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Question: We have just been granted the investment certificate for setting up a 100% foreign owned company. We wish to lease land from the State with lump sum rent payment for implementation of our project and are now carrying out the procedure for signing land lease contract. Could you let us know the method for determining land rent rate? Is there any difference in the method for determining land rent rate if we sign the land lease contract in 2010?

Answer:

It is stipulated under Decree 142/2005/ND-CP dated November 14, 2005 of the Government on collection of land rents and water surface rents that the annual land rent rate shall be equal to 0.5% of the land price according to the use purpose of the rented land which is promulgated by the provincial-level People’s Committee where the project is located.

For land of urban centers, commercial or service centers, traffic hubs, concentrated population quarters, which may yield special profits or be used as ground for production, business and/or service activities, provincial-level People’s Committee presidents shall base on the local situation to decide on the promulgation of land rent rates higher than the set rent rate, which, however, must not exceed four times the land rent rate as specified above. This means the annual land rent rate shall not exceed 2% of the land price according to the use purpose of the rented land.

For land in deep-lying, remote, highland or island regions, areas facing socio-economic difficulties, areas facing particular socio-economic difficulties; land used for agricultural production, forestry, aquaculture or salt production, land used as ground for production and/or business activities of projects in the domains entitled to investment encouragement or special investment encouragement, provincial-level People’s Committee presidents shall decide on the promulgation of land rent rates lower than the set land rent rate, which, however, must not be lower than half the set rent rate as  specified above. This means the annual land rent rate cannot be lower than 0.25% of the land price according to the use purpose of the rented land.

Land rent rates in case of auction of the rented-land use rights or bidding for projects involving the use of rented land shall be winning bids.

In case of lump-sum rent payment for land renting period, the land rent rate shall be the multiplication of the annual land rent rate and total number of rent years (after deducting the number of land rent exemption years, if any).

However, if your company signs the land lease contract with lump sum rent payment for the whole land rent period after December 31, 2009, according to Decree 69/2009/ND-CP dated August 3, 2009 (coming into force as from October 1, 2009) of the Government providing supplementations to land use planning, land price, land recovery, compensation, assistance and resettlement, the amount of the lump sum rent payment for land use shall equal the amount of land use fees payable with the same land use period if land had been allocated with collection of land use fees.

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