Foreign investors contribute capital to real estate business companies

Foreign investors contribute capital to real estate business companies

 

Real estate business is a type of investment that many domestic and foreign investors are interested in. This is one of the conditional business lines according to the provisions of Vietnamese law. Therefore, when entering the Vietnamese market to do business in this field, more specifically investing in real estate companies, foreign investors need to pay special attention to the investment conditions, procedures and capital contribution procedures to avoid unnecessary mistakes. In the article below, Siglaw would like to share with you the process for foreign investors to contribute capital to real estate companies in Vietnam.

 

Legal ground for foreign investors to contribute capital to real estate business companies

• Law on Enterprises 2020
• Law on Investment 2020
• Law on Housing 2014
• Law on Real estate Trading 2014
• International treaties of which Vietnam is a member.

 

Conditions for foreign investors to contribute capital to real estate business companies

Conditions for limiting market access when contributing capital to real estate business companies of foreign investors

Real estate business is on the list of industries with conditional market access for foreign investors as prescribed in Section B, Appendix I of Decree 31/2021/ND-CP. Therefore, foreign investors must satisfy the conditions on investment form, scope of operation, capital ownership ratio, Vietnamese partners participating in investment activities, and other conditions as prescribed by Vietnamese law and international treaties to which Vietnam is a member.

Conditions on investment form: capital contribution, purchase of shares, capital contribution of real estate business company.

Conditions on capital:

Capital contribution registration: 

• Foreign investors are required to carry out capital contribution registration procedures if the capital contribution ratio is over 51%.
• Capital contribution ratio: Current Vietnamese law does not limit the capital ownership ratio of foreign investors, therefore, they can own from 1% to 100% of the charter capital of a real estate business company.

Vietnamese partner: The real estate business company to which the foreign investor contributes capital must be a company that has been granted a Business Registration Certificate.

 

Market Access Restrictions in AFAS

Vietnam commits to open up the following services:

• Rental/leasing services related to self-owned or rented residential premises (CPC 82101): no restrictions
• Rental or leasing services related to self-owned or rented non-residential premises (CPC 82102): no restrictions
• Management services of residential real estate on a fee or contract basis (CPC 82201): no restrictions
• Management services of residential real estate on a fee or contract basis (CPC 82202): no restrictions.

 

Market Access Restrictions in EVFTA

No commitments on land ownership, land lease, land use, land use right revocation, land use duration, land planning, rights and obligations of land users. Cultural heritage with unidentified owners found in land belongs to the State of Vietnam. Natural resources found in land belong to the State of Vietnam. No commitments on measures related to the purchase, sale, ownership and lease of residential real estate by foreigners.

 

Restricted Market Access Conditions in CPTPP

Annex NCM I-VN-34: Real Estate: Regarding the construction, leasing, purchase, hire-purchase, and transfer of real estate, the Law on Real estate Trading provides more limited rights for foreign entities than for Vietnamese entities. Foreign-invested enterprises may only carry out the following activities:

• Regarding residential real estate:

• Construction of residential real estate for lease on land leased from the State;
• Construction of residential real estate for sale, lease, or hire-purchase on land allocated by the State;
• Leasing residential real estate for sub-lease;
• Purchase, hire-purchase, or hire of commercial residential real estate in housing construction investment projects;
• Accepting the transfer of residential real estate projects, in part or in whole, to construct housing works for sale or lease.

• Regarding commercial real estate

• Construction of commercial works on leased land in industrial parks, industrial clusters, or economic zones for business purposes in accordance with the land use purpose;
• Leasing commercial real estate for use or subleasing;
• Constructing commercial works for sale, lease or hire-purchase on land leased from the State;
• Receiving the transfer of commercial real estate projects, partial or in whole, to construct commercial works for sale or lease;
• Buying or hire-purchasing commercial real estate for use in accordance with their functions.

Foreign-invested enterprises may provide real estate trading floor services, real estate brokerage, real estate management services for residential and commercial real estate, and real estate consulting services.

 

Conditions under Vietnamese Law

For investment projects in the construction of housing and urban areas specified in Point g, Clause 1, Article 31 of the Investment Law, which are under the authority of the Prime Minister to approve investment policies.

 

According to the provisions of the Law on Real Estate Business, foreign-invested enterprises are allowed to conduct real estate business in the following forms:

• Renting houses and construction works for sub-lease;
• Investing in the construction of houses for rent; investing in the construction of houses and construction works other than houses for sale, lease, or lease-purchase on land leased by the State;
• Investing in the construction of houses for sale, lease, or lease-purchase on land allocated by the State;
• Receiving the transfer of all or part of the real estate project of the investor to build houses and construction works for sale, lease, or lease-purchase;
• For leased land in industrial parks, industrial clusters, export processing zones, high-tech zones, and economic zones, it is allowed to invest in building houses and construction works for business purposes in accordance with the land use purpose.

 

Procedures for registering capital contribution to a real estate business company by foreign investors

Step 1: Prepare the capital contribution registration documents

Procedures for registering capital contribution to a real estate business company by foreign investors

Step 1: Prepare the capital contribution registration dossier

Foreign investors must prepare the following documents:

• A registration certificate for capital contribution to a Vietnamese real estate business company;
• A copy of the personal legal documents of the foreign investor who is an individual; A copy of the Enterprise Registration Certificate or other equivalent documents confirming the legal status of the investor as an organization and must have consular Legalization;
• In case the foreign investor authorizes another person to carry out the procedure, there must be a power of attorney or authorization through a service contract.

Step 2: Submit the capital contribution registration documents

After fully preparing the above documents, the foreign investor submits the documents to the Department of Planning and Investment where the real estate business company is headquartered. Within 15 days from the date of receiving valid documents, the Department of Planning and Investment will send a notice of acceptance or non-acceptance of the foreign investor’s capital contribution to the real estate business company.

 

Step 3: Implement the capital contribution

After the Investment Registration Authority approves the capital contribution, the foreign investor contributes capital to the real estate business company by establishing an investment account at a bank in Vietnam, then transferring the capital contribution through this account.

 

Step 4: Carry out procedures to change the type of company, members, and shareholders of the company

After receiving the capital contribution of the foreign investor, the real estate business company must carry out procedures to change the members and shareholders of the company. In case the capital contribution to the real estate business company leads to a change in the type of company, it must carry out procedures to change the business registration according to regulations. See more: Establishing a foreign-invested real estate business company

The above are some of Siglaw’s shares on the conditions and procedures for foreign investors to contribute capital to a real estate business company. For any questions related to the capital contribution process to the company, please contact Siglaw for answers and dedicated advice.

 

Siglaw Law Firm

Phone: (+84) 961 366 238

Email:

• vphn@siglaw.com.vn
• vphcm@siglaw.com.vn

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