On 30 December 2010, the Vietnamese Government issued Decree No. 121/2010/ND-CP (Decree 121) amending and supplementing a number of articles of Decree No. 142/2005/ND-CP dated 14 November 2005 on collection of land rent and water surface rent (Decree 142).

Decree 121 replaces Article 12 (Land rent unit price) of Decree No. 69/2009/ND-CP dated 13 August 2009 of the Government on land use planning, land prices, land recovery, compensation, assistance and resettlement (Decree 69).

Decree 121 extends the governing scope of Decree 142 to cases of leased land from the State for the construction of underground works for commercial purposes in accordance with the approved plan. It is clear that where construction work is carried out underground only, without using the surface land, rent is still payable. In this case, land rent must not exceed 30% of the rental rate of the grounds used for the same purpose.

The salient provisions of Decree 121 are presented below.

Amendment on land rent and water surface rent payers

Foreign organisations who rent land and water surface rights now include "joint venture economic organisations between domestic and foreign investors" (joint ventures). This effectively means that the State may lease land or water surface rights with rent collected annually or in lump sum for the whole land or water surface lease term to joint ventures to implement their investment projects.

Land price amendments

Decree 121 stipulates that when land rent is paid annually, the amount of annual rent will be equal to 1.5% of the land price for a particular piece of land promulgated by the provincial People's Committee who must follow the provisions of the Government in determining land prices and price brackets. However, if at the time of entering into the lease, the land price fixed by the provincial People's Committee is not close to the market price for such land, this authority may re-determine the land price based on such market price. The price bracket stipulated in Decree 69 is between 0.5% and 2%.

However, there are exceptions to this standard rate:

  • For land in urban areas, commercial or service centres, traffic hubs, and densely populated areas that may yield special profits or be used for production, business and/or service activities, the provincial People's Committee president can set higher rates, but not more than 3% of the land price.
  • For land in remote and distant areas, high mountains, offshore islands and areas with difficult or specially difficult socio-economic conditions, land used for agricultural production, forestry, aquaculture or salt production, land used as grounds for production and/or business activities of projects in the domains entitled to investment encouragement or special investment encouragement, the provincial People’s Committee president can fix lower rates, but not lower than 0.75% of the land price.

Where the State leases land and requires land rent to be paid in an up-front lump sum, the amount will be equal to the land use fee payable as if such land were allocated for the same duration and purpose.

Decree 121 clarifies that the land rent rate in the case of auction or tendering for land use rights will be the auction or tender winning unit price.

Effective date

Decree 121 takes effect as from 1 March 2011.

For inquiries related to this Legal Update, please contact:

Dao Nguyen (dao.nguyen@mayerbrown.com)

Kevin B Hawkins (kevin.hawkins@mayerbrown.com)

Thinh Dan (thinh.dan@mayerbrown.com)

Learn more about our Vietnam offices and Real Estate practice.