Ownership of apartments in Vietnam by foreigners in contributing capital or purchasing shares or stakes in Vietnamese companies

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There are several ways that foreign investors can own allowed apartments in Vietnam, including buying apartments directly from construction project investors, purchasing from foreign individuals or organizations and investing in project-based housing construction in Vietnam…. Furthermore, it is a way for foreign investors to own apartments in Vietnam by contributing capital or purchasing shares or stakes in Vietnamese companies that owned apartments in Vietnam. However, to indirectly own the apartments in Vietnam, the foreign investors have to meet all the requirements to purchase shares or contribute capital under Law on Investment 2020 and own apartments according to Law on Housing 2014.

It is assumed that a Vietnamese company owns an apartment in Vietnam. When foreign investors want to contribute capital, buy shares or contribute capital to the company, the company must carry out procedures for registration of capital contribution and share purchase/ stakes for such foreign investors according to the Law on Investment 2020. As a result of this procedure, the foreign investor becomes a shareholder, member or owner of the Vietnamese company.

A foreign investor contributing capital or purchasing shares or stakes in a Vietnamese organization shall satisfy the conditions set out in Clause 2 Article 24 of the Law on Investment 2020, including:

a) Market access conditions applied to foreign investors upon capital contribution, and purchase of shares and stakes in business organizations established in Vietnam as prescribed in Clause 3 Article 9 of the Law on Investment and Articles 15, 16 and 17 of this Decree;

b) Conditions concerning assurance of national defense and security and conditions for land use applied to a business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors in case such business organization has the certificate of rights to use land on the island, in border commune, ward or town and coastal commune, ward or town; other areas that affect defense and security, except for the business organization executing the investment project in an industrial park, export-processing zone, hi-tech zone or economic zone established under the Government’s regulations.

Because the Vietnamese company has owned the apartment, during the process of receiving and processing dossiers of registration for capital contribution, share purchase of the foreign investor, the Department of Planning and Investment may send the company’s dossiers to gather opinions from specialized management agencies for appraisal. Specialized agencies in defense, security and construction such as the Ministry of National Defense, the Ministry of Public Security, the Department of Construction shall advice, determine whether the apartment owned by the company are located in the area affecting national defense and security or not, are eligible to allow foreign investors to purchase/ own. After being approved, the foreign investor may contribute capital, purchase shares and capital contributions to the company.

The regulation about not owning land and houses, apartments in the area affecting security and defense applied to foreign investors is a new point of the Law on Investment 2020, and a condition that foreign investors must strictly comply before investing in Vietnam in a similar situation.

Besides, according to Clause 1 Article 75 of Decree No. 99/2015-ND-CP on guidelines for the Law on Housing 2014:

“1. Foreign organizations and individuals can only own houses (including apartments and separate houses) in investment projects to build commercial houses,except for areas of defense and security assurance in accordance with Vietnamese law.

2. TheMinistry of National Defense and the Ministry of Public Security shall specify areas that need to ensure security and defense in each locality and notify the provincial-level People’s Committees in writing to direct the Department of Construction to specify the list of investment projects to build commercial houses in the area that allows the organization and organization, foreign individuals are entitled to own houses.“

Which means foreign organizations and individuals (including foreign-invested economic organizations) may only buy and own apartments in commercial houses projects which are announced by the Department of Construction that foreign individuals and organizations are allowed to purchase/ own.

Besides, in accordance with Clause 3, Article 76 of Decree No. 99/2015-ND-CP stipulates that:

Foreign entities may own up to 30% of the total number of apartments of an apartment building. In an area whose population is equivalent to that of a ward, if there is more than one apartment buildings for sale or lease-purchase, foreign entities may own up to 30% of the number of apartments of each apartment building, and up to 30% of the total number of apartments of all these apartment buildings

Thus, in order to foreign investors contribute capital or purchase shares or stakes in the Vietnamese company which has owned the apartment in Vietnam to own the apartment indirectly, the apartment must be:

  • In investment projects to build commercial houses;
  • Not in the areas of defense and security assurance according to the decisions of The Ministry of National Defense and the Ministry of Public Security;
  • In the range up to 30% of the total number of apartments of an apartment building;
  • On the list of investment projects to build commercial houses in the area that allows the organization and organization, foreign individuals are entitled to own houses published by the Department of Construction.

If the apartment owned by the Vietnamese company is not satisfied all the requirements above, the foreign investor is not permitted to contribute capital or purchase shares or stakes in the Vietnamese company unless the Vietnamese company transfers the ownership of the apartment to other individuals or organizations.

Since the foreign investor successfully and legally contributed capital or purchased shares or stakes in the Vietnamese company which owned the apartment in Vietnam. The Vietnamese company becomes a foreign organization. In this case, the foreign organization cannot use the apartment for lease, offices or other purposes except for their employee to stay according to Clause 2, Article 162 of the Law on Housing 2014.

By: Julie (Thu) Nguyen | LinkedIn

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