Vietnam Housing Law – major points you should be aware of as a foreign investor

The properties owned by foreigners can be sold, sub-leasedm unherited and collateralized (Previously only for owner occupying purpose).

WHAT ARE THE COMMON LEGAL TERMS?

The owner of apartment/house shall have the following legal rights:

• The right to inviolability of house unnder his/her lawful owneship
• To use houses for residential purposes and other purposes not banned by law
• To be granted certificates for houses under his/her lawful ownership
• To sell, transfer sales and purchuse contracts, lease, put for lease-puchase, gift, exchange, bequeath, mortgage, contribute as capital,lend, permit stay at, or authoize management of, his/her houses. In the case of donation or bequesthal of houses to subjects ineligible to own houses in Vietnam, such subjects are onlu entitled to the value of such houses.
• To use public facilities in the housing area in accourdance with Housing Laws and other relevant laws.
• To maintain, renovate, demolish, or rebuild his/her house as prescrible in Housing Law and law on construction.
• To receive the compensation as prescribed in regulations of law pr payment according to fair market price when their house is demolished, imposed compulsory purchase order, or commandeered by the State for national defense and security purposes, for socio-economic development purpose, or in the state of war, state of emergency or disacter situations.
• Right to file complaints, denunciation, or lawsuilts over violations against his/her lawful ownership and other violations against law on housing

HOUSE OWNERSHIP CERTIFICATE

The “House Ownership Certificate”, which stands for “Certificate of land use rights or house and land-attached asset onership” is the certificate granted by the State Authority to certify/ recognize the ownership of an eligible individual/organization over his/her/their land or house. It is commonly referred to as the “ownership certificate” or “pink book”.

The ownership term of foreigner is 50 YEARS from the day on which the ownership certificate is granted.

However, under the new residential housing law, there are some restrictions for foreigners as per the following:

• He/she may not buy , rent and purchase , receive, inherit and own more than 30% of apartments in an apartment building; or more than 250 houses regarding separate houses including villas, row houses in an area whose population is equivalent to a ward-administrative division.
• In case the foreigner receive or inherit house(s) which are exceeding the number of houses prescrible in above, he/she only receives the value of that house(s).
• The ownership term of foreigners is 50 uears, from the day on which the ownership certificate is granted. They may apply to extend the term of ownership and it shall be subject to the approval of State Authority
• If a foreign individual marries a Vietnamese citizen or an overseas Vietnamese, he/she qualifies for stable and long-term home ownership and has all rights of a homeowner similar to Vietnamese citizens.
• During the ownership term, the homeowner is entitled to gift pr sell houses(s) to individuals/entitles eligible for homeownership in Vietnam; if not, upon the expire of the ownership term, their houses(s) shall belong to the State. If the homeowner sell houses to Vietnamese individuals/entities, the tenure for the buyers will be permanent.

Red Invoice/Value Added Tax (VAT) Invoice

“Red invoice” is a legitimate invoice which is legally called “Va;ue Added Tax invoice”. It is issued by the seller to state that information on goods/services are sold/provided in accordance with laws, for organizations/individuals to declare and pay Value Added Tax. Currently, the Value Added Tax (VAT) tariff is 10% of the house/apartment price.

In comparison, a receipt is a form of invoice showing a payment transaction has been completed for the amount issued by the seller to the buyer. It í to help both contractual partries record that a certain amount has been paid by the buyer to the seller which is lawful and recognized by laws. Later on, a red invoice shall still be issued by the seller for taxation purposes.

Maintainance Fee

The “Maintainance Fee”, commonly referred to as “sinking fund”, is a fund contributed by buyers of a development to maintain commonly owned areas of the development. It is used for maintainance, small repairs, medium repairs and overhauls of commonly owned areas in order to preserve quality. Currently the sinking fund is 2% of the house/apartment price before VAT.

Management Fee

The “monthly management fee” is a fee contributed by residents to managing operations of the development, such as operating the elavator system, generator and providing services for the building such as security, pest control, rubbish collection service, etc…Management fee is caculated per Net Salable Area.

HOW DO I MAKE PAYMENTS FOR MY APARTMENT?

Foreign investors are recommended to set up a local bank account to transfer payments for their apartment to the Developer’s bank account. Below are some international banks with branches in Vietnam:

• Standard Chartered Bank
• United Oversea Bank

WHAT ARE THE PAYMENT SCHEMES?

Generally, for projects under construction, the payment scheme is decided by developers and agreed with purchasers.

Housing laws limit the maximum collection before handover to be up to 70% for local Vietnamese developers, and up to 50% for foreign developers. The law also stipulates that 5% is to be collected upon issuance of the pink book.

A default interest shall be applied as agreed in the SPA (commonly the default interest rate is at 1.5% per month of the late amount). If this violation exceeds the time given in the SPA, the developer has the right to unilaterally terminate the SPA and forfeit an amount. At a common practice, the forfeiture amount is roughly 20% to 30% of the apartment selling price.

WHAT ARE THE TAX INVOLVED?