Can we purchase the building for doing hotel business and business of office for lease?
Question:
We, a foreign company, intend to purchase an office and hotel building which has completely been developed by a foreign owned company in Vietnam. The foreign owned company is leased land by the State with payment of annual rent. Can we purchase the building for doing hotel business and business of office for lease?
Answer:
Pursuant to Article 119 of the Land Law, a foreigner investing in Vietnam who is leased land by the State with payment of annual rent has the right to sell its assets attached to the leased land. Under the laws of Vietnam, assets attached to the land include, inter alia, houses, buildings and other construction works. Article 119 of the Land Law also regulates that where the purchaser of the assets attached to the land is a foreign organization or individual, the State shall lease the land with one-off payment of rent for the entire term of the lease or with payment of annual rent.
However, it is noteworthy that, according to Article 10 of the Law on Real Estate Business, permitted scope of real estate business activities applicable to foreigners include:
(i) To invest in creation of houses and buildings for sale, lease out or grant of hire purchase;
(ii) To invest in upgrading land and to invest in infrastructure works on the leased land in order to lease out land with completed infrastructure;
(iii) To provide real estate business services (i.e. brokerage, evaluation, trading floor, consultancy, auctioning, advertising and management services).
It is stipulated in Article 18 of the Law on Real Estate Business that the following forms are considered as creation of houses and buildings:
(i) Investment in new construction of houses and buildings;
(ii) Investment in upgrading houses and buildings.
This means that foreigners cannot purchase buildings for lease. However, According to the Law on Tourism, the lease of hotel rooms is regarded as tourist accommodation business not real estate business. Therefore, you can buy the building from the foreign invested company for doing hotel business but you cannot buy the building for office lease.
Pursuant to Article 50 of the Law on Investment, foreigners wish to invest in Vietnam must set up their enterprises in Vietnam. Therefore, you must set up your foreign invested enterprise in Vietnam for carrying out hotel business.
