Decree No. 71/2001/NĐ-CP on Investment Incentives for Building Housing for Sale and Rent

DECREE OF THE GOVERNMENT

Regarding investment incentives for constructing housing for sale and rental

THE GOVERNMENT

Pursuant to the Government Organization Law dated September 30, 1992;

Based on the Land Law dated July 14, 1993; the Law Amending and Supplementing Certain Articles of the Land Law dated December 2, 1998 and the Law Amending and Supplementing Certain Articles of the Land Law dated June 29, 2001;

Based on the Law on Foreign Investment in Vietnam dated November 12, 1996 and the Law Amending and Supplementing Certain Articles of the Law on Foreign Investment in Vietnam dated June 9, 2000;

Pursuant to the Law on Encouraging Domestic Investment (amended) dated May 20, 1998;

At the proposal of the Minister of Construction,

PART I

GENERAL PROVISIONS

Article 1. Scope of Application

This Decree stipulates certain policies to create favorable conditions and incentives for enterprises participating in projects to invest in constructing housing for sale and rental.

Article 2. Housing Projects Eligible for Favorable Conditions and Incentives

The following housing projects are eligible for favorable conditions and incentives (hereinafter referred to as incentivized housing projects):

1. High-rise residential projects (five floors or more in Hanoi and Ho Chi Minh City, three floors or more in other provinces and cities); with closed apartment structures, having common staircases and walkways (hereinafter referred to as high-rise apartment buildings).

2. Residential projects where at least 60% of the total land area designated for housing construction consists of high-rise apartment buildings.

Article 3. Enterprises Eligible for Favorable Conditions and Incentives

This Decree applies to enterprises belonging to various economic sectors that have registered to operate in housing according to the law, including:

1. Domestic enterprises comprising:

a) State-owned enterprises established and operating under the Law on State-Owned Enterprises;

b) Enterprises established and operating under the Enterprise Law;

c) Enterprises established and operating under the laws of political organizations, political-social organizations, professional associations, security and defense enterprises;

d) Cooperatives established and operating under the Law on Cooperatives;

e) Enterprises directly invested in Vietnam by overseas Vietnamese residents; enterprises directly invested in Vietnam by foreign residents living long-term in Vietnam; enterprises jointly established by Vietnamese citizens with overseas Vietnamese residents and foreign residents living long-term in Vietnam.

2. Foreign-invested enterprises under the Law on Foreign Investment in Vietnam.

Article 4. Forms of Selecting Project Investors

The form of selecting investors for housing projects eligible for favorable conditions and investment incentives shall be carried out as follows:

1. Selecting domestic investors (hereinafter collectively referred to as project investors):

a) Investors of projects decided by the People's Committee of the province or centrally-administered city (hereinafter collectively referred to as provincial People's Committee) where the project is located;

b) In cases where two or more investors register to become project investors, the provincial People's Committee shall select the project investor in accordance with the tendering regulations.

2. The selection of foreign investors participating in the construction of housing eligible for favorable conditions and investment incentives shall be carried out in accordance with the laws on foreign investment in Vietnam.

Article 5. Sale and Rental of Housing in Projects Eligible for Favorable Conditions and Incentives

1. Apartments in incentivized high-rise apartment buildings shall be prioritized for sale and rental to individuals facing housing difficulties as follows:

a) Individuals receiving salaries from the state budget;

b) Cadres, workers, and staff working in enterprises belonging to various economic sectors;

c) Students of universities and colleges.

2. Other types of housing within the scope of the project (if any), investors may sell and rent to all individuals with housing needs as follows:

a) Sell and rent to Vietnamese citizens residing in Vietnam;

b) Rent to overseas Vietnamese residents and foreigners residing in Vietnam.

The purchase of housing by overseas Vietnamese residents shall be carried out in accordance with separate government regulations.

Article 6. Sale price and rental price for housing in subsidized housing projects

1. The sale price and rental price for high-rise apartment units in subsidized housing projects shall be determined by the project investor on the principle of capital preservation, without including in the sale price and rental price of such apartments any subsidies that the project investor has received according to this Decree.

2. The sale price and rental price for other types of housing (excluding high-rise apartment units) within the scope of the project (if any) shall be agreed upon by the parties.

PART II

CREATE CONDITIONS AND SUBSIDIES FOR DOMESTIC ENTERPRISES

Article 7. Creating conditions for procedures investment and construction

The project investor shall be provided with favorable conditions regarding investment and construction procedures as follows:

1. Based on the urban planning, land use plans for housing development announced by competent state agencies and their own investment capacity, enterprises wishing to register with the provincial People's Committee to become the project investor or participate in bidding to become the project investor for subsidized housing projects shall do so. Within 10 working days from the date of receipt of the dossier as mentioned in Sub-clause b, Clause 1, Article 3 above, the Ministry of Foreign Affairs will review and submit to the competent authority for decision (Issues exceeding the Ministry of Foreign Affairs' jurisdiction will be referred to the Prime Minister for consideration and decision).Provincial People's Committees shall accept domestic enterprises that wish to become project investors or participate in bidding to become project investors for subsidized housing projects under favorable conditions and subsidies.

2. For areas where general and detailed planning have been approved by competent state agencies, the project investor for subsidized housing projects only needs to prepare a feasibility study report. In cases where there is general planning but no detailed planning approved by the competent authority, the investor may prepare detailed planning concurrently with the feasibility study report. The cost of preparing detailed planning shall be included in the total investment cost of the project.

3. Based on the planning already approved by the competent authority and the housing development program of each locality, the Chairman of the provincial People's Committee shall decide on investment and approve the technical design and overall budget estimates for subsidized housing projects within the scope of the area after receiving a review document from the specialized agency under its jurisdiction.

Construction works and components within the scope of subsidized housing projects that have been technically designed and approved by the competent state agency shall be exempted from obtaining a Construction Permit.

Article 8. Creating conditions for compensation and land clearance

The project investor shall be provided with favorable conditions for compensation and land clearance as follows:

1. The project investor shall determine the compensation and land clearance plan, resettlement land fund, and submit it to the provincial People's Committee for approval. In case it is necessary to ensure the progress of the project, the investor may supplement relocation support costs, but must ensure the economic efficiency of the project. This additional support cost shall not be included in the land damage compensation costs to be deducted from the land use fee payable under Clause 2 of this Article and other payments to the State budget (if any).

2. If the project investor is assigned land and must pay the land use fee and compensate for land damage, the land use fee payable shall be fully deducted from the land damage compensation costs of the project, but shall not exceed the total land use fee that the investor must pay. In cases where domestic enterprises face difficulties in capital, the State shall provide favorable conditions for them to borrow funds to implement compensation and land clearance.

3. The project investor shall take the lead and coordinate with local People's Committees to unify the compensation plan, funding, land clearance schedule, and settlement of accounts for land clearance work. Within 10 working days from the date of receipt of the dossier as mentioned in Sub-clause b, Clause 1, Article 3 above, the Ministry of Foreign Affairs will review and submit to the competent authority for decision (Issues exceeding the Ministry of Foreign Affairs' jurisdiction will be referred to the Prime Minister for consideration and decision).Local People's Committees shall have the responsibility to cooperate in organizing compensation and land clearance according to the schedule and hand over the cleared land to the construction contractor. Within 10 working days from the date of receipt of the dossier as mentioned in Sub-clause b, Clause 1, Article 3 above, the Ministry of Foreign Affairs will review and submit to the competent authority for decision (Issues exceeding the Ministry of Foreign Affairs' jurisdiction will be referred to the Prime Minister for consideration and decision).Local People's Committees shall have the responsibility to cooperate in organizing compensation and land clearance according to the schedule and hand over the cleared land to the construction contractor.

Article 9. Creating Conditions for Tendering and Acceptance of Construction Contracts

The project investor shall be provided with conditions for tendering and acceptance of construction contracts as follows:

1. The bidding plan and results of construction installation tenders for housing projects as stipulated in Article 2 of this Decree shall be reviewed and approved by the competent authority or the authorized body in accordance with the Bidding Regulations. The project investor may prepare a bidding plan to submit for approval simultaneously with the feasibility study report.

2. The project investor is permitted to undertake construction themselves or select a construction contractor (without bidding) for works, parts of works, or packages using more than 50% of their own legitimate investment capital (self-owned capital, advance funding from organizations or individuals).

Article 10. Creating Conditions for Mobilizing Investment Capital

The project investor shall be provided with conditions for mobilizing investment capital as follows:

1. They may mobilize advance funding from organizations and individuals with housing needs; borrow funds from credit institutions and apply other lawful methods of raising capital as prescribed by law.

2. They may be considered by the State for loans from the Development Support Fund or guaranteed investment credit according to Decree No. 43/1999/NĐ-CP dated June 29, 1999 of the Government, or borrow from the Housing Development Fund or Urban Development Fund.

Article 11. Creating Conditions for Investing in Infrastructure Projects

Project investors shall be provided with conditions for investing in infrastructure projects as follows:

1. The State invests from the budget to construct:

a) Infrastructure technical works (roads, electricity, water supply and drainage) outside the project area connecting to the common regional infrastructure system;

b) National or provincial-level infrastructure technical works within the project area;

c) Certain essential social infrastructure works within the project area (if applicable).

2. In cases where the state budget has not timely allocated sufficient investment capital for the works and components specified in Clause 1 of this Article according to the project schedule, the investor may use other legitimate sources of capital to invest in order to ensure the project operates on schedule. This capital will be deducted from land use fees or land rental fees and other amounts that the investor must pay to the budget as prescribed. If the pre-funded capital used by the investor to build infrastructure exceeds the amount payable to the budget, the difference between the pre-funded investment capital and the amount payable to the budget will be refunded from the state budget.

3. The infrastructure works and components funded from the state budget as specified in Clause 1 of this Article must be implemented in accordance with the legal provisions on investment management and construction.

Article 12. Housing Development Fund

1. Based on local housing development needs, conditions, and programs, the Chairman of the Provincial People's Committee may decide to establish a Housing Development Fund to mobilize various sources of capital to serve housing development in the locality as follows:

a) The Housing Development Fund is formed from the following sources: state budget (proceeds from the sale of state-owned housing, depreciation reserves extracted from rent of state-owned housing, land use fees, and other state budget sources if any); collected funds, deposits from individuals seeking to purchase housing, support funds, voluntary contributions from domestic and foreign organizations and individuals, and other lawful methods of raising capital as prescribed by law;

b) The Housing Development Fund operates under the principle of capital preservation and cost recovery as stipulated in the Charter promulgated by the Minister of Finance, after consultation with the Minister of Construction;

c) The Housing Development Fund may be used for the following purposes:

To lend at low interest rates to domestic enterprises specified in Clause 1 of Article 3 of this Decree for investment in preferential housing projects;

To lend at low interest rates to individuals receiving state budget salaries to purchase housing;

To lend to domestic enterprises under favorable credit terms for investment in housing projects.

2. The Ministry of Finance shall coordinate with the Ministry of Construction to guide the management and use of the Housing Development Funds of localities.

3. The Ministry of Construction shall coordinate with the Ministry of Planning and Investment and the Ministry of Finance to study proposals for establishing a National Housing Development Fund to be submitted to the Prime Minister for consideration and decision.

Article 13. Preferential treatment for land use fees, land rental fees, and land use taxes

The project investor shall enjoy preferential treatment for paying land use fees and land use taxes as follows:

1. Land use fee incentives:

a) Exemption from land use fees for the area used to construct high-rise apartment buildings;

b) A reduction of 50% on the land use fee for constructing non-high-rise apartment buildings within the scope of the project (if applicable);

c) Exemption from the land use fee for constructing various types of housing if the project is located in areas with difficult economic and social conditions or extremely difficult conditions (as specified in Category B or C of the annex accompanying Government Decree No. 51/1999/NĐ-CP dated July 8, 1999);

d) Permission to delay payment of the land use fee for the area of land that must be paid according to the construction progress of each project as decided by the provincial People's Committee, but the maximum period for delayed payment of the land use fee shall not exceed five years, starting from the date of land allocation.

2. Preferential treatment for land use tax:

The project investor shall be exempted from land use tax for three (three) years, starting from the date of land allocation for the area of land used to construct high-rise apartments.

Article 14. Corporate income tax rate

1. The project investor shall apply the corporate income tax rate as follows:

a) A tax rate of 15% for high-rise apartments and other types of housing in areas with extremely difficult economic and social conditions (as specified in Category C of the annex accompanying Government Decree No. 51/1999/NĐ-CP dated July 8, 1999);

b) A tax rate of 20% for high-rise apartments and other types of housing in areas with difficult economic and social conditions (as specified in Category B of the annex accompanying Government Decree No. 51/1999/NĐ-CP dated July 8, 1999);

c) A tax rate of 25% for high-rise apartments and other types of housing in other areas.

2. The Ministry of Finance shall be responsible for studying lower preferential tax rates for high-rise apartments to submit to the Government for consideration and decision.

CHAPTER III

CREATING CONDITIONS AND PREFERENCES FOR FOREIGN INVESTED ENTERPRISES TO PARTICIPATE IN HOUSING CONSTRUCTION FOR SALE AND RENT

FOREIGN INVESTED CAPITAL PARTICIPATING IN CONSTRUCTING HOUSING FOR SALE AND RENT

Article 15. Objectives participating in investment in housing construction for sale and rent

The State of Vietnam encourages foreign-invested enterprises (hereinafter referred to as investors) to participate in housing projects as stipulated in Article 2 of this Decree in cities as prescribed by Vietnamese laws on foreign investment.

Article 16. Creating favorable conditions for land

1. Investors participating in housing projects as stipulated in Article 2 of this Decree may lease land to implement the project in accordance with current laws on land.

2. In cases where the investor is a joint venture enterprise or parties to a business cooperation contract, and the Vietnamese party contributes capital through the value of land use rights granted by the State, the joint venture enterprise or parties to the contract may continue to use the land for investment in housing construction and operation.

Article 17. Preferential treatment for land rental fees

Investors participating in housing projects as stipulated in Article 2 of this Decree shall enjoy preferential treatment for land rental fees as follows:

1. Exemption from land rental fees for the area of land used to construct high-rise apartments throughout the duration of the lease.

2. Exemption from land rental fees for the first three (three) years, starting from the date of signing the land lease contract for the area of land that the investor must pay the rental fee (excluding the area for constructing high-rise apartments).

3. In cases where the project must temporarily halt construction or operations with the approval of the competent state authority for leasing land, the investor shall be entitled to a 50% reduction in land rental fees corresponding to the period of temporary halt.

4. In cases where the investor sells non-high-rise apartment housing, they must pay the land use fee (linked to the sold housing), but can deduct the land rental fees already paid by the investor.

The Ministry of Finance shall provide guidance on paying the land use fee when the investor sells housing as mentioned in this clause.

Article 18. Preferential treatment for corporate income taxInvestors participating in housing projects as stipulated in Article 2 of this Decree shall enjoy preferential treatment for corporate income tax as follows:

1. A tax rate of 10% for high-rise apartments and other types of housing in areas with extremely difficult economic and social conditions (as specified in Section A of the annex accompanying Government Decree No. 24/2000/NĐ-CP dated July 31, 2000).

2. A tax rate of 15% for high-rise apartments and other types of housing in areas with difficult economic and social conditions (as specified in Category B of the annex accompanying Government Decree No. 24/2000/NĐ-CP dated July 31, 2000).

3. A tax rate of 20% for high-rise apartments and other types of housing in other areas.

3. A tax rate of 20% applies to high-rise apartment buildings and other types of housing in the remaining areas.

Article 19. Resolution of Remaining Issues When the Investor's Investment Period Expires

1. Upon expiration of the investment period as stipulated in the Investment License, the investor shall be responsible for transferring the entire infrastructure system within the project area to the competent state agency of Vietnam without compensation, in accordance with the law.

2. In cases where the investor wishes to extend the investment period, they may apply for an extension of the investment time according to the provisions of the Law on Foreign Investment in Vietnam. If the investor does not apply for an extension, three (3) months from the end date of the investment period, Within 10 working days from the date of receipt of the dossier as mentioned in Sub-clause b, Clause 1, Article 3 above, the Ministry of Foreign Affairs will review and submit to the competent authority for decision (Issues exceeding the Ministry of Foreign Affairs' jurisdiction will be referred to the Prime Minister for consideration and decision).the provincial people's committee shall cooperate with the investor to resolve all remaining issues related to the project in accordance with Vietnamese law.

PART IV

IMPLEMENTING PROVISIONS

Article 20. Responsibilities of the Ministry of Construction

1. To take the lead and coordinate with the Ministry of Planning and Investment, the Ministry of Finance in guiding localities to develop programs and plans for housing projects that are facilitated and incentivized for investment, to be submitted to the Prime Minister for consideration and decision.

2. To coordinate with relevant ministries and sectors to inspect the implementation of this Decree; to guide Within 10 working days from the date of receipt of the dossier as mentioned in Sub-clause b, Clause 1, Article 3 above, the Ministry of Foreign Affairs will review and submit to the competent authority for decision (Issues exceeding the Ministry of Foreign Affairs' jurisdiction will be referred to the Prime Minister for consideration and decision).the provincial people's committees to summarize the implementation situation and promptly propose amendments and supplements to policies facilitating and incentivizing housing investment in accordance with Vietnamese law.

3. To study and promulgate technical standards and regulations related to housing design and construction; to research and apply new technologies and materials in the field of housing development to meet quality and progress requirements.

4. To study and promulgate the Management Regulations for High-Rise Apartment Buildings.

Article 21. Responsibilities of Relevant Ministries and Sectors

The Ministry of Planning and Investment, the Ministry of Finance, the General Department of Land Administration, the State Bank of Vietnam, and other relevant ministries and sectors within their respective functions and tasks, shall be responsible for directing and guiding the implementation of policies facilitating and incentivizing housing investment for sale and lease as prescribed in this Decree.

Article 22. Responsibilities of Provincial People's Committees

1. To direct subordinate agencies to develop five-year housing development programs and annual housing construction plans; land use plans and capital allocation plans for technical and social infrastructure projects in housing projects receiving incentives within the jurisdiction.

2. To announce urban planning and housing development plans and land use plans; to review and approve lists of housing development projects receiving facilitation and incentive investments at the local level for enterprises to register participation in investment; to examine and approve projects, technical designs, and total budgets for construction works in housing projects receiving facilitation and incentive investments by domestic enterprises within their authority.

3. To direct subordinate agencies to implement compensation and land clearance for housing projects receiving facilitation and incentive investments; to issue or recommend authorities with jurisdiction to amend and supplement facilitation and incentive policies for housing projects within the jurisdiction.

4. To specify eligible entities to purchase or rent apartments in high-rise residential buildings in housing projects receiving facilitation and incentive investments within the jurisdiction.

5. To organize inspections and audits regarding the content, progress of implementation of projects, methods of determining selling prices and rental prices for apartments in high-rise residential buildings in housing projects receiving facilitation and incentive investments within the jurisdiction; to handle violations (or recommend competent authorities to handle them) according to their authority.

6. To consider and resolve specific issues concerning housing projects that have been approved by competent authorities and are currently being implemented within the jurisdiction in accordance with the provisions of this Decree.

7. To direct the acceptance and management of housing projects after the developer has completed investment and business activities in accordance with the law.

Article 23. Effectiveness of Implementation

1. This Decree takes effect 15 days from the date of signature.

2. Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, Chairmen Within 10 working days from the date of receipt of the dossier as mentioned in Sub-clause b, Clause 1, Article 3 above, the Ministry of Foreign Affairs will review and submit to the competent authority for decision (Issues exceeding the Ministry of Foreign Affairs' jurisdiction will be referred to the Prime Minister for consideration and decision).The provincial and centrally-administered city people's committees are responsible for implementing this Decree./.