Decree No. 71/2001/ND-CP dated October 05, 2001 of the Government on investment preferences for the construction of dwelling houses for sale and lease

DECREE

ON INVESTMENT PREFERENCES FOR THE CONSTRUCTION OF DWELLING HOUSES FOR SALE AND LEASE

THE GOVERNMENT

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to the July 14, 1993 Land Law; the December 2, 1998 Law Amending and Supplementing a Number of Articles of the Land Law and the June 29, 2001 Law Amending and Supplementing a Number of Articles of the Land Law;

Pursuant to the November 12, 1996 Law on Foreign Investment in Vietnam and the June 9, 2000 Law Amending and Supplementing a Number of Articles of the Law on Foreign Investment in Vietnam;

Pursuant to the May 20, 1998 Law on Domestic Investment Promotion (amended);

At the proposal of the Minister of Construction,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.-Scope of application

This Decree prescribes a number of policies to create favorable conditions and provide investment preferences for enterprises participating in investment projects on construction of dwelling houses for sale and lease.

Article 2.-Housing projects eligible for favorable conditions and preferences

The following housing projects shall enjoy favorable conditions and preferences (hereafter referred to as preferential housing projects):

1. Projects on multi-storied dwelling houses (with 5 stories or more for Hanoi and Ho Chi Minh cities, 3 stories or more for other provinces and cities), with self-contained apartments, common stairs and alleys (hereafter called condominiums).

2. Housing projects with residential land accounting for at least 60% of the total land acreage for the construction of condominiums.

Article 3.-Enterprises enjoying favorable conditions and preferences

This Decree applies to enterprises of all economic sectors that have registered their housing business under the provisions of law, including:

1. Domestic enterprises:

a/ State enterprises set up and operating under the State Enterprise Law;

b/ Enterprises set up and operating under the Enterprise Law;

c/ Enterprises of political organizations, socio-political organizations, professional associations, security and defense enterprises, set up and operating under the provisions of law;

d/ Cooperatives set up and operating under the Law on Cooperatives;

e/ Enterprises directly invested in by overseas Vietnamese in Vietnam; enterprises directly invested in by foreigners permanently residing in Vietnam; enterprises set up jointly by Vietnamese citizens, overseas Vietnamese and/or foreigners permanently residing in Vietnam.

2. Foreign-invested enterprises under the Law on Foreign Investment in Vietnam.

Article 4.-Forms of selecting investors

The forms of selecting investors for housing projects eligible for favorable conditions and investment preferences are prescribed as follows:

1. Selecting investors being domestic enterprises (hereafter referred collectively to as investment project owners):

a/ The investment project owners shall be decided by the presidents of the People’s Committees of the provinces and centrally-run cities (hereafter collectively referred to as the provincial-level People’s Committees) where the projects are to be implemented;

b/ In cases where two or more investors are registered to be investment project owner for one project, the provincial-level People’s Committee shall select the investment project owner according to the Bidding Regulation.

2. The selection of foreign investors to participate in the investment and construction of dwelling houses eligible for favorable conditions and investment preferences shall comply with the provisions of the legislation on foreign investment in Vietnam.

Article 5.-Sale and lease of dwelling houses under projects enjoying favorable conditions and preferences

1. Condominium apartments shall be sold or leased, first of all, to the following subjects that meet with accommodation difficulties:

a/ Subjects enjoying salaries from the State budget;

b/ Officials and public employees working in enterprises of different economic sectors;

c/ Students of universities and colleges.

2. Dwelling houses of other types (if any) under the projects may be sold or leased by investors to any of the following subjects that have the demand therefor:

a/ To be sold or leased to Vietnamese citizens residing in Vietnam;

b/ To be leased to overseas Vietnamese and foreigners residing in Vietnam.

The permission for overseas Vietnamese to buy dwelling houses in Vietnam shall comply with the Government’s specific stipulations.

Article 6.-Sale prices and rent rates of dwelling houses under preferential housing projects

1. The sale prices and rent rates of condominium apartments under preferential housing projects shall be determined by investors on the principle of preserving capital, without calculating into such sale prices and rent rates the preferences that the investment project owners have already enjoyed under the provisions of this Decree.

2. The sale prices and rent rates of dwelling houses of other types (except for condominium apartments) within the scope of projects (if any) shall be agreed upon by concerned parties.

Chapter II

CREATING CONDITIONS FOR AND GIVING PREFERENCES TO DOMESTIC ENTERPRISES

Article 7.-Creating conditions on investment and construction procedures

The investment project owners shall be given the following favorable conditions on investment and construction procedures:

1. Basing themselves on the construction planning and plans on the use of land for housing development announced by the competent State agencies as well as their investment capabilities, enterprises having demand may register with the provincial-level People’s Committees to become investors or participate in bidding for becoming investors of housing projects that enjoy favorable conditions and preferences.

2. For the areas with general plannings and detailed plannings, already approved by the competent State agencies, the housing project owners enjoying favorable conditions and preferences shall only need to go through one step of making feasibility study reports. In cases where a general planning has been elaborated for the project area but the detailed planning to be approved by the competent agency is not available yet, the investor may draw up a detailed planning for submission together with the feasibility study report for approval. The cost of elaborating the detailed planning shall be accounted in the total investment level of the project.

3. Basing themselves on the plannings already approved by the competent agencies and the housing development programs of their respective localities, the presidents of the provincial-level People’s Committees shall decide on investment and ratify technical designs as well as total cost estimates of housing projects entitled to favorable conditions and investment preferences in their respective localities after receiving the written appraisal records from the dependent specialized bodies.

4. Projects and project items within the scope of preferential housing projects, for which technical designs have been approved by the competent State agencies, shall be exempt from construction permits.

Article 8.-Creating conditions on compensation and ground clearance

The investment project owners shall be given the following conditions on compensation and ground clearance:

1. The investment project owners shall determine the compensation and ground clearance plans as well as the land fund in service of resettlement and submit them to the provincial-level People’s Committees for approval. In case of necessity, to ensure the project implementation tempo, investors may be supported with additional relocation funding but must ensure the projects’ economic efficiency. This additional support funding must not be accounted in the expenses for land-loss compensation for deduction from the payable land use levy prescribed in Clause 2 of this Article or from other State budget remittances (if any).

2. If an investment project owner assigned with land must pay land use levy and land-loss compensation, the payable land-use levy amount shall be used to cover the whole amount of compensation for the loss of land under the project, which, however, must not exceed the total land use levy amount to be paid by the investor. In cases where the investment project owners are domestic enterprises meeting with capital difficulty, the State shall create conditions for them to borrow capital for compensation and ground clearance.

3. The investment project owners shall assume the prime responsibility and coordinate with the local People’s Committees in reaching agreement on the compensation plans, funding, ground clearance schedule and account settlement as well as final settlement for the ground clearance work. The local People’s Committees shall have to coordinate in organizing the compensation payment and ground clearance according to the set schedule and hand over the construction ground to contractors.

Article 9.-Creating conditions on bidding for construction

The investment project owners shall be given conditions on bidding as follows:

1. The bidding plans and results of bidding for the construction and installation of housing projects stipulated in Article 2 of this Decree shall be considered and approved by the competent persons or competent authorities according to the provisions of the Bidding Regulation. The investment project owners may elaborate bidding plans and submit them together with the feasibility study reports.

2. The investment project owners are allowed to build by themselves or select contractors (without bidding) for the building of projects, project items or bidding packages using more than 50% of investment capital being their own lawful capital (self-procured capital or capital advanced by organizations and/or individuals).

Article 10.-Creating conditions on investment capital mobilization

The investment project owners shall be given conditions on investment capital mobilization as follows:

1. To be entitled to mobilize advance capital of organizations and individuals that have demand for dwelling houses; to borrow capital from credit institutions and apply other lawful capital mobilization forms as prescribed by law.

2. To be considered by the State for capital loans from the Development Assistance Fund or be provided with investment credit guarantee according to the provisions of the Government’s Decree No.43/1999/ND-CP of June 29, 1999 or borrow capital from the Housing Development Fund or Urban Development Fund.

Article 11.-Creating conditions on investment in building infrastructure works

The investment project owners shall be given conditions on investment in building infrastructure works as follows:

1. The State shall invest from its budget in the building of:

a/ Technical infrastructure works or items (roads, electricity, water supply and drainage) outside the project’s premise, linking to the common technical infrastructure system of the region;

b/ The national- or provincial-level technical infrastructure works or items within the project area;

c/ A number of essential social infrastructure works or items within the project area (if any).

2. In cases where the State budget fails to apportion in time the investment capital for the works or items prescribed in Clause 1 of this Article according to the project implementation tempo, the investors may use other lawful capital sources for investment in order to put the projects into operation as scheduled. This capital amount shall be deducted from the land use levy amount and other amounts payable by the investors to the budget as prescribed. In cases where the capital amount advanced by an investor for the above-mentioned infrastructure construction is larger than the amount payable to the State budget, the difference between the advanced investment capital and the amount payable to the budget shall be refunded from the State budget.

3. Projects and project items invested with budget capital, prescribed in Clause 1 of this Article, must strictly comply with the provisions of the legislation on investment and construction management.

Article 12.-Housing development fund

1. Basing him/herself on the housing development demand, conditions and program of the locality, the president of the provincial-level People’s Committee may decide to set up a housing development fund in order to mobilize capital from various sources in service of investment in housing development in the locality according to the following stipulations:

a/ The housing development fund shall be formulated from the following sources: State budget (proceeds from the sale of State-owned houses, capital depreciation deducted from rentals of State-owned houses, residential land use levy and other budgetary sources, if any); money mobilized from or deposited by people having demand to buy dwelling houses, support money, money voluntarily contributed by organizations and/or individuals at home and abroad and other lawful capital mobilization forms prescribed by law;

b/ The housing development fund shall operate on the principle of preserving capital and covering expenses according to the Regulation issued by the Finance Minister after reaching agreement with the Minister of Construction;

c/ The housing development fund shall be used for the following purposes:

- To be lent to domestic enterprises prescribed in Clause 1, Article 3 of this Decree at low interest rates for investment in the construction of preferential housing projects;

- To be lent to subjects salaried by the State budget at low interest rates, for the purchase of dwelling houses.

- To be lent to domestic enterprises with favorable credit conditions for investment in the construction of housing projects.

2. The Finance Ministry shall coordinate with the Ministry of Construction in guiding the management and use of housing development funds in localities.

3. The Ministry of Construction shall coordinate with the Ministry of Planning and Investment and the Finance Ministry in studying a project on setting up the national housing development fund, to be submitted to the Prime Minister for consideration and decision.

Article 13.-Preferences on land use levy, land rentals and land use tax

The investment project owners shall be given the following preferences regarding the payment of land use levy and land use tax:

1. Preferences on land use levy:

a/ To be exempt from land use levy for the land acreage used for construction of condominiums;

b/ To enjoy 50% reduction of land use levy for the construction of dwelling houses other than condominiums within the project area (if any);

c/ To be exempt from the land use levy for land area used for the construction of dwelling houses of different types, provided that the projects are carried out in the areas meeting with socio-economic difficulties or exceptional socio-economic difficulties (as defined in Lists B and C of the appendix attached to the Government’s Decree No.51/1999/ND-CP of July 8, 1999).

d/ To be entitled to the deferred payment of land use levy for the land acreage subject thereto according to the construction schedule set for each project under decision of the provincial-level People’s Committee, but the duration of deferred payment of land use levy must not exceed 5 years after the land assignment.

2. Land-use tax preferences:

The investment project owners shall be exempt from land use tax for 3 (three) years after the land assignment, for the land area used for the construction of condominiums.

Article 14.-Enterprise income tax rates

1. The following enterprise income tax rates may be applied to investment project owners:

a/ 15%, for condominiums and dwelling houses of other types in the areas meeting with exceptional socio-economic difficulties (prescribed in List C of the appendix attached to the Government’s Decree No.51/1999/ND-CP of July 8, 1999);

b/ 20%, for condominiums and dwelling houses of other types in the areas meeting with socio-economic difficulties (prescribed in List B of the appendix attached to the Government’s Decree No.51/1999/ND-CP of July 8, 1999);

c/ 25%, for condominiums and dwelling houses of other types in other areas.

2. The Finance Ministry shall have to study lower preferential tax rates for condominiums and submit them to the Government for consideration and decision.

Chapter III

CREATING CONDITIONS AND PROVIDING PREFERENCES FOR FOREIGN-INVESTED ENTERPRISES PARTICIPATING IN THE CONSTRUCTION OF DWELLING HOUSES FOR SALE AND LEASE

Article 15.-Subjects participating in the investment and construction of dwelling houses for sale and lease

The State of Vietnam encourages foreign-invested enterprises (hereafter referred collectively to as investors) to participate in the construction of housing projects stipulated in Article 2 of this Decree in urban areas according to the provisions of the legislation on foreign investment in Vietnam.

Article 16.-Creating land-related conditions

1. Investors making investment in the construction of housing projects defined in Article 2 of this Decree may rent land for project implementation according to the provisions of the current land legislation.

2. In cases where investors are joint-venture enterprises or parties to business cooperation contracts, to which the Vietnamese side contributes capital with value of the right to use land assigned by the State, such joint -venture enterprises or contractual parties may continue using that land for investment in, building and trading of dwelling houses.

Article 17.-Land-rental preferences

Investors making investment in the construction of housing projects defined in Article 2 of this Decree shall enjoy the following land-rental preferences:

1. To be exempt from land rentals for the land areas used for the construction of condominiums throughout the land-lease duration.

2. To be exempt from land rentals for the first 3 (three) years after signing the land-lease contract for the land areas for which the investors must pay the land rentals (except for the land areas used for the construction of condominiums).

3. In cases where the project construction or operation is suspended with approval of the State agency competent to lease land, the investor shall enjoy 50% reduction of the land rental corresponding to the suspension duration.

4. In cases where investors sell dwelling houses other than condominiums, they must pay the use levy on the land (affixed with the already sold dwelling houses), but with the land rental amounts they have already paid being subtracted therefrom.

The Finance Ministry shall provide guidance on the payment of land use levy when investors sell dwelling houses mentioned in this Clause.

Article 18.-Enterprise income tax preferences

Investors participating in the construction of housing projects stipulated in Article 2 of this Decree shall enjoy the following preferential enterprise income tax rates:

1. 10%, for condominiums and dwelling houses of other types in the areas meeting with exceptional socio-economic difficulties (defined in List A of the appendix attached to the Government’s Decree No.24/2000/ND-CP of July 31, 2000).

2. 15%, for condominiums and dwelling houses of other types in the areas meeting with socio-economic difficulties (defined in List B of the appendix attached to the Government’s Decree No.24/2000/ND-CP of July 31, 2000).

3. 20%, for condominiums and dwelling houses of other types in other areas.

Article 19.-Handling of problems at the end of investment duration

1. At the end of the investment durations defined in their investment licenses, investors shall have to hand over without compensation the whole infrastructure system under the project to the Vietnam’s competent State agencies according to law provisions.

2. In cases where an investor wants to prolong the investment duration, it may apply therefor according to the provisions of the legislation on foreign investment in Vietnam. If the investor does not apply for the investment duration extension, after 3 (three) months from the end of its investment duration, the provincial-level People’s Committee of the concerned locality shall coordinate with the investor in settling definitely the project’s remaining problems according to the provisions of Vietnamese law.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 20.-Responsibilities of the Construction Ministry

1. To assume the prime responsibility and coordinate with the Ministry of Planning and Investment and the Finance Ministry in guiding localities to work out programs and plans on investment in housing projects entitled to favorable conditions and investment preferences, and submit them to the Prime Minister for consideration and decision.

2. To coordinate with the concerned ministries and branches in inspecting the implementation of this Decree; guiding the provincial-level People’s Committees in reviewing the implementation situation and making timely suggestions on amendments and supplements to issues related to the policies on creating favorable conditions and providing preferences for investment in building dwelling houses and submitting them to the Government for consideration and decision.

3. To study the elaboration and promulgation of regulations, rules and standards related to the designing and building of dwelling houses; to study the application of technologies and new materials to the housing development so as to meet the requirements on quality and tempo of construction of dwelling houses.

4. To study the elaboration and promulgation of the Regulation on management and use of condominiums.

Article 21.-Responsibilities of the concerned ministries and branches

The Ministry of Planning and Investment, the Finance Ministry, the General Land Administration, the State Bank of Vietnam and the concerned ministries and branches shall, within the scope of their respective functions and tasks, have to direct and guide the implementation of policies on creating favorable conditions and providing preferences for investment in building dwelling houses for sale and lease as prescribed in this Decree.

Article 22.-Responsibilities of the provincial-level People’s Committees

1. To direct their attached functional agencies to work out 5-year housing development programs and annual housing plans; residential land use plans and plans on the arrangement of investment capital for building technical and social infrastructure works under the preferential housing projects in their respective localities.

2. To announce dwelling house construction and development planning and residential land use plans; to approve lists of housing development projects entitled to favorable conditions and investment preferences in their respective localities so that enterprises may register for participation in investment; to consider and approve, according to their vested competence, projects, technical designs and total cost estimates of the constructions under housing projects eligible for favorable conditions and investment preferences, with their investors being domestic enterprises.

3. To direct their dependent agencies to pay compensation and carry out ground clearance for housing projects eligible for favorable conditions and investment preferences; to promulgate according to their competence, or propose the competent agencies to amend and/or supplement policies on creating favorable conditions and providing investment preferences for housing projects in their respective localities.

4. To specify subjects entitled to buy or rent condominium apartments under housing projects eligible for favorable conditions and investment preferences in their respective localities.

5. To organize the inspection and examination of the contents and tempo of implementation of projects, modes of determining the sale prices and rent rates of condominium apartments under housing projects eligible for favorable conditions and investment preferences in their respective localities; to handle (or propose the competent agencies to handle) violations according to their vested competence.

6. To consider and work out specific solutions to housing projects already ratified by competent authorities and being implemented in localities in conformity with the contents prescribed in this Decree.

7. To direct the reception and management of housing projects after the investors finish their investment and business activities according to law provisions..

Article 23.-Implementation effect

1. This Decree takes effect 15 days after its signing.

2. The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People’s Committees of the provinces and centrally-run cities shall have to implement this Decree.