Do Foreign-Invested Enterprises (FDI) have the right to lease land?

A foreign-invested economic organization (FDI enterprise) is an economic organization in which foreign investors are members or shareholders. When investing in Vietnam, FDI enterprises must have a headquarters or other facilities serving business purposes. This requires the enterprise to lease land in Vietnam. So, do foreign-invested enterprises (FDI) have the right to lease land? Below, Viet An Law will provide legal consultation to address this question.

Are Foreign-Invested Enterprises (FDI) considered land users under the Land Law?

According to Clause 46 Article 3 of the 2024 Land Law, a foreign-invested economic organization is an economic organization that must meet conditions and comply with investment procedures applicable to foreign investors under the Investment Law to implement a project that uses land.

Additionally, according to Article 4 of the 2024 Land Law regarding land users, one of the entities recognized as a land user is a foreign-invested economic organization.

Thus, foreign-invested enterprises (FDI) are considered land users under the 2024 Land Law.

Forms of Land Use Rights Acquisition for Foreign-Invested Enterprises

According to Article 28 of the 2024 Land Law on entities acquiring land use rights, foreign-invested enterprises can acquire land use rights through the following forms:

• Receiving land use rights transfers in industrial parks, industrial clusters, and high-tech zones;
• Receiving investment capital contributions in the form of land use rights value as regulated by the Government;
• Receiving capital contributions in the form of land use rights;
• Being allocated land by the State to implement housing investment projects for sale or combined sale and lease;
• Leasing land from the State;
• Acquiring land use rights through: successful dispute resolution recognized by competent People’s Committees, agreements in mortgage contracts for debt settlement, decisions or rulings of the Vietnam Commercial Arbitration,…

Do Foreign-Invested Enterprises (FDI) have the right to lease Land?

According to Point k Clause 1 Article 28 of the 2024 Land Law:

“Article 28. Acquisition of Land Use Rights 1. Entities acquiring land use rights are regulated as follows: _… Foreign-invested economic organizations and foreign organizations with diplomatic functions are entitled to lease land from the State; …”

Thus, under this provision, foreign-invested enterprises (FDI) have the right to lease land from the State. Accordingly, FDI enterprises may lease land either by paying rent in a lump sum or paying rent annually per Article 120 of the 2024 Land Law. Specifically:

Leasing land with a one-time payment

The State leases land with a one-time rental payment for the entire lease term in the following cases:

• Using land for agricultural, forestry, aquaculture, and salt production investment projects;
• Using land in industrial parks, industrial clusters, high-tech zones, worker accommodations in industrial parks; land used for public purposes with business objectives; using commercial and service land for tourism and office business activities;
• Using land for building social housing for lease according to housing laws.

Leasing land with annual payments

The State leases land with annual rental payments in the following cases:

• Cases not subject to one-time rental payment;
• Cases eligible for a one-time rental payment but opting for an annual rental payment.

Can Foreign-Invested Enterprises lease land from households and individuals?

According to Article 123 of the 2024 Land Law, the provincial People’s Committee has the authority to lease land to foreign-invested economic organizations. Thus, only the State has the right to lease land to FDI enterprises. FDI enterprises cannot directly lease land from households and individual land users.

If a foreign enterprise identifies a suitable land plot currently owned by an individual or household, it may still acquire the land by negotiating compensation with the existing land user, allowing the State to recover the land through voluntary return. The enterprise can then proceed with the necessary procedures to lease the land from the competent authority.

Conditions for Foreign-Invested Enterprises to lease land for investment projects

According to Clause 2 Article 122 of the 2024 Land Law, foreign-invested enterprises leasing land from the State for investment projects must meet the following conditions:

• Provide deposit or other guarantees as per investment laws;
• Demonstrate financial capacity to ensure land use according to the project’s schedule and other relevant legal conditions;
• Have no violations of land laws, or if violations exist, have fully complied with legally effective decisions or judgments at the time of the land allocation, lease, or land use conversion request. This applies to all land plots the enterprise uses nationwide.

Specifically, Clause 1 Article 43 of the 2020 Investment Law and Clause 1 Article 25 of Decree 31/2021/ND-CP require investors to provide a deposit or a bank guarantee for deposit obligations when applying for State land leases, except in the following cases:

• Investors winning land use rights auctions for projects where the State allocates land with payment or leases land with a one-time payment;
• Investors winning bids for projects involving land use;
• Investors receiving land allocation or lease through the transfer of an investment project that has already provided a deposit or completed capital contribution as per the investment approval document or Investment Registration Certificate;
• Investors leasing or receiving allocated land from the State based on land use rights transfer agreements with other land users, etc.

Depending on the scale, nature, and progress of each investment project, the deposit rate for investment project implementation ranges from 1% to 3% of the total investment capital, specifically:

• For capital up to VND 300 billion: 3% deposit;
• For capital over VND 300 billion to VND 1,000 billion: 2% deposit;
• For capital over VND 1,000 billion: 1% deposit.

Payment Methods for land rent by Foreign-Invested Enterprises

According to Article 30 of the 2024 Land Law, foreign-invested enterprises may choose their land rent payment method as follows:

• FDI enterprises currently leasing land with annual rent payments but eligible for one-time payment for the entire lease term may opt to switch to one-time payment for the remaining lease period, subject to re-determination of land rental rates at the time of conversion.
• FDI enterprises currently leasing land with a one-time payment for the entire lease term may opt to switch to annual rental payments.

Can Foreign-Invested Enterprises mortgage, contribute capital, or lease assets attached to leased land?

According to Clause 2, Article 41 of the 2024 Land Law, the rights of FDI enterprises to mortgage, contribute capital, or lease assets attached to leased land depend on the form of land lease:

For annual rental payments:

• Mortgage assets attached to land at licensed credit institutions in Vietnam;
• Contribute capital with assets attached to land within the lease term; the capital recipient may continue leasing the land for the remaining lease period under the original land use purpose;
• Sell assets attached to land along with lease rights in the lease contract;
• Lease assets attached to land along with lease rights in the lease contract.

For one-time rental payments:

• Transfer land use rights and assets attached to land within the land use term;
• Lease or sublease land use rights and assets attached to land within the land use term;
• Mortgage land use rights and assets attached to land at licensed credit institutions in Vietnam;
• Contribute capital with land use rights and assets attached to land.

For further inquiries regarding: Do Foreign-Invested Enterprises (FDI) have the right to lease land?, please contact Viet An Law for the best support and advice!