foreigner investor guide - cornerstone · the potential for vietnam real estate appreciation is...
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FOREIGNERINVESTOR
G U I D E I N V I E T N A M
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THE NEW RESIDENTIAL HOUSING LAW
WHAT IS “SPA”?
3
4
7
CONTENTS
WHY VIETNAM ?
8WHAT IS “PINKBOOK”?
OTHER IMPORTANT TERMS 9
TAX 12
UPON & AFTER HANDOVER 13
RENTAL INCOME & INSURANCE 14
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WHY VIETNAM ?
The potential for Vietnam real estate appreciation is bolstered
by strong economic fundamentals such as rising GDP (6-7%
average annually), growing population close to 100 million (Ideal
Population for developing itself), and large- scale infrastructure
improvements. The key cities in Vietnam are Ho Chi Minh City,
Hanoi and Danang. Potential investors can choose to invest for
any of the following reasons:
•As a secondary house or investment
•As a strong source of rental income with high rental yieldpotential
•As a vacation property
•For capital appreciation
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THE NEW RESIDENTIALHOUSING LAWSINCE JULY, 2015
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INDIVIDUALS
All foreigners who are granted permission to enter
Vietnam (Stamp in Passport) are allowed to buy and
own residential properties within a property
development project in the country (with the exception
of foreigners entitled to diplomatic or consular
immunities and privileges prescribed by law).
ENTITIES
All legal entities like foreign investment funds, banks,
Vietnamese branches, and representative offices of
overseas companies, with investment license, which are
established in Vietnam are eligible to buy with 20%
transfer tax instead of 2%. (20% is tax deductible).
TYPES
The new Residential Housing Law allows the eligible
foreign entity and individual to buy and own all
residential sectors including apartments and landed
properties such as villas and townhouses within the
residential property development projects. Currently
there are three main types : Apartments or
Condominium, Officetele, and Condotel.
PURPOSE OFPURCHASE
The properties owned by foreigners can be sold, sub-
leased, inherited and collateralized (previously only for
owner occupying purpose).
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VOLUME
The rule is that foreigners has 30% quota for Condominiums, and 10% cap for
Villas/Townhouses (previously foreign residents with minimum of 1 year working visa
could purchase only one apartment in Vietnam, and no Villas/Townhouses were allowed
to purchase).
Foreign entity and individual ownership of units in an apartment building may not
exceed 30% of total units in the project, market practice is usually per block.
For housing projects with villa or townhouse, foreign ownership quota should not exceed
10% of total number of villas and townhouses.
Foreign owners should not purchase more than 250 units within ward.
TENURE
The tenure allowed to foreign individuals buying homes is 50 years from the date
the authority issues the house ownership certificate to the relevant owner with
renewal possibility upon expiration. Long Term Lease is 50 years from the project
license date. Foreign individuals married to Vietnamese citizens are entitled to
freehold tenure. Eligible foreign entities shall have the tenure of ownership of
apartment/house in accordance with the duration as stated in their business
license/investment certificate.
YEARS
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WHAT IS “SPA”,SALES & PURCHASE AGREEMENT?
SALES & PURCHASE AGREEMENT(“SPA”)
The SPA is a legally binding contract between the buyer and developer to prove that a house
or an apartment is sold to the buyer by the developer. The SPA is also used as evidence of
ownership of the house or apartment before the house ownership certificate has been granted
to the owner. It is used for applying for house ownership certificate for the owner. The template
of the SPA is in accordance with the standard template as provided by the Ministry of
Construction and is to be registered with Consumer Protection Bureau under the Ministry of
Industry of Trade. As such, the SPA is a standard template which is not to be changed or
amended.
The owner of apartment/house shall have the following legal rights:
• The right to inviolability of houses under his/her lawful ownership.
• To use houses for residential purposes and other purposes not banned by law.
• To be granted certificates for houses under his/her lawfulownership.
•To sell, transfer sales & purchase contracts, lease, put for lease-purchase gift, exchange,
contribute as capital, lend, or authorize management of his/her houses.
In the case of donation or bequeathal of houses to subjects ineligible to own housesin Vietnam, such subjects are only entitled to the value of such houses
• To use public facilities in the housing area in accordance with Housing laws and
other relevantlaws.
• To maintain, renovate, demolish, or rebuild his/her house as prescribed in Housing
Law and law on construction.
•To receive the compensation as prescribed in regulations of law or payment
according to fair market price when their house is demolished, imposed
compulsory purchase order, or commandeered by the State for national defense
and security purposes; for socio-economic development purposes, or in the state
of war, state of emergency, or disaster situations.
• Rights to file complaints, denunciation, or lawsuits over violations against his/her
lawful ownership and other violations against law on housing.
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WHAT IS “PINKBOOK”, HOUSE OWNERSHIP CERTIFICATE?
HOUSE OWNERSHIPCERTIFICATE
The “House Ownership Certificate”, which stands for “Certificate of land use rights or house and land-attached asset ownership” is the certificate granted by the State Authority
to certify/recognize the ownership of an eligible individual/organization over his/her/their land or house. It is commonly referred to as the “ownership certificate” or “pink book”.
The ownership term of foreigners is 50 YEARS from the day on which the ownership certificate is granted.
• If a foreign individual marries a Vietnamese citizen or an overseas Vietnamese (refer to Viet Kieu), he/she qualifies for stable and long-term home ownership and has all rights
of a homeowner similar toVietnamese citizens.
• During the ownership term, the homeowner is entitled to gift or sell their house(s) to individuals/entities eligible for homeownership in Vietnam; if not, upon the expiry of the
ownership term, their house(s) shall belong to the State.
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WHAT IS “VAT, MAINTENANCE FEE, MANAGEMENT FEE”?
RED INVOICE / VALUE ADDEDTAX (VAT) INVOICE
“Red invoice” is a legitimate invoice which is legally called “Value Added Tax
Invoice”. It is issued by the seller to state that information on goods/services
are sold/ provided in accordance with laws, for organizations/ individuals to
declare and payValue Added Tax.
Currently, the Value Added Tax (VAT) tariff is 10% of the house/apartment
price.
In comparison, a receipt is a form of invoice showing a payment transaction
has been completed for the amount issued by the seller to the buyer. It is to
help both contractual parties record that a certain amount has been paid by
the buyer to the seller which is lawful and recognized by laws.
*It is very important that buyers keep all the receipts to purchase
apartment for smooth transaction to transfer money back to his/her
country.
MAINTENANCEFEE
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 maintenance, small repairs,
medium repairs and overhauls of commonly owned areas in order to
preserve quality. Currently the sinking fund is 2% of the house/apartment
price before VAT. It is possible to collect Maintenance Fee if fund is used.
VAT.
MANAGEMENTFEE
The “monthly management fee” is a fee contributed by residents to
managing operations of the development, such as operating the elevator
system, generator and providing services for the building such as security,
pest control, rubbish collection service, etc. Management Fee is calculated
per Net Salable Area(NSA).
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HOW IS “NSA & CFA MEASURED IN VIENTMAM”?
NET SALABLEAREA (NSA)
Commonly referred to as “carpet area”, NSA refers to the area for
private use of the purchased apartment, which is measured by a
clearance method and stipulated in the House Ownership
Certificate granted to the Buyer. It shall include the area of room-
dividing walls built inside the apartments and area of balcony,
loggia attached to such apartment (if any); but shall exclude the
area of the external walls, apartment-dividing walls, columns and
service ducts inside the apartment. The apartment selling price and
management fee are based on the NSA as regulated by law. The
NSA shall also be stated in the pink book.
CONSTRUCTION FLOOR AREA(CFA)
This refers to the area which is measured from the center line of
the external walls and apartment-dividing walls, including the
area of columns and services ducts built inside the apartment.
CFA is commonly used for resale properties in Vietnam.
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HOW IS PAYMENT SCHEDULE LIKE?
Foreign investors are recommended to set up a local bank account to
transfer payments for their apartment to the Developer’s bank account.
Agencies also take refundable deposits prior to developer officially launch
project. Below are some international banks with branches in Vietnam:
•Citibank
•ANZ
• Standard CharteredBank
• HSBC
• Shinhan bank
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.
Generally, Developer collects up to 30% prior to sign SPA, 25% upon
handover, and 5% upon receiving pink book. So there is 40% to be paid
from SPA signing till handover of an apartment.
HOW IS PAYMENT PROCESSED?
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HOW IS TAX PAID TO BUY APARTMENT IN VIETNAM?
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.
VALUE ADDEDTAX (VAT)
10% VAT is taxed on any sale of property by local orforeigners.
ADMINISTRATION FEE
A minimal administration fee is to be granted an ownership certificate at
the currentregulation.
REGISTRATION TAX FOR OWNERSHIP
0.5% registration tax for obtaining the house ownership certificate on the
apartment value.
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TRANSACTION FEE when selling the apartment (2% on the selling price)
If personal income is earned through the assignment or resale of apartments
or houses, a 2% transaction fee has to be paid on the transacted value ( the
selling price) or 25% tax on difference but please note that this is a rare case
in Vietnam as this gets rejected by Tax officer.
If apartment is purchased under 100% foreign company, seller must pay 20%
corporate tax on difference which then will be divided into shareholders as
dividend. Shareholders will have to pay 5% tax on the dividend.
The following taxes apply to property lease transactions:
PERSONAL INCOME TAX(PIT)
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 1,500,000 per month, a business license
tax of VND 1,000,000 per yearapplies.
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Handover Process What’s after Handover?
WHAT IS HANDOVER PROCESS? AND WHATS AFTER HANDOVER?
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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 theunits.
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.
Developer will measure the unit once again to confirm the final size of the
unit. If the unit is smaller than the purchasing size, developer must pay for
the difference, usually deducted from the payment. If the unit is bigger
than the purchasing size, buyer must pay the difference.
*There will be a acceptable range depending on the developer for the size.
Before establishing the Committee of Management for the building, the
developer shall act on behalf of the Committee of Management to engage
a qualified company to provide the property management services.
Our Sister Company, Blanket Solution, can assist clients to rent, pay tax,
and manage unit on behalf of owner. In order to do this, Owner should
authorize Blanket Solution for above purposes. Blanket Solution will
prepare Power of Attorney (POA) to be signed by owner. It is
recommended to sign POA with Blanket Solution while owner is in
Vietnam for Handover. Otherwise, owner might have to come back to Ho
Chi Minh City.
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How to collect Rental income? Insurance for the apartment?
HOW TO COLLECT RENT? AND WHAT ABOUT INSURANCE?
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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. For more details, we recommend to speak
with Blanket Solution.
Landlord is required to pay tax (5% PIT & 5% VAT) for rental income
according to Vietnam Law. Balnket Solution can also assist to pay tax on
behalf of the client.
By law, the Developer is not obliged to provide insurance for private areas
of the residential house/ apartment. As such, owners of the
house/apartment/ are recommended to buy insurance for their house/
apartment in accor- dance with the law.
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Contact us: Cornerstone Vietnam
L6-SH.07 Vinhomes Golden River, 02 Ton Duc Thang, Ben Nghe Ward, District 1, HCMC, VietnamT: +84 937 836 896E: [email protected]
This presentation and the information contained herein is highly confidential and has been prepared solely for the informational use of the Recipient (the “Recipient”). Distribution of this
presentation to any person other than the Recipient and those persons retained to advise the Recipient, who agree to maintain the confidentiality of this material and be bound by the
limitations outlined herein, is unauthorized. This material must not be copied, reproduced, distributed or passed to others at any time without the prior written consent of Cornerstone. By
accepting the delivery of this presentation, you agree to the foregoing.
This presentation includes certain observations, assumptions, statements, estimates and projections as to future events and thus involves significant elements of subjective judgment and
analysis. Such statements, estimates and projections reflect certain assumptions and anticipated results; such assumptions and results may or may not prove to be correct. Actual results
may differ from such statements, estimates and projections and such differences may be material. Such estimates and projections are inherently subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include general economic and business conditions, competition,
changes in political, social and economic conditions, and possible changes in the regulatory structure, customer preferences and various other matters, many of which are beyond the
control of Cornerstone, as applicable. Such forward-looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and that may be
incapable of being realized. There can be no assurances that actual events will not differ materially from those assumed or projected. In the event any of the assumptions used in this
presentation do not prove to be true, results are likely to vary substantially from those discussed herein and such variations may be material. Cornerstone does not undertake to update or
revise any of the observations, assumptions, projections or forward-looking statements contained herein or any other information contained herein, even if it becomes clear that they will
not be realized or are otherwise inaccurate. The delivery of this presentation shall not under any circumstances imply that there has been no change in the affairs of Cornerstone and
investment targets or that the information set forth herein is correct at any date subsequent to the date of this presentation or the date at which the information was provided. The
information contemplated in this presentation is in summary form and thus does not contain all relevant and material information relating to the matters contemplated herein.
FOREIGNERINVESTOR
G U I D E I N V I E T N A M