BUYING RESIDENTIAL LAND FOR BUSINESS PURPOSE, MAY AN ENTERPRISE  IMPLEMENT?

BUYING RESIDENTIAL LAND FOR BUSINESS PURPOSE, MAY AN ENTERPRISE  IMPLEMENT?

According to the provisions of the Enterprise Laws, land use rights can be used as capital contribution assets at enterprises, provided they have legal ownership and use rights and can be valued in Vietnam dong. If a company shareholder wants to buy land use rights to carry out commercial business, it is necessary to carry out relevant legal procedures, including transfer of land use rights and change of land use purpose.

1.         Regulations on change of land use purpose

Based on the purpose of use, the land is classified into different groups, in which there are 3 groups: agricultural land (land for rice cultivation, annual and perennial crops, production forest land, aquaculture land, forest land, etc.) households, …), non-agricultural land (including residential land, land for building office buildings, land for non-industrial production and business, land used for public purposes, …) and other types of land .

Corresponding to each land use purpose recorded in the certificate issued by the competent state agency, the owner or user is allowed to carry out activities within the permitted scope. However, in fact, many land owners and users have the need to perform activities other than the permitted land use purposes. At that time, they will need to take note and carry out the necessary procedures according to regulations.

At point d, clause 2, Article 5 of Circular 09/2021/TT-BTNMT, the cases of change of land use purpose not requiring permission from permission from competent authority but require change registration:

–           Repurposing of land for annual plant farming land into other types of agriculture land, namely land for construction of greenhouses and other housing for crop production; land for construction of housing for livestock, poultry and other lawful animals; and land for aquaculture for the purposes of study, research and experimentation;

–           Repurposing into land for farming of other annual plants; repurposing of land for aquaculture into land for perennial plant farming;

–           Repurposing of land for perennial plant farming into land for aquaculture or land for perennial plant farming;

–           Repurposing of residential land into non-agricultural land besides residential land;

–           Repurposing of land for economic/service activities into non-agricultural business land besides land for non-agricultural production facilities; repurposing of non-agricultural business land besides land for economic/service activities and land for non-agricultural production facilities into land for service structure construction.

For these cases, users only need to carry out the procedures for registration of land changes according to regulations. In which, land change registration is the registration to notify the State about changes in land that has been issued with a red book or registered.

2.         Transfer of land use rights

Transfer of land use rights means the transfer of land use rights from one person to another through the forms of exchange, transfer, inheritance, donation of land use rights and capital contribution with land use rights. Accordingly, with the transfer of land use rights, according to the provisions of Article 167 of the Land Law 2013, only the person who is granted the Certificate of land use right (or the person whose name is on the red book) has the right to convert, transfer, lease, sublease, inherit, donate, mortgage or contribute land use rights as contribution capital.

            Regarding the transfer conditions, the land user may only transfer the land use right when the following conditions are satisfied:

–           Having the certificate, except the case prescribed in Clause 3, Article 186 and the case of receiving inheritance prescribed in Clause 1, Article 168 of the Land Law 2013;

–           The land is dispute-free;

–           The land use rights are not distrained to secure judgment enforcement;

–           Within the land use term.

In addition, land users also need to pay attention to the cases where land transfer is not allowed, including:

–           Not to receive the transfer of land use rights in cases where the transfer is not permitted by law;

–           If they are not directly engaged in agricultural production, they are not allowed to receive the transfer of land use rights for rice cultivation;

–           Not to receive the transfer of the right to use residential land, agricultural land in the protection forest area, in the strictly protected subdivision, the ecological restoration subdivision in the special-use forest, if not living in the protected forest area and special-use forests.

BUYING RESIDENTIAL LAND FOR BUSINESS PURPOSE, MAY AN ENTERPRISE  IMPLEMENT?

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3.         Specific situations

Company A intends to buy 03 adjacent residential land plots in an 1/500 approved residential area in 2020 (to be named by shareholders), the Investor has also been granted a certificate of land use rights, The purpose is for showroom of business.

(i).   Do shareholders of the company have the right to buy residential land here and right after that shareholders will change the purpose of land use into commercial and service land? What are the regulations when changing the land use purpose that must be consistent with the land use master plan and plan?

(ii).  If a shareholder buys land, does it automatically belong to the company’s ownership, or does the shareholder have to transfer the land use right to the company?

a.         Right to buy land use right and change land use purpose

According to regulations, economic organizations, households and individuals may receive land use right transfer through the transfer of land use rights, except for the case specified in Article 191 of the 2013 Land Law…. In addition, residential land is subject to the transfer of land use rights.

In the above case, the shareholders of the company want to change the purpose of using residential land to commercial and service land. Commercial and service land includes land for construction of commercial and service establishments and other works in service of business, commerce and services. Pursuant to Point d, Clause 2, Article 5 of Circular 09/2021/TT-BTNMT, the conversion of residential land to non-agricultural land that is not residential land does not require permission from a competent state agency, but must be registered on change.

Accordingly, when a shareholder wishes to move from residential land to commercial or service land, he or she does not have to obtain permission from a competent state agency, but only needs to carry out the procedures for registration of land changes according to the prescribed order.

However, it should be noted that the change of land use purpose must also be based on the State’s decision on land use purposes through the district-level master plans, land use plans and annual land use plans decision by the competent state agency.

b.         Land use rights for companies

If the shareholder is an individual who buys back the land use right, the right to use that land does not automatically belong to the company.

If the company wants to own this land use right, the shareholders and the company need to carry out the procedure for transferring the land use right first. Forms of transfer include: purchase, sale, donation, capital contribution, etc.

–           The capital contribution must satisfy the following conditions, based on Article 188 of the 2013 Land Law:

–           Have a certificate of land use right;

–           Undisputed land;

–           The land use right is not distrained to secure judgment enforcement;

–           Still in the land use period.

Legal basis:

  • Enterprise Law 2020;
  • Land Law 2013;Circular 24/2014/TT-BTNMT on cadastral records issued by the Minister of Natural Resources and Environment on May 19, 2014;

  • Circular 33/2017/TT-BTNMT guiding Decree 01/2017/ND-CP amending the decree guiding the Land Law and amending the circular guiding the implementation of the Land Law issued by the Minister of Natural Resources and Environment issued on December 5, 2017;

  • Circular 02/2015/TT-BTNMT guiding Decree 43/2014/ND-CP and Decree 44/2014/ND-CP issued by the Minister of Natural Resources and Environment on January 27, 2015;

  • Circular 09/2021/TT-BTNMT amending the Circular providing guidance on the Land Law issued by the Minister of Natural Resources and Environment on June 30, 2021.

𝐋𝐈𝐍𝐂𝐎𝐍 𝐋𝐀𝐖 𝐅𝐈𝐑𝐌 – 𝐒𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐥𝐞 𝐜𝐨𝐨𝐩𝐞𝐫𝐚𝐭𝐢𝐨𝐧

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