The New Land Law 2024 – Notable Amendments To Legal Regulations On Industrial Zone Land In Vietnam

April 27, 2024 Nguyen Quang Vu

In this post, we highlight some key changes to regulations on industrial zone land under the new Land Law 2024.

Regarding areas eligible for investment incentives (those with underdeveloped socio-economic conditions) that are unable to attract private developers, the Land Law 2024 allows the State to lease or allocate land to a public-service entity (đơn vị sự nghiệp công lập) to develop industrial zones.
Under the Land Law 2013, it appears that only economic organization, foreign-invested company, and Vietnamese individual residing oversea can become industrial zone developer (IZ Developer).

The Land Law 2024 expressly allows the IZ Developers using industrial zone’s land via annual rental payment method to change to the one-off land rental payment method for all or part of the leasable land area.
The Land Law 2013 also generally entitles a land user using land on annual rental payment to change to using land with one-off land rental payment. However, the law does not make clear whether the change can be made for separate land parcels in the industrial zone. Accordingly, one may take a strict view that the IZ Developer may only convert all industrial zone land to one-off rental payment instead of a portion of it.
The new regulation of the Land Law 2024 may provide flexibility for both a IZ Developer and its tenants in negotiating the suitable land rental payment method.

The Land Law 2024 now requires that the land use term of a project in the industrial zone must be in line with the project’s operation term. This means that an investor cannot sublease land from IZ Developer for a period shorter or longer than the operational term of its project. Under current Land Law 2013, it appears that only an investor who directly leases land from the State must follow this requirement.
The law further provides that in case where the operating term of an investment project exceeds the remaining land use term of the industrial zone, the IZ Developer must obtain permission from the competent state authority to adjust the land use term accordingly, provided that the total land use term does not exceed 70 years. It is not clear how this regulation will work in practice. An IZ Developer usually has many tenants whose projects are located in the industrial zone. The IZ Developer cannot apply for adjustment of land use term for entire industrial zone just to accommodate a relevant project. In practice, investors in industrial zones typically align their project's operational term with the remaining land use term of the industrial zones.

The Land Law 2024 requests the IZ Developer to set aside land with ready-built infrastructure to sublease to small and medium-sized enterprises and facilities relocated due to environmental pollution. This regulation appears to codify the similar requirements outlined in Decree 35/2022. The specific area to be reserved will be determined according to the relevant provisions in Decree 35/2022.
The reserved land above will be entitled to land sublease rental reduction. The reduced land sublease rental will be reimbursed to the IZ Developer through a deduction from the land rental that it must pay to the State in accordance with law. It is not clear if the IZ Developer has already made lump sum rental payment for the land, then how this reimbursement mechanism will work in practice. Probably, the IZ Developer should only lease the reserved land from the State in the form of annual land rental payment.

According to the Land Law 2024, the land area designated for constructing worker accommodation within industrial zones pursuant to the planning is managed as commercial and service land and is eligible for incentives as per legal regulations.
The new regulation indicates that a parcel of land designated for constructing worker accommodation will be classified as commercial and service use, potentially subjecting it to different treatment compared to other parcels within the industrial zone. Under the current land law, all land areas within industrial zone’s boundaries are generally classified as “industrial zone land”.

This post is written by Nguyen Hoang Duong and edited by Nguyen Quang Vu.