FOREIGN INVESTORS CONTRIBUTE CAPITAL TO REAL ESTATE TRADING COMPANIES

FOREIGN INVESTORS CONTRIBUTE CAPITAL TO REAL ESTATE TRADING COMPANIES

The real estate business type of investment is interesting to many investors both domestically and abroad. This is one of the conditional business lines under Vietnamese law. Therefore, foreign investors entering the Vietnamese market to do business in this field, more specifically investing in capital contribution to a real estate business company should pay special attention to business investment conditions, order, and procedures for capital contribution to avoid unnecessary errors. In the article below, Siglaw would like to share with you the process of contributing capital to a real estate business company of foreign investors.

LEGAL BASIS

• Enterprise Law 2020;
• Investment Law 2020;
• Housing Law 2014;
• Law on Real Estate Business 2014;
• International treaties to which Vietnam is a signatory.

CONDITIONS FOR RESTRICTING MARKET ACCESS FOR FOREIGN INVESTORS WHEN CONTRIBUTING CAPITAL TO REAL ESTATE TRADING COMPANIES

Real estate business 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 conditions on the form of investment, scope of operation, percentage of capital ownership, Vietnamese partners participating in investment activities, other conditions prescribed by Vietnamese law and treaties to which Vietnam is a contracting party. 

Conditions on investment form:  capital contribution; share and capital contribution purchase of real estate trading company.

Capital conditions:

• 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 trading company.

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

Market Access Restriction Conditions in AFAS

Vietnam commits to open its doors to the following services:

• Rental or leasing services related to self-owned or rented residence (CPC 82101): unlimited
• Rental or leasing services related to self-owned or rented non-residential locations (CPC 82102): unlimited
• Management services for residential properties on a contract or fee basis (CPC 82201): unlimited
• Management services for residential properties on a contractual or fee basis (CPC 82202): unlimited

Conditions for restricting market access in EVFTA:

No commitment to land ownership, land lease, land use, revocation of land use rights, land use duration, land planning, rights and obligations of land users. Unidentified cultural heritage is found in land belonging to the State of Vietnam. Natural resources are found in land belonging to the State of Vietnam. There is no commitment to measures related to the purchase, sale, ownership and lease of residential real estate by foreigners.

Conditions for restricting market access in CPTPP:

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

• About residential real estate:

• Construction of residential real estate for lease on land leased by the State;
• Construction of residential real estate for sale, lease, or lease purchase on land allocated by the State;
• Renting residential real estate for subleasing;
• Buying, renting, or leasing commercial residential real estate in residential construction investment projects;
• Receiving transfer of residential real estate projects, in part or in whole for the construction of residential buildings for sale or lease.

• About commercial real estate

• Construction of commercial buildings on land leased in industrial parks, industrial clusters, or economic zones for business purposes under land use purposes;
• Leasing commercial real estate for use or subleasing;
• Construction of commercial buildings for sale, lease or rent purchase on leased land of the State;
• Receive transfers of commercial real estate projects, in whole or in part, for the construction of commercial buildings for sale or lease;
• Buy or lease commercial real estate to use under their function.

Foreign-invested enterprises can provide real estate exchange services, real estate brokerage, real estate management services for residential and commercial properties and real estate consulting services.

Laws of Vietnam

For investment projects to build houses and urban areas specified at Point g, Clause 1, Article 31 of the Law on Investment, under the competence to approve investment policies of the Prime Minister.

According to the Law on Real Estate Business, foreign-invested enterprises may do real estate business in the following forms:

• Rent houses, construction works for sublease;
• Invest in building houses for rent; invest in the construction of houses or non-residential construction works for sale, for lease or lease purchase for land leased by the State;
• Invest in building houses for sale, for lease or lease purchase for land allocated by the State;
• Receive the transfer of all or part of the real estate project of the investor to build houses or construction works for sale, lease or lease purchase;
• For leased land in industrial parks, industrial clusters, export processing zones, hi-tech parks and economic zones, houses and construction works may be invested in building houses and construction works for business purposes under land use purposes.

PROCESS OF REGISTRATION OF CAPITAL CONTRIBUTION OF FOREIGN INVESTORS WHEN CONTRIBUTING CAPITAL TO A REAL ESTATE BUSINESS COMPANY

Step 1: Prepare capital contribution registration documents

Foreign investors must prepare the following documents:

• Certificate of registration of capital contribution to a Vietnamese real estate trading company;
• Certified copies of personal legal papers of individual foreign investors; A copy of the Enterprise Registration Certificate or other equivalent document confirming the legal status of the investor as an organization and must be consular legalized;
• In case a foreign investor authorizes another person to carry out the procedures, a power of attorney or authorization through the service contract must be obtained.

Step 2: Apply capital contribution

After fully preparing the above documents, the foreign investor proceeds to submit the dossier to the Department of Planning and Investment where the real estate business company is headquartered. Within 15 days from the date of receipt of a valid dossier, the Department of Planning and Investment will send a notice of acceptance or disapproval of the foreign investor’s capital contribution to the real estate trading company.

Step 3: Make the capital contribution

After being approved by the Investment Registration Office for capital contribution, the foreign investor shall contribute capital to the real estate business company through the establishment of an investment account in a bank in Vietnam, and then transfer the contributed capital through this account.

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

After receiving the capital contribution of foreign investors, a real estate business company needs to carry out procedures for changing members and shareholders of the company. In case the capital contribution to a real estate business company leads to a change in the type of company, it is necessary to carry out procedures for changing business registration according to regulations.

There are some sharing of Siglaw about conditions and procedures for capital contribution of foreign investors to real estate trading companies. If you have any questions related to the capital contribution process to the company, please contact Siglaw for answers and dedicated advice.

Siglaw provides consulting services on capital contribution to Vietnamese companies

“Customer satisfaction is the measure of Siglaw’s success. For us, every customer is a brand ambassador!”

Therefore, Siglaw takes care and meticulously of each customer in the most thoughtful way, when using Siglaw’s capital contribution consulting services to Vietnamese companies, customers will be most enthusiastically supported as follows:

1. Guiding the preparation of necessary documents and information to prepare dossiers for capital contribution procedures to Vietnamese companies.
2. Answering and consulting legal regulations related to capital contribution to Vietnamese companies.
3. Consulting advantages, legal incentives, and the most optimal tax suitable for each customer.
4. Guidance on consulting all foreign documents and documents.
5. Guiding customers to carry out procedures at competent state agencies.
6. Supporting consulting on tasks and procedures to be done after contributing capital to a Vietnamese company.

Siglaw Law Firm

Phone: (+84) 961 366 238

Email:

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

Headquarters: Floor 12A Sao Mai Building, 19 Le Van Luong Street, Nhan Chinh Ward, Thanh Xuan District, Hanoi City.

Southern branch: No. 99 Cong Hoa, Ward 04, Tan Binh District, Ho Chi Minh City.

Central branch: 177 Trung Nu Vuong, Hai Chau District, Da Nang City

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