Decision No. 179/1998/QÐ-BTC on the issuance of the Regulations on land rent, water surface, and sea surface applicable to foreign investment projects in Vietnam.

MINISTRY OF FINANCE ********	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ********
Number: 179/1998/QĐ-BTC	Hanoi, February 24, 1998

 

Pursuant to …;

REGARDING THE ISSUE OF THE REGULATIONS ON LAND RENT, WATER SURFACE RENT, AND SEA SURFACE RENT APPLICABLE TO FOREIGN INVESTMENT FORMS IN VIETNAM

THE MINISTER OF FINANCE

Pursuant to the Law on Foreign Investment in Vietnam dated November 12, 1996;
Pursuant to the Land Law dated July 14, 1993;
Pursuant to Decree No. 12/CP dated February 18, 1997 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam; and Decree No. 10/1998/NĐ-CP dated January 23, 1998 of the Government regarding certain measures to encourage and ensure foreign direct investment activities in Vietnam.

Pursuant to …;

Article 1.

The attached Decision hereby promulgates the Regulations on land rent, water surface rent, and sea surface rent applicable to foreign investment forms in Vietnam.

Article 2.

This Decision shall take effect fifteen days from the date of signature and shall replace Decision No. 1417 TC/TCĐN dated December 31, 1994 of the Minister of Finance.

Article 3.

Ministers of Ministries, Heads of ministerial-level agencies and agencies under the Government, Chairmen of Provincial People's Committees directly under the Central Government shall, within their respective functions, duties, and authorities, be responsible for directing relevant units to implement this Decision.

 

Pham Van Trong (Signed)

 

REGULATIONS

ON LAND RENT, WATER SURFACE RENT, AND SEA SURFACE RENT APPLICABLE TO FOREIGN INVESTMENT FORMS IN VIETNAM
(Attached to Decision No. 179/1998/QĐ-BTC dated February 24, 1998 of the Minister of Finance)

Article 1.-

Subjects required to pay land rent, water surface rent, and sea surface rent.

Joint ventures, wholly foreign-owned enterprises, and parties participating in business cooperation contracts (hereinafter referred to as foreign-invested enterprises) that are leased land, water surfaces, and sea surfaces (collectively referred to as land lease) by the Socialist Republic of Vietnam for use in implementing projects must pay land rent according to these Regulations.

Article 2.-

Subjects not required to pay land rent.

1. Joint ventures and foreign parties are not required to pay land rent in the following cases:

- Joint ventures where the Vietnamese party contributes capital through land rent;

- Business cooperation contracts under the form of profit sharing, where land rent has been included in the share of profit allocated to the Vietnamese party.

2. The Vietnamese party participating in joint ventures and business cooperation contracts as stipulated in Clause 1 of this Article shall be responsible for paying land rent in accordance with this Decision.

Article 3.-

The rental rates for land, water surfaces, and sea surfaces are defined as follows:

1. Urban land:

1.1. Urban land refers to land within cities, towns, and townships as specified in Article 55 of the Land Law. The rental rate for urban land is defined as follows:

Unit of measurement: USD/m2/year

Urban group	Minimum price level	Maximum price level
Group 1:	1,00	12,00
Group 2:	0,80	9,60
Group 3:	0,60	7,20
Group 4:	0,35	4,20
Group 5:	0,18	2,16

List of urban groups as per Appendix No. 1 attached.

1.2. For urban areas located in mountainous regions, remote areas, and economically disadvantaged areas, the rental rate is determined at 80% of the level prescribed in Clause 1.1 of this Article; specifically, for market towns in these areas, the rental rate is determined at 50% of the level prescribed in Clause 1.1 of this Article.

1.3. The rental rate for urban land is determined as follows:

Land tax rate		Minimum price level prescribed		Coefficient		Coefficient		Coefficient
1 year	=	for each urban group	x	location	x	infrastructure	x	Environment
(USD/m2/year)		(USD/m2/year)				structure		industry

The coefficients are determined as follows:

a. Location coefficient (location):

- Location 1 has a coefficient of 3: applied to plots of land, parcels of land (hereinafter collectively referred to as plots of land) facing main streets of the city, traffic hubs within the city, very favorable for production, business, service, tourism, living activities, with the highest potential for profit and the highest actual land prices;

- Location 2 has a coefficient of 2.5: applied to plots of land not facing main streets but adjacent to other streets or alleys directly connected to main streets, favorable for production, business, service, tourism, living activities, with lower potential for profit than Location 1, having lower actual land prices than Location 1;

- Location 3 has a coefficient of 2: applied to plots of land not facing streets, relatively favorable for production, business, service, tourism, living activities, with lower potential for profit than Location 2, having lower actual land prices than Location 2;

- Location 4 has a coefficient of 1: applied to plots of land not facing any streets or alleys, less favorable for production, business, service, tourism, living activities, with the lowest land prices in the city.

Based on the above provisions, depending on the characteristics of each city, when determining the rental rate for plots of land with standards between two locations, the coefficient within the range between the two locations may be applied.

b. Infrastructure coefficient:

- Coefficient 2 applies to plots of land meeting all of the following conditions:

+ Convenient transportation;

+ Proximity to power supply facilities capable of meeting project needs;

+ Availability of water supply systems near the project perimeter usable for the project.

- Coefficient 1.7 applies to plots of land lacking one of the above conditions.

- Coefficient 1.4 applies to plots of land lacking two of the above conditions.

- Coefficient 1 applies to plots of land lacking all three of the above conditions.

c. Industry coefficient:

- Group 1 has a coefficient of 1: applied to industries such as electricity generation and distribution, water supply and drainage, mining, metallurgy, machinery and equipment manufacturing, chemical basic products, fertilizers, pesticides, oil refining, natural gas, oil pipelines, gas pipelines, processing of agricultural, forestry, fishery products, agriculture, forestry, fisheries production, medical examination and treatment, schools, pharmaceuticals, medical equipment and supplies, sports, environmental pollution control and waste management, construction of bridges and roads, infrastructure development, housing construction for sale or lease, industrial zones, export processing zones, high-tech zones, and production facilities using advanced technology;

- Group 2 has a coefficient of 1.5: applied to other industries not covered by Groups 1 and 3;

- Group 3 has a coefficient of 2: applied to industries such as trade and tourism, hotels, restaurants, financial leasing, consulting, brokerage, real estate trading (excluding infrastructure development, housing construction for sale or lease), finance, banking, insurance, auditing.

In cases where a project operates across multiple industries with different coefficients, the rental price for land shall be determined based on the area of land allocated to each industry, calculating the rental price for each industry separately to establish the overall rental price for land; If it is not possible to determine the land allocated to each industry, then the coefficient for the main business industry of the project shall apply to the entire leased land area of the project.

1.4. For newly established districts and wards formed from rural areas outside urban centers, within ten years from the year of establishment decision, the rental price for land shall be applied according to the rental price of urban areas with lower rental prices as follows:

- Urban group 1, the minimum rental price for land shall not be lower than the minimum rental price for land of urban group 3;

- Urban group 2, the minimum rental price for land shall not be lower than the minimum rental price of urban group 4;

- Urban group 3, the minimum rental price for land shall not be lower than the minimum rental price of urban group 5;

- For urban groups 4 and 5, the minimum rental price for land shall be fifty percent of the prescribed rental price for those urban areas.

2. Non-urban land:

Non-urban land refers to land that does not fall under the scope defined in Clause 1 of this Article, the rental price for land is regulated as follows:

2.1. For residential land, specialized land, agricultural land, forestry land, aquaculture land, unused land (with potential for agricultural, forestry, or aquaculture production).

a. For land of communes adjacent to inner urban areas:

Unit of measurement: USD/m2/year

Type of commune	Minimum price level	Maximum price level
1. Commune with one side adjacent to inner urban group 1:	0,18	1,08
2. Commune with one side adjacent to inner urban group 2:	0,10	0,60

b. The remaining areas:

Unit of measurement: USD/m2/year

Type of commune	Minimum price level	Maximum price level
Delta	0,060	0,360
Midland	0,045	0,270
Mountainous	0,020	0,120

The rental price for non-urban land shall be determined as follows:

Land tax rate		Minimum price level prescribed		Coefficient		Coefficient		Coefficient
1 year	=	for each type of commune	x	location	x	infrastructure	x	Environment
(USD/m2/year)		(USD/m2/year)				structure		industry

The coefficients are defined as follows:

Location coefficient (location):

+ Location 1 has a coefficient of 3: applicable to plots of land having at least one side adjacent to urban areas, traffic hubs, along major traffic routes, adjacent to industrial zones, commercial zones, tourist zones, favorable for production, business, service, tourism activities, living, and with the highest profit potential, and the highest actual land price;

+ Location 2 has a coefficient of 2.5: applicable to plots of land adjacent to plots of land in location 1, relatively favorable for production, business, service, tourism activities, living, and with lower profit potential compared to plots in location 1, with an average actual land price lower than the average actual land price of location 1;

+ Location 3 has a coefficient of 2: applicable to plots of land not belonging to locations 1, 2, and 4;

+ Location 4 has a coefficient of 1: applicable to plots of land far from traffic routes, less favorable for production, business, service, tourism activities, and living, with the lowest average actual land price.

For plots of land whose criteria lie between two locations, the coefficient within the range between the two locations shall be applied.

Infrastructure coefficient:

- Coefficient 2 applies to plots of land meeting all of the following conditions:

+ Convenient transportation;

+ There is an electricity facility nearby that can meet the project's needs;

+ There is a water supply system near the perimeter of the construction site that can be used for the project.

- A coefficient of 1.5 applies to plots of land lacking one to two conditions among the above conditions.

- Coefficient 1 applies to plots of land lacking all three of the above conditions.

Industry coefficient: uniformly applied to all industries is 1.

2.2. For land that is not urban, currently not residential land, not specialized land, but currently cannot be used for agricultural, forestry, or aquaculture production, the rental price for land shall be calculated from 100 to 600 USD/ha/year, and the specific price for each project shall be determined according to the provisions of Clause 2.1 of this Article. Specifically, for land in rocky mountainous areas, barren hills, poor quality land difficult to use; if used for projects that are not industrial production, services, tourism, or commerce, the rental price for land shall be calculated from 30 to 100 USD/ha/year;

The specific price for each project shall be decided by the competent authority granting investment permission.

2.3. In cases where land is used for agricultural, forestry, or aquaculture production projects, the rental price for land shall be calculated at fifty percent of the price specified in Clauses 1 and 2 of this Article.

3. Rent for water surface and sea surface.

3.1. River, lake, bay water surfaces have a rental price ranging from 75 to 525 USD/ha/year.

Specifically, for architectural structures built on water surfaces within urban areas, the rental price shall be applied as for urban land as stipulated in Clause 1 of this Article.

3.2. Sea surface has a rental price ranging from 150 to 600 USD/km2/year. For cases where the rented area is not fixed, the rental price shall be from 1,500 to 7,500 USD/year.

4. For the following projects, the rent for land shall be calculated based on the minimum price set for each type of land:

- Projects that do not use ground surface (do not affect ground surface production activities), but use space above the ground surface (excluding aviation activities), such as building overpasses, conveyor belts, and similar cases;

- Surveying, exploration, and mining projects that regularly use land.

5. The following cases do not require payment of rent for land:

- Surveying, exploration of mineral resources, construction of underground works without affecting the current land use status of organizations or individuals using the land; however, compensation for damages caused by the project must be provided according to the Minerals Law;

- Underground mining activities that do not use surface land; if damage occurs, compensation must be provided according to the Minerals Law.

Article 4.-

Organizations and individuals leasing land, in addition to paying rent for land according to the rental price stipulated in this Regulation, must also pay the full cost of compensation for land and property attached to the land of the person whose land is being reclaimed for their own lease according to Vietnamese law.

Article 5.-

The rental price for land for each project shall be stable for at least five years. When increased, the increase shall not exceed fifteen percent of the previous regulation level, if the project has not reached five years since the last rental price determination, the current rental price shall still be applied until five years have passed before recalculating according to the new price.

The adjustment of rental price increases shall not apply to the following cases:

1. Paying once upfront for the entire duration of the project's operation, where the rental price or advance rent payment has already been determined at the time of adjustment.

2. Advance payment of land rent for multiple years at the beginning of each lease term, where during such term there is an adjustment to increase the land rent.

3. The Vietnamese party is permitted by the State to contribute land rent towards joint venture capital or participate in business cooperation contracts with foreign organizations or individuals, provided that the unit price of land rent has been finalized at the time of adjustment.

Article 6.-

Authority to determine land tax value

Based on this Regulation, upon the proposal of the Director of the Department of Finance, the People's Committees of provinces and centrally governed cities:

- Shall decide on the unit price of land rent for projects for which they issue investment permits;

- Shall submit written proposals regarding the unit price of land rent for projects under the investment permit authority of the Ministry of Planning and Investment or agencies authorized by the Ministry of Planning and Investment to issue investment permits; In this case, the Ministry of Planning and Investment or the agency authorized by the Ministry of Planning and Investment shall decide on the land rent price;

The Ministry of Finance shall only provide comments on determining the unit price of land rent in cases where the Ministry of Planning and Investment, agencies authorized by the Ministry of Planning and Investment, or provincial People's Committees request it.

Article 7.-

Time for calculating land rent.

The time for calculating land rent is the time when the enterprise receives the land for use. If the land has not yet been handed over but the enterprise has already used it, then the time for calculating land rent starts from the time the enterprise uses the land.

Article 8.-

Exemption and reduction of land rent.

The exemption and reduction of land rent shall be implemented as follows:

1. Projects invested according to the Build-Operate-Transfer (BOT), Build-Transfer-Operate (BTO), or Build-Transfer (BT) regulations shall be exempted or reduced from land rent in accordance with the provisions of the Government.

2. Projects investing in infrastructure development in industrial zones, export processing zones, high-tech parks shall have their land rent reduced by twenty percent.

3. During the construction period, projects constructing bridges, roads, airports, ports, power plants, planting forests, long-term industrial crops, and perennial fruit trees not falling within the scope of projects stipulated in Clause 1 of this Article shall be exempted from paying land rent, while other projects shall have their land rent reduced by fifty percent. In cases where a project includes several independent construction items or phases, the construction period shall be calculated based on the item with the largest proportion of investment capital.

Specifically, for forest planting projects, during the operation period, land rent shall be further reduced by ninety percent.

4. In cases where advance payment of land rent is made once for multiple years at the beginning of the first year, the reduction of land rent shall be as follows:

- Payment for five years shall result in a five percent reduction of the total land rent for those five years; payment for more than five years shall result in an additional one percent reduction for each additional year, but the total reduction shall not exceed twenty-five percent of the total land rent payable during that period;

- In cases where land rent is paid for the entire lease period exceeding thirty (30) years, a thirty percent reduction of the total land rent payable shall apply.

5. Implementation of reductions and exemptions of land rent pursuant to this Decision shall only be applicable to projects granted investment permits from the date this decision comes into effect.

Article 9.-

Provisions on payment of land rent.

1. Payment of land rent shall be carried out as follows:

1.1. Enterprises must submit the declaration form for land rent payment (Annex No. 2) and related documents to the land rent collection agency no later than one month from the date of calculation of land rent as stipulated in Article 7 of this Regulation.

1.2. The basis for calculating land rent is the leased land area, lease term, and rental rate. Among these:

- The land area for rent calculation is the actual area handed over; - The lease term is the term recorded in the land lease decision issued by the competent state agency;

- The rental rate is determined by the decision of the competent state agency as stipulated in Article 6 of this Regulation.

1.3. Land rent is calculated annually. For the first and last years of the lease term, it is calculated based on the actual months of use in the year.

1.4. Land rent for each year shall be paid in two installments, each installment being fifty percent of the annual rent due, and shall be paid no later than June 30 and December 31 of each year.

1.5. Land rent may be paid in US dollars (USD) or Vietnamese dong (VND); If paid in Vietnamese dong, it shall be converted to US dollars (USD) based on the average exchange rate for foreign currency transactions published by the State Bank of Vietnam at the time of payment.

1.6. Land rent shall be deposited into the State Budget at the State Treasury designated by the collection agency and in accordance with the current State Budget Classification. In cases of overpayment, the excess amount shall be deducted from the land rent payable in the next period; if there is no subsequent period, the State Budget shall refund the excess amount.

2. Foreign organizations and individuals cooperating with Vietnamese organizations to lease land from the State for housing construction shall pay land rent until the end of the lease term. Organizations and individuals purchasing houses shall bear the responsibility for paying land use fees in accordance with Vietnamese law.

Article 10.-

Land rent for certain special cases.

1. Vietnamese organizations and individuals permitted by the State to use the value of land use rights to contribute to joint ventures or business cooperation contracts with foreign organizations or individuals shall agree on the value of land use rights, but it shall not be lower than the land rent calculated based on the rental rate specified in this Regulation.

2. In special cases involving urban central land with exceptional profit potential and commercial advantages, if agreement can be reached with foreign parties and approved by the investment permit issuing authority, the rental rate may be set higher than the rental rate for that city specified in this Regulation.

Article 11.-

Provisions on handling violations; rewards and complaints resolution.

1. Violation Handling

- Violations of registration, declaration, and payment of land rent, water surface, and sea surface shall be penalized in accordance with Decree No. 22/CP dated April 17, 1996 of the Government on administrative penalties in the field of taxation;

- Failure to pay land rent on time shall result in a daily fine of 0.2% of the overdue amount.

2. Complaints:

A business has the right to appeal issues related to land rent payments (excluding issues related to determining the leased land area) with the authority that decides the land rental price.

In case of disagreement with the decision of the People's Committee or the competent investment permit issuing authority, there is the right to appeal to the Ministry of Finance. The agency receiving the appeal must be responsible for resolving it within thirty days from the date of receipt of the appeal; in complex cases, the maximum resolution period shall not exceed forty-five days.

3. Organizations and individuals who take advantage of their positions or powers to misappropriate or cause loss of land rent payments must compensate the full amount of the misappropriated or lost funds, and depending on the level of violation, they may be subject to disciplinary action, administrative penalties, or criminal liability according to the provisions of the law.

4. Individuals who have made significant contributions in detecting violations stipulated in this Regulation shall be rewarded according to the general regulations of the State.

Article 12.-

Implementation clause.

1. Foreign-invested enterprises and parties involved in joint venture contracts are responsible for strictly implementing this Regulation.

2. The General Department of Taxation is responsible for directing local tax bureaus to collect land rents according to this Regulation.

3. Provincial Departments of Finance under central cities directly under the Central Government are responsible for:

- Determining the unit price of land rent to submit to the provincial People's Committee for decision or to have the provincial People's Committee submit to the competent state authority for decision; - Regularly reporting the unit price of land rent for projects that have been granted investment permits in the locality to the Ministry of Finance.

4. The State Asset Management Agency is responsible for coordinating with relevant units to guide and determine land rent and unit prices when requested by sectors or localities for specific projects; inspecting the implementation of this Decision.

5. This provision only applies to projects licensed from the effective date of this Regulation. For cases where the unit price of land rent has been decided by the competent state authority according to the provisions of previous regulatory documents before the effective date of this Regulation, they shall be implemented according to those documents.

In cases where the land rent prices of projects specified before this Regulation are excessively unreasonable, upon proposal by the provincial People's Committee, the Ministry of Finance may consider adjusting them.

6. Any difficulties encountered during implementation should be reported to the Ministry of Finance for study and resolution.

APPENDIX 1

LIST OF URBAN AREAS CLASSIFIED BY GROUPS

Group 1: Inner city of Hanoi, Ho Chi Minh City.

Group 2: Inner city of the following cities: Vung Tau, Bien Hoa, Hai Phong.

Group 3: Inner city, town, and township of the following:

1. Gia Lam 5. Duc Giang 9. Nha Be

2. Van Dien (Thanh Tri) 6. Hue 10. Hoc Mon

3. Cau Dien (Tu Liem) 7. Da Nang 11. Binh Chanh

4. Ha Dong 8. Nha Trang 12. Thu Duc

Group 4: Inner city, town, and township of the following:

1. Dong Anh 2. Yen Vien 3. Soc Son

4. Bac Ninh 5. Hai Duong 6. Do Son

7. Ha Long 8. Nam Dinh 9. Ninh Binh

10. Phu Ly 11. Phuc Yen 12. Viet Tri

13. Vinh 14. Qui Nhon 15. Thanh Hoa

16. Tan An 17. Can Tho 18. Thu Dau Mot

19. Da Lat 20. Ba Ria 21. My Tho.

Group 5: Remaining inner cities, towns, and townships.

ANNEX NO. 2

APPLICATION FOR PAYMENT OF LAND RENT, WATER SURFACE RENT, AND COASTAL AREA RENT

1- Name of enterprise:

2- Address:

3- Investment license number, date:

4. Account number: Open at Bank:

5- Date of Land Lease Decision:

Part Declaration	Leased land area (m2)	Date of commencement for land rent payment	Unit price of land rent (USD/m2/year)	Amount to be paid in 199... (USD)	Remarks
Plot A
Plot B
Plot...
(*) The basis for budgeting expenses is based on the current regulations of the Ministry of Finance regarding travel expenses for civil servants and employees of the State going on short-term business trips abroad funded by the state budget.

First period: on the... day of... every year...

Second period: on the... day of... every year...

The enterprise commits to ensuring the accuracy of the declared data above and strictly adhering to the deadlines for land rent payments accepted by the tax authority.

..., day..., month..., year...

Enterprise director

Opinion of the Tax Authority