Why Vietnam?

Vietnam provides a vibrant backdrop for real estate investment as a dynamic and rapidly developing nation. The potential for Vietnam real estate appreciation is bolstered by strong economic fundamentals such as rising GDP, growing population, and large - scale infrastructure improvements. The key cities in Vietnam are Ho Chi Minh City, Hanoi and Danang.

New Residential Housing Law

  Who?

• Before: Foreigners who are WORKING in Vietnam for at least ONE year and meet other criteria
• After Jul 2015: Foreign individuals who are permitted to enter to Vietnam

Properties:

• Before: Only apartment
• After Jul 2015:

   Residential properties (apartments and landed houses)

  30% of total units in one apartment development

10% of total landed project (villas and houses) in a landed project

or 250 landed property units in one administrative ward

Duration:

• Before: 50 years only, no extension
• After Jul 2015: 50 years and can be extended, subject to the authority’s approval

Purpose:

• Before: Self-occupation/ Self-use
• After Jul 2015: Occupying, sale, lease, inheritance, mortgage, donation

 What are the taxes involved?

A foreigner may either directly or authorize a third party (by power of attorney) to declare and pay Tax at a District level tax bureau at the District where the property is located.

 Purchase:

• VALUE ADDED TAX (VAT): 10% VAT is taxed on any sale of property by local or foreigners.
• ADMINISTRATION FEE: A minimal administration fee is to be granted an ownership certificate at the current regulation.
• REGISTRATION TAX FOR OWNERSHIP: 0.5% registration tax for obtaining the house ownership certificate on the apartment value.
• MAINTENANCE FEE/SINKING FUND: The “maintenance fee”, commonly referred to as “sinking fund”, is a fund contributed by buyers of a development to maintain commonly owned areas of the development. It is used for major capital expenditures in the common area of the building and overhauls of commonly owned areas in order to preserve quality. Currently the sinking fund is 2% of the house/apartment price before VAT.

 Resale:

• PERSONAL INCOME TAX: If personal income is earned through the assignment or resale of apartments or houses, a 2% personal income tax has to be paid on the transacted value.

 Lease:

• PERSONAL INCOME TAX: If personal income is earned through rental of house/apartment, 5% VAT and 5% PIT has to be paid on revenue. For rental income exceeding VND 100 million per year, a business license tax of VND 1,000,000 per year applies.

How do buyers make payment?

Foreign investors are recommended to set up a local bank account to transfer payments for their apartment to the Developer’s bank account. Below are some international banks with branches in Vietnam:

• HSBC
• Standard Chartered
• Citi Bank
• ANZ

What are the payment schemes?

Generally, for projects under construction, the payment scheme is decided by developers and agreed with purchasers. Housing laws limit the maximum collection before handover to be up to 70% for local Vietnamese developers, and up to 50% for foreign developers. The law also stipulates that 5% is to be collected upon issuance of the pink book. A default interest shall be applied as agreed in the SPA (commonly the default interest rate is at 1.5% per month of the late amount). If this violation exceeds the time given in the SPA, the developer has the right to unilaterally terminate the SPA and forfeit an amount. At a common practice, the forfeiture amount is roughly 20% to 30% of the apartment selling price.

What is the handover process?

Upon the completion of the building, the developer shall serve a Handover Notice to the buyer to indicate the date of handover for the units and the outstanding amount to be paid before taking over the units. The buyer pays the outstanding amount as per the Handover Notice. On the handover date, the buyer will check the unit and take over the units by signing the Minutes of Handover. The buyer will also sign the application for a pink book, electricity, water, and telephone contracts with supplier at the handover date.

How do buyers find a tenant?

The owner can appoint Savills Vietnam to help lease out or resale their unit.

How do buyers collect rental income?

The method of collecting rental income is a commercial decision agreeable by the landlord and tenant. Typically, the landlord will request 2 months of deposit. The landlord retains the right to instruct the management of the building to cut off water and electricity provision to the unit if the lessee fails to pay rent.