News & Legal Updates News Decree simplifies land law issues
To foreign-invested enterprises, land law issues are among the most complex and unpredictable problems they face when doing business in Viet Nam due to excessive promulgation of fast-changing regulations.
The Government, in an attempt to resolve land-related issues and simplify the legal framework, issued Decree No 69/2009/ND-CP on August 13 to amend a number of provisions on land use planning, land rental rates, land reclamation, and resettlement and compensation. Taking effect tomorrow, Decree 69 vests in provincial People’s Committees with broader discretion to determine the annual land rental rates within a range of 0.5 per cent to 2 per cent of the annual published land price.
The new provision relating to annual land rental rates will only be applicable to land lease agreements signed on January 1, 2010, and after. For existing land lease agreements that specify annual lease rates, the specified rates will continue to be applied for another five years.
In addition, Decree 69 permits provincial People’s Committees to retrospectively re-determine land prices on a case-by-case basis and in specific circumstances in which the previously determined land prices were substantially less than its actual market values at the time of leasing or allocating. The re-determination of land prices would not be subject to land price ranges prescribed by the Government under Decree 123/2007/ND-CP of July 2007. Even though the wording of Decree 69 would appear to give provincial People’s Committees broad discretion in this regard, it is expected that they would only exercise such power in cases of difficult compensation processes or cases in which investors fail to use leased or granted land efficiently.
At present, foreign invested companies are only permitted to lease land from the State (either paying for the land rental annually or in a lump sum), while domestic investors can be granted with the land use rights, either for a fixed term or permanently. While the legal rights exercisable by the foreign investor who pays for the land rental by a lump sum are essentially the same as those of the domestic investor being granted with the land use rights, the foreign-invested company may actually end up paying less in terms of rentals in comparison with the land use fees payable by the domestic investor.
Decree 69 rectifies this inequity by requiring foreign-invested companies which lease land and pay in a lump sum to pay the same amount as a domestic investor would be if granted with the land use rights for the same use and duration.
For the first time, Decree 69 also provides for land rental rates for independent underground construction works that are not a part of surface construction works, not to exceed 30 per cent of the land rental of the land on the surface with the same use purpose, although the decree does not specify in detail the procedure for obtaining land leases for this type of project, nor does it provide a legal definition of what constitutes "underground construction works".
With regard to land use planning, Decree 69 stipulates that if there is any conversion in land use of agricultural areas to any other purpose, the provincial People’s Committee must report to the Minister of Natural Resources and Environment and obtain the approval of the Prime Minister. Previously, such conversions were within the power of the People’s Committee.
Importantly, Decree 69 introduces a reform to converge currently separate investment, construction and land lease procedures to be handled by a focal point (i.e. the investment licensing authority).
With regard to land compensation and clearance, Decree 69 stipulates in detail the kind of support and allowances payable to residents displaced by projects. It also grants provincial People’s Committees the right to re-determine land prices in the event of pending land compensation when formerly determined land prices are not close to actual market values.
Decree 69 will likely result in an increase in costs to investors who may be required to pay more for land compensation and allowances than they are currently required to pay.
by VILAF lawyers
Source: Vietnam News - 30 September 2009
