Decision No. 1417/TC/TCĐN Issuing Regulations on Rent for Land, Water, and Sea Surface Applicable to Foreign Investment Forms in Vietnam

Pursuant to …;

THE MINISTER OF FINANCE

BASED ON THE FOREIGN INVESTMENT LAW OF VIETNAM dated December 29, 1987, AMENDMENTS AND SUPPLEMENTS TO CERTAIN PROVISIONS OF THE FOREIGN INVESTMENT LAW OF VIETNAM dated June 30, 1990 and December 23, 1993;

BASED ON THE LAND LAW dated December 23, 1993;

BASED ON DECREE NO. 178/CP of the Government dated October 28, 1994 stipulating the tasks, powers, and organizational structure of the Ministry of Finance;

BASED ON THE DELEGATION OF AUTHORITY FROM THE PRIME MINISTER pursuant to DOCUMENT NO. 7283/KTN of the Government dated December 27, 1994;

Pursuant to …;

Article 1: ISSUES WITH THIS DECISION THE REGULATIONS ON RENT FOR LAND, WATER SURFACE, AND SEABED APPLICABLE TO FOREIGN INVESTMENT FORMS IN VIETNAM.

Article 2: THIS DECISION REPLACES DECISION NO. 210A/TC-VP of the Minister of Finance dated April 1, 1990 and Circular No. 50 TC/TCĐN of the Ministry of Finance dated July 3, 1993.

Article 3: THIS DECISION SHALL TAKE EFFECT FROM JANUARY 1, 1995.

REGULATIONS

REGARDING RENT FOR LAND, WATER SURFACE, AND SEABED

APPLICABLE TO FOREIGN INVESTMENT FORMS IN VIETNAM

(ISSUED ALONG WITH DECISION NO. 1417 TC/TCĐN

dated December 31, 1994 of the Minister of Finance).

Article 1: Joint ventures (JV), wholly foreign-owned enterprises, and foreign parties participating in business cooperation contracts (hereinafter referred to as foreign-invested enterprises) that lease land, water surface, and seabed from the Socialist Republic of Vietnam for use must pay rent according to this regulation.

In cases where the business cooperation contract divides products according to Article 75 of Decree No. 18/CP of the Government dated April 16, 1993, and the rent for land, water surface, and seabed has been included in the portion allocated to the Vietnamese party, foreign parties shall not pay rent under this regulation. When the Vietnamese party sells the allocated product, they are responsible for paying this rent into the State Budget.

Article 2: Rent for land, water surface, and seabed is calculated annually based on a unit area and the total area specified in the contract or other state regulations.

Article 3: The level of rent for land, water surface, and seabed per unit area is defined as follows:

3.1 - Land rent in urban areas:

3.1.1 - The range of land rent applicable to urban groups:

Land rent within cities, towns, market towns, tourist areas, concentrated industrial zones, and transportation hubs, agricultural land, rural residential areas, and specialized land designated by the Government and Provincial People's Committees for changing purposes to be used for industrial, service, and tourism production targets (hereinafter referred to as urban areas) shall apply the following range of land rent:

Group 1: 1.70 - 13.6 USD/m2/year.

Group 2: 1.50 - 12.0 USD/m2/year.

Group 3: 1.125 - 9.0 USD/m2/year.

Group 4: 1.75 - 6.0 USD/m2/year.

Group 5: 0.375 - 3.0 USD/m2/year.

(List of urban areas attached as Appendix 1)

3.1.2 - Method for determining the rental rate for land:

Rental Rate = Basic Rate * Location Factor * Infrastructure Factor * Industry Factor

(USD/m2/year)

Where: - The basic rate is the minimum rate within the prescribed range for each type of urban area.

The factors will be determined according to standards set within the range of 1 to 2.

Method for determining the factors:

a- Location factor:

Factor 2: applies to land in the city center, frontage of streets, cultural, tourist, and entertainment centers.

Factor 1.7: applies to land in the city center, not frontage of streets.

Factor 1.30: applies to land near the city center, frontage of streets.

Factor 1: applies to land near the city center, not frontage of streets.

b- Infrastructure factor:

Factor 2 applies to locations meeting all of the following conditions:

Favorable traffic conditions,

No need for leveling,

Adjacent or nearby power supply facilities capable of meeting project needs.

Nearby facilities for water supply and drainage that can be utilized.

Factor 1.7 is a factor lacking one of the above conditions.

Factor 1.5 is a factor lacking two of the above conditions.

Factor 1.2 is a factor lacking three of the above conditions.

Factor 1 is a factor lacking all four of the above conditions.

c- Industry factor:

Factor 1: Applies to the following industries: bridges, roads, airports, ports, power plants, electricity distribution, infrastructure construction for export processing zones, and concentrated industrial zones.

Factor 1.2: Includes mining, metallurgy, machinery manufacturing, shipbuilding, automobile assembly, building materials, electrical materials, basic chemicals, fertilizers, pesticides.

Factor 1.5: Includes other manufacturing and trading industries, including processing industries, land for factory buildings of agricultural, forestry, and fishery projects.

Factor 2: Industries in the tourism and service sector.

3.1.3 - For unused land within cities, towns, and market towns, the minimum rental rate within the urban land rental range applicable to that urban area shall be applied.

3.1.4 - For specialized land, agricultural land, and rural residential areas used for industrial, service, and tourism projects (excluding processing industries using land in raw material cultivation areas, which are subject to the rental rates specified in Article 3.2 below), the uniform range of urban land rental rates for Group 5 in Appendix I of this Regulation shall be applied. If the land use area is in mountainous regions, the rental rates specified in Article 3.2 (rental rates for non-urban areas) shall also be applied.

3.2 - Land rent in non-urban areas is specifically defined as follows:

3.2.1 - Mountainous rocky areas, barren hills, poor quality land difficult to use have rental rates ranging from 30 - 150 USD/ha/year.

3.2.2 - Other areas apply rental rates ranging from 150 - 750 USD/ha/year.

Specific rental rates for each project are determined based on the natural conditions of the land, infrastructure conditions, and operational objectives similar to the principles for determining location factors, infrastructure factors, and industry factors as stated in Article 3.1 of this regulation.

3.3 - Water surface and seabed rent:

3.3.1 - River, lake, and bay water surfaces have rental rates ranging from 75 - 525 USD/ha/year.

3.3.1. Surface area of rivers, lakes, bays has rental fees from: 75 - 525 USD/ha/year.

As for architectural construction projects on water surfaces in any urban area, the rental fee shall be applied at the same level as that for land in such urban areas (as stipulated in Article 3.1 above).

3.3.2. Sea surface: 150 - 600 USD/km2/year.

In cases where the leased area has an undefined usage area, the rate from 1500 USD to 7500 USD shall apply.

Article 4: The rental fees for land, water surfaces, and sea surfaces specified above apply to the current status of the leased area and do not include compensation or clearance costs.

Article 5: After every five-year period, if necessary, the Ministry of Finance will review and adjust the rental rates for land, water surfaces, and sea surfaces. When increasing the rates, the increase shall not exceed 15% of the previously prescribed rate.

The adjustment of rental rates for land, water surfaces, and sea surfaces every five years does not apply to cases where payment is made upfront for the entire duration of the project's operation or where Vietnamese parties contribute capital to joint ventures with foreign entities through land rental payments.

Article 6: Principles for determining rental rates for land:

1. Based on the guidelines provided herein, the People's Committees of provinces and centrally-administered cities shall provide written opinions on the rental rates for each specific project. These opinions shall specify: the basic rates prescribed for each type of land, calculation factors, and the total rental amount per unit area for one year, which shall serve as the basis for the State Committee on Cooperation and Investment to determine the official rental rates and record them in the investment permit or lease contract. The Ministry of Finance will only provide comments upon request by the State Committee on Cooperation and Investment.

2. In cases where foreign organizations and individuals cooperate with Vietnamese economic organizations and are permitted to lease state-owned land to build houses for sale, they must pay the land rental fees until the houses are sold to other users. Vietnamese units and individuals purchasing the houses shall be responsible for paying the land use fees according to the law.

3. Time point for determining rental rates for land:

The time point for calculating land rental fees is the date when the competent authority issues the certificate of land use rights to foreign-invested enterprises.

If an enterprise has been permitted to use land but has not yet received the certificate of land use rights, the time point for calculating land rental fees is the date of signing the handover document for the land use by the enterprise.

In cases where Vietnamese parties participate in foreign-invested enterprises by contributing capital through land rental payments, the time point for calculating land rental fees is the date when the State Committee on Cooperation and Investment issues the foreign-invested enterprise license.

Article 7: Reductions in land rental fees:

1. Foreign-invested enterprises investing in special difficult regions or regions encouraged to attract investment as listed in Appendix 2 attached to this Regulation shall be eligible for a 50% reduction in rental fees.

2. Projects constructing bridges, roads, airports, ports, power plants that are not under the Build-Operate-Transfer (BOT) investment model shall be exempt from paying land rental fees during the construction period.

3. Projects searching for minerals shall only have to pay 15% of the prescribed rental fees during the exploration and development phases up to the start of industrial exploitation.

4. During the construction phase of production industry, hotel, tourism, office, housing projects, foreign-invested enterprises shall only have to pay 50% of the rental fees. Upon commencement of exploitation and business operations, full rental fees as prescribed shall be paid (for projects with independent construction phases, the construction period shall be calculated separately for each phase).

5. Projects in agricultural planting and industrial tree planting sectors shall be subject to the minimum rental fees within the prescribed range for each type of land used.

6. For forest planting projects, during the initial cycle before trees produce products, the project owner shall not have to pay land rental fees. For long-term industrial tree planting projects, the project owner shall also not have to pay land rental fees during the basic construction period. Specifically, for forest planting projects, the reduction can reach up to 90% of the prescribed rental fees, depending on the type of land determined by the Ministry of Forestry and the Ministry of Finance.

7. Foreign-invested enterprises shall enjoy a 5% reduction in rental fees payable if the investor pays the land rental fees once for a five-year lease term. If the payment is made once for a lease term exceeding five years, an additional 1% reduction shall be granted annually, but the total reduction shall not exceed 15% of the total rental fees payable (this provision does not apply to cases where Vietnamese parties contribute capital to foreign-invested enterprises through land rental payments).

Article 8: Provisions on payment of land rental fees:

Foreign-invested enterprises must submit two copies of the land lease contract, declaration form, and related documents to the revenue collection agency within one month from the effective date of the contract.

Foreign-invested enterprises are responsible for paying land, water surface, and sea surface rental fees to the State Treasury as designated by the revenue collection agency.

Land rental fees shall be paid in two installments per year, each installment being 50% of the total amount due. The deadlines for payment are June 30 and December 31 of each year. For the first and last years, the rental fees shall be calculated and paid based on the actual months of use.

In cases where foreign-invested enterprises fail to make timely payments as stipulated in the lease contract and the guidelines of this Regulation, the revenue collection agency shall issue a notice for payment based on the figures recorded in the lease contract.

Rental fees for land, water surfaces, and sea surfaces may be paid in US dollars (USD) or Vietnamese dong. If paid in Vietnamese dong, it shall be converted at the selling exchange rate published by the State Bank at the time of payment.

Total revenues from leasing land, water surfaces, and sea surfaces to foreign-invested enterprises shall be allocated to local budgets according to the current system of budgetary management.

Article 9: In the case where the Vietnamese party participates in a joint venture or cooperative enterprise by contributing capital through land lease payments, water surface lease payments, or sea surface lease payments, the value of such contributions shall be agreed upon within the price range specified in this regulation by both parties, and the joint venture or foreign cooperative partner does not have to pay lease fees to the State, but the Vietnamese party has the responsibility to record the amount of capital contributed through land lease payments, water surface lease payments, or sea surface lease payments into the capital source provided by the State Budget (the responsibilities of the Vietnamese party towards the State when contributing capital through land lease payments will be specifically guided by the Ministry of Finance).

Article 10: Violations concerning land lease payments, water surface lease payments, or sea surface lease payments as stipulated herein shall be subject to penalties as follows:

1. For late declaration beyond the prescribed time limit, a penalty of 2 USD per day of delay shall be imposed.

2. For inaccurate declaration to reduce the amount payable, a penalty up to twice the amount understated shall be imposed.

3. For failure to pay the lease fee or penalty on time, a penalty of 0.2% of the overdue amount per day of delay shall be imposed.

Article 11: Implementation Provisions:

1. Joint ventures with foreign investment and participating parties shall strictly comply with the provisions set forth in this regulation.

2. The General Department of Taxation shall be responsible for collecting land lease payments, water surface lease payments, or sea surface lease payments from joint ventures with foreign investment and depositing them into the State Budget account at the National Treasury.

3. For joint ventures with foreign investment that are currently implementing land lease payments, water surface lease payments, or sea surface lease payments as specified in the investment license issued by the State Committee for Cooperation and Investment or other legal documents prior to the effective date of this regulation, they shall continue to follow the provisions of those documents. This regulation shall only apply to projects licensed from the effective date of Decision No. 1417 TC/TCĐN dated December 31, 1994, issued by the Ministry of Finance.

4. Any complaints regarding issues related to land lease payments, water surface lease payments, or sea surface lease payments should be submitted to the Ministry of Finance for specific guidance on implementation.

ANNEX 1

LIST OF URBAN AREAS CLASSIFIED BY GROUPS

Group 1: Hanoi City, Ho Chi Minh City.

Group 2: Cities: Vung Tau, Bien Hoa, Hai Phong.

Group 3: The following cities, towns, and townships.

1- Van Dien 2- Gia Lam 3- Cau Giay

4- Ha Dong 5- Mai Dich 6- Hue

7- Da Nang 8- Nha Trang 9- Dalat

10- Can Tho 11- Thu Duc 12- Ho Chi Minh

13- Nha Be 14- An Lac

Group 4: The following cities, towns, and townships.

1- Dong Anh 2- Soc Son 3- Bac Ninh

4- Hai Duong 5- Do Son 6- Ha Long

7- Nam Dinh 8- Ninh Binh 9- Thanh Hoa

10- Sam Son 11- Qui Nhon 12- Long Xuyen

13- Buon Ma Thuot 14- Thu Dau Mot 15- Tay Ninh

16- Vinh Long 17- Soc Trang 18- My Tho

Group 5: The following cities, towns, and townships.

1. Son Tay 2. Thai Nguyen 3. Viet Tri

4. Vinh Yen 5. Phu Tho 6. Hoa Binh

7. Bac Giang 8. Son La 9. Tuyen Quang

10. Lai Chau 11. Dien Bien 12. Lao Cai

13. Yen Bai 14. Ha Giang 15. Ha Nam

16. Hung Yen 17. Kien An 18. Thai Binh

19. Uong Bi 20. Bim Son 21. Tam Diep

22. Dong Ha 23. Hoi An 24. Dong Hoi

25. Vinh 26. Quang Ngai 27. Quang Tri

28. Tuy Hoa 29. Phan Rang 30. Phan Thiet

31. Rach Gia 32. Kon Tum 33. Chau Doc

34. Sa Dec 35. Bac Lieu 36. Cao Lanh

37. Tan An 38. Tra Vinh 39. Tam Ky

40. Ben Tre 41. Vinh An 42. Vien Thanh

43. Song Cong 44. Go Cong 45. Ha Tinh

46. All market towns of the remaining districts not mentioned in Groups 4 and 5.

ANNEX NO. 2

LIST OF LOCALITIES ENCOURAGED TO ATTRACT FOREIGN INVESTMENT

1- Quang Ninh 2- Bac Thai 3- Cao Bang

4- Lang Son 5- Lao Cai 6- Yen Bai

7- Ha Giang 8- Tuyen Quang 9- Son La

10- Lai Chau 11- Hoa Binh 12- Vinh Phu

13- Ha Bac 14- Thanh Hoa 15- Nghe An

16- Ha Tinh 17- Quang Tri 18- Quang Binh

19- Quang Ngai 20- Binh Dinh 21- Kon Tum

22- Gia Lai 23- Dak Lak 24- Lam Dong

25- Tay Ninh 26- Phu Yen 27- Ninh Thuan

28- Binh Thuan

APPLICATION FOR LAND LEASE PAYMENTS, WATER SURFACE LEASE PAYMENTS, AND SEA SURFACE LEASE PAYMENTS

ANNEX NO. 3

1- Name of the foreign-invested enterprise or foreign partner participating in business cooperation based on a contract:

4- Account number: Opened at bank

2- Address:

3- Investment license number, date:

5- Certificate of land use rights or lease contract number

Area Leased Date of Lease Price per Year Amount Due Notes

Part Declaration

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According to Contract Usage

Request the Tax Bureau to approve the payment schedule for land lease payments, water surface lease payments, and sea surface lease payments as follows:

VND

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Plot A

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Plot B

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First Period: On the date and month each year.

Second Period: On the date and month each year.

The enterprise hereby guarantees the accuracy of the information declared above and strictly adheres to the payment deadlines for land lease payments registered above./.

Director of the Enterprise

..., Date Month Year

Confirmation of the tax authority

Payment Schedule:

Deposited into account number:

Opened at the National Treasury

According to Chapter Section Category

According to Chapter type clause category

Head of the tax authority

(signature, stamp)