Vietnam's Land Finance Overhaul: New Decree Seeks to Streamline Fees, Rent

In Ho Chi Minh City, a hectare of agricultural land generates approximately VND 500 million (USD 19,763) per year, Dr. Tran Minh Son, Chairman of the Advisory Council of the Center for International Commercial Arbitration recently told the government news website.

However, when repurposed for non-agricultural use, such as production, industrial, commercial, and urban areas, the value skyrockets to around VND 55 billion (USD 2.17 million) per year, marking a significant economic shift, he said.

Over the span of 25 years, from its establishment in 1997 to 2022, District 7 witnessed a staggering increase in state budget revenue from VND 59 billion (USD 2.33 million) to VND 5,550 billion (USD 218.86 million), emphasizing the financial potential of land development.

Draft Decree Introduces New Regulations

Dr. Son said the Ministry of Finance has submitted a draft Decree to the Government for detailed regulations on land use fees and rents. The Ministry of Justice has reviewed this Decree, signaling a potential overhaul in land finance policies.

The draft Decree aims to streamline the calculation, collection, and payment processes for land use fees and rents, emphasizing clarity and fairness.

It addresses exemptions and reductions, particularly for mixed land-use projects, aiming to balance interests between investors, the State, and relevant stakeholders. Moreover, it proposes transitional regulations to address specific cases before the enactment of the Land Law 2024.

Challenges in Fee Calculation and Collection

Businesses express concerns over the current complexity and opacity in land use fee calculations, labeling it as burdensome and prone to exploitation through the 'ask-give' mechanism.

They advocate for a thorough impact assessment and widespread consultation to reform existing policies, aligning them with legal frameworks and addressing operational challenges.

Moreover, the draft Decree seeks to limit the 'ask-give' culture in fee calculations, advocating for transparent administrative procedures and equitable monetary assessments.

By engaging stakeholders, especially businesses, in comprehensive discussions, the aim is to craft regulations that foster sustainable development while mitigating operational hurdles.

Ensuring Fairness and Transparency

Beyond addressing fee calculation complexities, the draft Decree also delves into principles for exemption and reduction of land use fees.

Dr. Son emphasizes the importance of careful consideration in applying these regulations, particularly in scenarios like land use rights auctions. While exemptions or reductions can incentivize investment, they also risk distorting market prices if not implemented judiciously.

Furthermore, the draft Decree includes provisions for handling specific cases, such as transitional regulations for decisions made before the Land Law 2024's effective date but pending land price determinations.

These measures aim to provide clarity and continuity in land finance regulations, ensuring a smooth transition amidst legal updates.

Safeguarding Investments Amidst Legal Reforms

As Vietnam navigates evolving land finance policies, safeguarding investments remains a priority.

The draft Decree underscores the importance of comprehensive impact assessments and stakeholder consultations to foster an environment conducive to sustainable development.

By balancing regulatory clarity with investor interests, the aim is to promote transparency, fairness, and economic growth in the real estate sector.

As Vietnam's urban landscape continues to evolve, ensuring equitable land use fee policies is paramount for sustainable economic growth.

The draft Decree signals a step towards transparent and efficient land finance regulations, poised to navigate the intricacies of Vietnam's dynamic real estate market while fostering a conducive environment for investment and development.