RESOLUTION 18PROVIDES NEW POLICIES ON LAND AND REAL ESTATE IN VIETNAM

    I.KEY HIGHLIGHTS

1. The land price bracket mechanism has been removed – land prices will be determined by market principles;
2. Individuals and entities who own more land will pay more tax.

    II. MAIN CONTENTS OF RESOLUTION 18

On June 16, 2022, the Central Committee of the Communist Party of Vietnam issued Resolution 18-NQ/TW 2022 on “[c]ontinuing to innovate and perfect institutions and policies, improving the effectiveness and efficiency of land management and use, creating a driving force to turn our country into a high-income developing country” (“Resolution 18”).

A series of new orientations and policies in land management and land use have been set out, of which two key policies are highlighted as follows:

1. Removing the land price bracket mechanism – determining the land price according to market principles

Resolution 18 removes the land price bracket mechanism, adopting a new mechanism and method for determining land prices according to market principles, and prescribes the functions, tasks, and responsibilities of State agencies that are in charge of land price determination.
(Currently, the land price bracket mechanism is prescribed in Decree 96/2019/ND-CP, which is the basis for local authorities to issue a land price table for the period 2020-2024).

The Central Committee shall develop criteria and procedures for inspecting and supervising localities in formulating land price tables.

Provincial People’s Councils shall decide, inspect and supervise the implementation of land pricing.

An effective mechanism is to be created to improve the quality of land valuation and ensure the independence of land price appraisal councils, the capacity of land price determination consultancy organizations, and ethics of appraisers.

Regulations are to be supplemented to ensure the transparency on land price e.g. publicizing of land price,  trading through real estate exchanges, making payment via banks, not using cash in transactions; and strictly dealing with violations.

2. Individuals and entities who own more land will pay more tax

Resolution 18 also proposes a number of solutions to improve financial mechanisms and policies on land.

Higher tax rates are to be imposed on those using large areas of land or who own multiple real estate properties, speculating on land, failing to put land to use as scheduled, or leaving land idle.

The Central Committee has urged the relevant bodies to build laws and policies on land tax with reference to international norms but at the same time, are suitable to the domestic market development, with specific conditions and a feasible roadmap.

III. RECOMMENDATIONS

In recent years, overwhelming land speculation, land lot division for sale, gathering of cheap agricultural lands, and conversion of land use purposes from agricultural use into residential use have pushed land prices to rise. This creates a risk of real estate bubbles and instabilities in the market. Moreover, land compensation then would not follow the market price, leading to long lasting complaints and lawsuits, as well as delays in many real estate projects.

To deal with these problems, aside from tightening lending in real estate investments, the Central Committee and the Government have introduced various new policies and legal frameworks to manage and regulate the real estate market, with the aim to form a real estate market that is more equitable, stable and healthy in development.

Currently, the Land Law 2013 and related legal documents are being reviewed and adjusted in accordance with the spirit of Resolution 18. As a result, Vietnam’s real estate market in the upcoming years will offer more opportunities, but also potentially more volatility. To mitigate risks, investors and the community in general should consult with experienced lawyers before entering into transactions of buying, selling, investing or trading real estate.

Our professionals at VCI Legal are ready and willing to assist with your case, and have many years of experience with main practice areas being investment consulting, M&A, and dispute settlement regarding real estate, assisting both international and local individuals, investors, and corporations.

Please kindly refer to VCI Legal’s Real Estate Services and our relevant experiences here: https://vci-legal.com/wp-content/uploads/2021/02/Intro-RE-Hospitality-Practice-2019.pdf