A Foreign Individual Owner’s Right To Residence In Vietnam

Owning rather than renting a residence has been a preferred option for foreigners since the Government allowed ownership on July 1, 2015. By “residence” we mean a house including an apartment, a condominium, a separate house like a villa or town-house with underlying land.

To begin with, a foreigner–an individual–is entitled to own a residence only in commercial housing projects. A foreigner may acquire a residence by purchasing it from the project developer or from another foreigner entitled to own the residence. A foreigner is not allowed to buy a residence from a Vietnamese individual, but a foreigner may inherit or be gifted a residence. There are limits on the number of units that a foreigner can own regardless of the method of acquisition. The number of apartments or condos is limited to 30% of the total number of apartments/condos in one apartment complex. The number of separate houses is up to 250 villas/town-houses with attached land.

Following are key issues to consider for a foreign individual who wants to own a residence.

1. Title document proving ownership of a residence

Title is evidenced by a form issued to a homeowner whether a Vietnamese citizen or a foreign individual. It is called the “Certificate of Land Use Rights, Ownership of Assets Attached to Land” (the “Certificate”). More simply it is called the “pink book” or “red book”.

Regarding the underlying land, and by way of background, land in Vietnam is owned by the State. Individuals and organizations (both Vietnamese and foreign) only have the right to use the underlying land. They do not own it. “Ownership” of a residence means both “to own the residence” and “to have the right to use the land on which the residence is built”. A Certificate recognizes the ownership of the residence and, separately, the right to use the land on which it is built.

2. Term of ownership

A Vietnamese owner is entitled to own a residence including the underlying land without time-limit, whereas a foreign individual owner is entitled to own a residence and the right to use the underlying land for not more than 50 years from the date of the Certificate. A foreigner can extend the term one time and for up to an additional 50 years upon request. Prior to expiration of the 50-year ownership term, a foreigner may sell or gift his/her residence to a Vietnamese or to another foreigner eligible to own a residence. The new foreign individual buyer’s term of ownership is also 50 years. At the end of the second 50-year term, the residence and the right to use the underlying land will revert to the State.

However, the limit of 50-years does not apply to a foreigner married to a Vietnamese who resides in Vietnam or if he or she is married to an overseas Vietnamese permitted to enter Vietnam. Such married foreigner may own a residence and may exercise the same control over the underlying land in his/her own name, in the same way as a Vietnamese may exercise ownership and control. That is, the spouse may own it on a stable basis and without time-limit, just as a Vietnamese.

3. Common rights of the owner of a residence

Foreign owners, like Vietnamese owners, have the following rights in respect of their residence:

• the inviolability of domicile and residential ownership – that is, their property rights are the same as those of a Vietnamese and they have the sole right to own and to use the residence;

• to use their residence and the underlying land for residential purposes;

• to obtain a Certificate for the residence which gives the right to use the underlying land;

• to share public utilities. If the residence is an apartment/condo, the owner has the right to own, use common property of an apartment building and the common infrastructure of the apartment building and have the right to use the common underlying land;

• to maintain, renovate, demolish, construct and reconstruct the residence;

• to receive the State’s protection of ownership of the residence;

• to complain, denounce, file lawsuits against violation of their legal ownership of the residence; and

• to exercise their other legal rights.

4. Transactions involving residences

Foreign individual owners of residences are entitled to sell, lease, gift, bequeath, mortgage, and contribute the residence (together with the right to use the underlying land) as capital. There are some conditions:

• Foreign individual owners are entitled to mortgage their residences only with a credit institution licensed in Vietnam.

• Foreign individual owners are entitled to lease their residences, provided that beforehand, they send a written notice to inform the authorities of the existence of the lease.

• Limitations on sale: To repeat, the Housing Law allows foreign individuals to purchase and own residences for residential purposes and not for frequent investment — that is purchase and sale for business purposes (except for leases). The Law on Real Estate Business does not allow foreigners to conduct the real estate business — that is, to purchase residences for the purpose of resale. Therefore, although foreign individual owners have the right to sell their own residences to a Vietnamese or to another foreigner, in order for such sales not to be considered a prohibited real estate business activity under the Housing Law and the Law on Real Estate Business, a sale by a foreign individual owner may not exceed 300 billion VND (currently, US$11,280,000) per contract and the total sales must not number more than 10 transactions/contracts in a year. In reality, the annual limitations, if used to the full, could be considered a business rather than personal transactions, but such transactions are within the law and we believe there will be no consequences if one stays within the individual price limits and there are no more than 10 transactions per year.

• In both a sale and a lease of a residence and underlying real estate, the proceeds are taxable as ordinary income in the same way as such income is taxable to a Vietnamese citizen.

5. Conclusion

To engage in a transaction that involves their own residence, a foreign individual owner must implement one of the following steps: (i) execute a contract that reflects the contemplated transaction (such as a contract for sale and purchase of a residence, a contract to gift a residence, a will, etc.) before a Vietnamese notary; (ii) declare tax on the proceeds, and (iii) register the change of ownership with the land registration office. After fulfilling his tax obligations, a foreign individual owner may work with a credit institution to remit the net amount abroad.

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