003 and effective 1 July
2004 (“Old Land Law” or “OLL”);
2 Law No. 60/2005/QH11 on Enterprises passed by the National Assembly on 29 November 2005 and effective 1
July 2006 (“Enterprise Law”);
3 Law No. 59/2005/QH11 on Investment passed by the National Assembly on 29 November 2005 and effective 1
July 2006 (“Investment Law”);
4 That is, entities which are established and operate under other jurisdictions than Vietnam. Please see Section 3
below for further information on status of land users.

2. 1. leasing the LURs5
2. being allocated with (receiving the assignment of) LURs in case of residential housing
projects (“Land Allocation”);
from the State and paying land rents on either one-off basis or annually
(“Land Lease”);
3. in case of a joint venture with a local partner, receiving capital contribution by the local
partner in the forms of LURs;
4. leasing/sub-leasing land from existing land users other than land users being individuals or
households;
5. receiving the transfer of projects which is attached with LURs of the relevant land site from
existing local
6. sub-leasing land from industrial/economic zone developers (the “IZ Developers”).
land user(s); and
KEY NOTES:
(i) Acquiring land via local partners (point (3)) was most preferred in the early days of foreign
investment in Vietnam (i.e. - 1990s). At that time, FIEs, mainly joint venture companies,
acquired land by joining forces with local State owned partners with the latter making capital
contribution by way of LURs. When the Old Land Law was adopted in 2003, local land users,
most of which were thinly capitalized, were required to pay land use fee on an one-off basis
for the entire land use term for the purpose of capital contribution by way of LURs. This
requirement has effectively deterred local partners from making capital contribution that
way.
(ii) Acquiring land by way of project transfer (point (iv)) is not highly active in practice due to
unclear borders between the Investment Law and the Old Land Law on project transfer
procedures.
(iii) As a matter of practice, FIEs mainly have access to land by way of either (a) leasing land
directly from the State bodies (via a land lease agreement signed with the provincial
Department of Natural Resources) and Environment (the “DONRE”) or (b) sub-lease land
with/without infrastructure from IZ Developers.6
(iv) The New Land Law is not crystal clear on how FIEs can effectively lease land directly
domestic entities other than State bodies and IZ Developers.7
5 Under the New Land Law, entities lease/are allocated with the LURs rather than the “land” as it is currently the
case. Again it simply indicates a terminological, rather than a substantive, change.
6 In the early days of foreign investment in Vietnam (i.e. – 1990s), FIEs, mainly joint venture companies, acquired
land by joining forces with a local State owned partner with the latter making capital contribution by way of LURs.
7 Article 153.3 of the New Land Law. Previously, the absence of any guidance on land acquisition by leasing and sub-
leasing land from domestic entices (Article 93.3 of the Old Land Law) leads to a conservative interpretation that FIEs
cannot effectively lease/receive the transfer of land from domestic entities. Our broad view is however that land

3. 2. Land Allocation vs. Land Lease
Though the New Land Law still retains two major ways of land acquisition: (i) land allocation and
(ii) land lease, their coverage is changed drastically from the past.
For instance, with respect to access land held by the State, the Old Land Law permits all FIEs to
decide to lease land from State bodies and pay land rents either on an one-off or annual basis at
their choice. Similarly, domestic companies have 02 options: (i) being allocated with land be
allocated with (or “receive the assignment of”) land by a competent State body or (ii) lease land from
the same and pay land rents annually.
The New Land Law however distinguishes these two by “objectives of land use” rather than
characteristics of land users (i.e. - FIEs vs. domestic companies). Particularly, pursuant to the New
Land Law, LURs are allocated to all entities including FIEs in case the latter implement investment
projects for development of residential housing (abbreviated as “Residential Housing Projects”).8
For other projects, corporate entities may lease land from the DONRE and pay land rents on either
annual or one-off basis.
The above change appears to address a shortcoming of the Old Land Law, that is, a buyer of
houses developed by an foreign invested, not domestic, developer had to pay twice for a
single house/apartment. Firstly, he/she pays the residential housing developers the selling
price for that house/apartment. When the house/apartment’s title is transferred to the
buyer, that buyer is required to pay land use fee for the parcel of land to which the house is
attached. The reason is that the State revokes the leased land from foreign invested
developers and allocate the same to the homeowners.9
Phu My Hung Development LLC, the developer of Phu My Hung new urban zone in Ho Chi
Minh City, Vietnam (“Phu My Hung”), sold its houses to many local buyers. The standard
house sales contract makes it clear that buyers will be responsible for paying land allocation
fee, if any. At the peak of the real market buble (2006-2007), buyers paid no attention to
details of such contract other than total area and selling price, which was very high then,
with a view to resell them to another third party immediately. When bubble blowed, buyers
carried out procedures to have their ownership officially recorded. Then, they were
requested to pay land use fee which can be up to $20,00 - $30,000. When asked, Phu My
Hung explained that unlike domestic entities, has the right to lease land for a 50-year period
only. As a matter of law, Ho Chi Minh City must transfer title over its respective piece of
This is not an issue with local
developers as they are allocated with land at the first place and has already paid “land use
fee”.
acquisition that way is by and of itself a commercial agreements between contracting parties without substantial
involvements of State bodies.
8 Please however note that the concept of “residential housing” is relatively ambiguous under Vietnamese law.
9 Article 2.1 of Decree 198 dated 3 December 2004.

4. leased land (i.e. – land that is attached to the sold house) to buyer by revoking land from
Phu My Hung and allocating the same to buyers. The land use fee must be collected at the
time of allocation. The buyers rejected such payment as they considered it a mandatory
obligation of the developer, Phu My Hung. The dispute came to the attention of the Prime
Minister who later on issued a letter stating that buyers are still responsible for such
payment but allowing the land use fee to be calculated at the time of purchasing house
(2006 – 2007).
Despite their terminological differences, Land Lease and Land Allocation are basically the same,
especially with respects to key aspects of LURs such as land-related expenses, land use terms or
specific rights of the land users.10
FIEs who have leased land from the State and paid land rent on an one-off basis to implement
Residential Housing Projects prior to the effectiveness date of the New Land Law can choose to
continue leasing land or change to land allocation if desirable.
3. Domestic Entities vs. FIEs With Respect To Land Acquisition/Use
Another classic issue is what is the border between a “economic organization”, or more exactly
“domestic entities” and foreign invested enterprises for the purposes of, inter alias, land acquisition
and use.
The Old Land Law confuses a foreign investor, an entity which is established and operating under
the laws of a jurisdiction other than Vietnam, with an FIE, a subsidiary established and operating
under Vietnamese law. Specifically, in the context of the Old Land Law, foreign investors are
unofficially interpreted to refer to FIEs having legal status under Vietnamese laws including joint
venture companies, wholly foreign owned companies. Meanwhile the Investment Law defines
“foreign investors” as individuals bearing foreign nationality or organization established and
operating under foreign laws. Now, the New Land Law has corrected this confusion in accordance
with Investment Law.
In this respect, the New Land Law appears to address the acquisition/use of land of the converted
FIEs by foreign investors’ purchasing shares in domestic entities. In this case, the acquisition will
come with 02 following possible scenarios:11
(i) If a foreign investor(s) owns entire or “majority of shares” in a converted FIE in accordance
with prevailing laws”, then that converted FIEs will enjoy rights and obligations applicable to
land users being “foreign invested enterprises”;
(ii) If a foreign investor(s) owns “minority of shares” in a converted FIE in accordance with the
prevailing laws, then that converted FIEs will enjoy rights and obligations applicable to land
users being “domestic enterprises”.
10 Article 55.3 of the New Land Law.
11 Article 183.4 of the New Land Law.

5. To this extent, this however remains to be seen how the phrase “majority of shares” is interpreted.
In fact, the laws of Vietnam confuses with each other as to which ownership ratio would make a
person/entity a majority shareholder (i.e. - 51%, 65%, 75% or a specific voting ratio prescribed in
charter of the relevant FIE, which can be in theory 100%). In addition, the New Land Law does not
deal with the situation of a FIE of which the foreign investor acts as an “incorporator” of an FIE.12
Similarly, it is still unclear as to how the Law on Investment and the Law on Land synchronize with
each other with respect to projects that consume land and invested by “Vietnamese overseas
residents” (aka “Viet Kieu”), who are technically treated as foreign investors under the Law on
Investment but are granted with more rights than FIEs pursuant to the Law on Land (e.g. -
Vietnamese overseas residents can lease land from individual land users or households).
Different treatments between foreign invested and local land users still exist?
It appears that New Land Law is intended to create an even playing ground for domestic
and foreign invested enterprises with repsect to land-related issues. Notably the law
classifies major forms of land acquisition based on land use purposes (residential housing
projects vs. other business purposes) rather than land users’ identity (i.e. - domestic
entities vs. foreign invested entities). Nevertheless, following differences make the party
less fun as it appears:
(i) Unlike domestic entities, FIEs are not allowed to lease or sub-lease land from the
individual land users or households;
(ii) Domestic entities are entitled to LURs on a stable and long term basis if they apply
for conversion of land use purposes from non-agricultural LURs on a stable and long
term basis upon to a fixed term non-agricultural LURs and vice versa. FIEs are not
granted such rights.
4. Rights of the Land Users
Both the Old Land Law and the New Land Law adopt the same classic principle that links the scopes
of LURs of a land user to the mode of payment of land use fee/land rents it chooses. That is, if a
land user pay land rent on an one off basis, it has the rights over both the land and the assets
attached to that land. On the contrary, if it chooses to pay land rents annually, it has the right over
the assets attached to the land only.
Normally, land users’ rights center on key following rights (i) to transfer LURs/assets; (ii) to make
capital contribution in the form of LURs/assets; and (iii) to use LURs as mortgage at credit
organizations licensed to operate in Vietnam.
12
This means that, for the purpose of the New Land Law, a FIE that local incorporator holds, say, 99%
shares can be treated as “foreign invested enterprises” while another FIE, only 49 % of its shares held by
foreign investor, can be considered “domestic entity”.

6. KEY NOTES:
(v) Neither FIEs nor domestic entities are allowed to use LURs as mortgage at any other
organizations than credit organisations (i.e. - banks, financial companies) licensed to operate
in Vietnam (i.e. - not offshore lenders);13
(vi) Granting guarantee in the forms of LURs are removed from the New Land Law as it is
ultimately interpreted as a variant of mortgage of LURs. In fact, local courts declare
guarantee agreements by way of LURs voidable vastly on the above ground.
(vii) The New Land Law imposes more conditions on both the seller and buyer of assets attached
to land.14 On the seller’s side, the construction of such its assets has been fully complied with
relevant detailed construction master plan and the approved investment projects. The buyer
must also meet a number of relatively ambiguous conditions including “having capacity to
implement the investment project” and “having registered scope of activities which are in line
with the investment project”.15
(viii) The Law on Land is almost silent on transfer of “rights to lease land” or “rights to develop
projects” (collectively “LLR”) though such rights have long been implicitly realised under
Vietnamese tax and investment law. “LLR” is technically different from the LURs in that
buyers of the LLRs continues to pay land rents to the State. Meanwhile, persons who receive
the transfer of LURs will use the allocated/leased land without further payment of land
rents/land use fees.
These new requirements may be cumbersome as local
entities and foreign investment in Vietnam by way of merger and acquisition are not strictly
required to have an “approved” investment project especially in sectors which are not
considered conditional.
Historically, local users who have successfully entered into a long-term lease with the State
with respect to a “golden” land site would seek to transfer this privilege (i.e. - the rights to
lease golden land site). However strictly speaking, they, as the users paying land rents on
annual basis, do not the have the rights to transfer the land/LURs. In order to go around this
restriction, they offer the LLR, often concurrently with the sales of assets attached to that
land, to a third buyer on demand. Vietnamese tax law implicitly accepts validity of such
transfer from a perspective of tax relating to transfer of real property. Unfortunately, the Old
Land Law’s silence on this particular issue leave validity of transactions uncertain.16
13 Offshore lenders often go around this restriction by joining force with a local bank where the latter acting as an in-
name receiver of the LURs of the mortgagor.
There
was even a case that a seller of LLR were examined for penal liability on the above ground
(i.e. - the absence of special laws).
14 According to explanations of the draftspersons, the new requirements aim to avoid land users’ actually sale of land
under the umbrella of “sales of assets”.
15
Article 188 of the New Land Law.
16 To the best of our knowledge, the MONRE’s defends its position on this point that the transfer of the rights goes
against the “spirit” of Vietnamese law on land.

7. 5. Land Revocation
As the New Land Law stands, land can be “revoked” under limited circumstances including
revocation of land for the purposes of socio-economic developments [for the national and public
objectives]. In such cases, broadly speaking, the State will forcefully take the land from existing
land users (with or without compensation as the case may be) and grant it to the others. Normally,
the State revokes land to host projects they deem to be of socio-economic significance including
private investor projects such as industrial zones, export processing zones and even new urban
zones. In case of land revocation, the State is responsible for site clearance and giving “clean” land
to the investors. If, however, the relevant investors wish to speed up the site clearance process for
some reason, it can organize the site clearance itself. In such case, expenses incurred for such
purpose are deducted from the State from future land use fee/land rents. It is important to note
that wholly foreign owned projects and projects that fall inside Group A which cannot be
implemented in an industrial zone/hightech zone (i.e. - major and important projects”) are no
longer in the list of compulsory land revocation.
On the contrary, if a project falls outside the list, the investor has to deal with, or more exactly,
compensate each and every existing land user for the land site. Expenses for the site clearance in
this case is not entitled to any deduction/assistance by the State.17
It is important to note that land can also be revoked at the investor’s fault. Typical examples would
be land revocation when an investor fails to use the land for a project for a consecutive 12 month
period or when such investor is 24 months behind the licensed project schedule for such use. In the
former case, investors will be granted with a 24-month extension to continue their projects. If still
failed, land will be revoked without compensation on land/assets attached to land except for force
majeure reasons.
Hence, the investor has to pay
twice for a single land lot (i.e. - compensation for the existing land users and land rents/use fee to
the State).
The Old Land Law introduced a positive approach to “land acquisition” issue. The
draftspersons’ initial intention was that all land acquisitions for “business” purposes must
come down to negotiations with land users. In fact, the Old Land Law limits the compulsory
revocation of land for the purpose of “economic developments” to the development of
industrial zones, high tech zones or projects of large scale decided by the Government.18
However, the “super” Decree 181,19
17
It appears to us that the deduction issues will be clarified in a decree guiding the New Land Law on this
particular point.
as BBC named it, was issued, land revocation was
expanded to other projects falling inside Group A or wholly foreign invested projects that
cannot be implemented in industrial zones or ODA projects. Unfortunately, subsequent law
in other sectors have expanded to Group A projects to cover almost investment projects
including residential housing developments projects. This loophole was fully taken
18
Article 40 of the Old Land Law.
19
Decree 181 dated 29 October 2004.

8. advantages by investors of all sizes to effectively take land from land users without going
through any negotiation process. The land revocation practice vary by provinces. Hanoi and
almost other provinces, land is revoked and directly handed over to investors. In Da Nang,
the city revokes land in accordance with relevant master plan and conduction auctions. Ho
Chi Minh City and some Southern provinces chose to revoke land if investors successfully
reached agreements with land users to receive 70% of total area20
As a matter of fact, revocation of land provokes fiercest controversies in Vietnam in that
most complaints against State bodies and their officials relate to compulsory revocation and
compensation for existing land users. Recent years witnesses violent clashes between local
farmers and Government enforcers including police as the formers refuse compensation
offers for land, which are in their view too low, especially when the same land lots is sold to
end users with a much higher price. In early 2012, a farmer in Hai Phong City opened fire to
the Government enforcers when the local authority organized a coercive revocation of an
area of land that he and his family acquired by cultivating wetlands by building a sea dyke
and planting mangroves. Four months later, many farmers in Van Giang District, Hung Yen
Province clashed with around 500 police officers who were sent there to revoke 5.8 hectares
of agricultural land for a commerce and service urban area project. In that case, the
Government approved to allocate land to the project’s investor in exchange for the latter’s
development of a highway system that connects Hung Yen Province and Hanoi (i.e. – under
the umbrella of “exchange [Government] land for [private-funded] infrastructure”, a variant
of build-transfer form).
6. Land Use Term
Like the Old Land Law, the land use term depends on (i) the land user; and (ii) the purpose of the
land use. Broadly, the term can be either “stable and long term use” or “fixed”.
In most cases, the duration of land is fixed to maximum 50 years, and under limited circumstances
(i.e. - projects implemented in areas with “difficult socio-economic conditions” or “projects of large
scale but a slow return on investment”, up to 70 years. In case of residential housing development
projects, individual buyers will be entitled to land lease term on a “stable and long term use” though
the land lease term granted to the developers is definite.
The State will “consider” a possible extension upon the expiry of the land use term if the existing
land user wishes to continue using the land “but the extended duration will not exceed the duration
stipulated by the law”. This means the existing land user is not given priority in continuing leasing
land it currently uses.
Individual land users, households and in some cases corporate entities are entitled to duration of
land on a “stable and long term use” basis if their land is used for certain purposes such as
residential housing, afforestation, etc.
20
The Report on Amendments of the Land Law by Land Association of Vietnam (LANDA).

9. 7. Land Price
Land price which is defined as “value of land use rights calculated for a given parcel of land” is
prepared by the State on a 5-year basis. Unlike the Old Land Law which subjects land price to,
among other things, commercial agreements of contracting parties, land prices under the New Land
Law will be solely decided by the State.
The land price framework issued by the State cover all types of land in each area from time to
time. Adjustment of the price framework is made if the land price in the market fluctuates at a 20%
rate. People’s councils of provincial level will base on the land price framework to issue their own
land price table. The land price table is used to calculate, among other things:
• Land use tax;
• Fees relating to management and use of land;
• Monetary fine in case of administrative sanctions in land sector;
However, only specific land prices determined by the people’s committees of provincial level (the
“PC”) on basis of the land table are used to form the basis for calculation of, among other things:
• Land use fees in case of Land Allocation;
• Land rent in case of Land Lease
• Compensation to existing land users upon recovery of land by the State.
Please note that the New Land Law no longer requires PC to publish land prices on annual basis
with a view to give more flexibility to PC in determining land prices.
The New Land Law for the first time involves professional land price valuators to give consultations
to PCs with respect to specific land price applied within its locality (i.e. - to proposed land price in
consideration of, among other things, market price of land, etc.).
As far as land acquisition, it is again important to note that the above land pricing mechanism
applies to land revocation, particularly, “compensation to existing land users upon recovery of land
by the State”. For other projects, investors must agree with existing land users on compensation
offers for land.
8. Land-Related Dispute
Jurisdictions to settle land dispute, which are defined as “a dispute involving the rights and
obligations of land users between two or more parties in a land relationship”,21
21
Article 3.24 of the New Land Law.
appear to be among
the most controversial issues under Vietnamese law on land.

10. Under both the Old Land Law and the New Land Law, land disputes must be first solved through the
people’s committee of commune level by way of reconciliation. If parties have failed to reach an
agreement at this stage, parties can bring this case to either a competent court or people’s
committee of district/provincial levels for final settlement depending on the “red book” status of
the concerned parties.22
This above mechanism is proven to have many shortcomings. For example, land dispute is a
relatively broad concept which is can be interpreted as any dispute relating to land including assets
attached to land (i.e. – disputes over the purchase or lease of factory/office building). In such
sense, regulations of the New Land Law regretfully divests parties of their right to seek for other
more transparent and efficient ways of dispute settlement including foreign and domestic
arbitration bodies. In fact, some local courts tend to interpret “land dispute” as broadly as possible.
In addition, technically the requirement that minutes of reconciliation must bear signatures of all
parties in disputes may effectively result in a deadlock (i.e. – the dispute can not be forwarded to
higher authority for settlement). In addition, given the above ambiguousness, the prospect that
local courts would arbitrarily attempt link any disputes which are more or less relating to land
(including disputes with/among foreign invested enterprises/foreign investors) to their own
jurisdictions cannot be ruled out.
22
Article 203 of the New Land Law.