The State’s lease of non-agricultural land is one of the most common mechanisms through which investors implement investment projects in Vietnam. However, not all cases are subject to the same land lease regime. The choice of the land lease mechanism, the method of land rental payment, and compliance with applicable legal requirements directly affect both the implementation schedule of the project and the investor’s rights throughout the land use period. This article outlines the key legal issues that investors should consider before leasing land for the implementation of an investment project.

1. What Types of Non-Agricultural Land May Be Used for Investment Projects?

Pursuant to Clause 3, Article 9 of the 2024 Law on Land, the category of non-agricultural land comprises various types of land, including residential land; land for the construction of offices of state agencies; land used for national defense and security purposes; land for the construction of public service facilities; non-agricultural production and business land; land used for public purposes; land used for religious purposes; cemetery and funeral facility land; land with specialized water surfaces; and other types of non-agricultural land.

For investment and business activities, the most commonly used category is non-agricultural production and business land, which includes:

• Industrial park and industrial cluster land, being land used for the construction of industrial production facilities, handicraft production facilities, centralized information technology parks, workers’ accommodation within industrial parks, service facilities supporting industrial and handicraft production, infrastructure facilities, and other works within industrial parks, industrial clusters, and centralized information technology parks.

• Commercial and service land, being land used for the construction of commercial and service establishments and other facilities serving commercial and service activities; accommodation establishments and service facilities for golf players (excluding golf courses, practice areas, green spaces, water surfaces, landscapes, and facilities serving the management, operation, exploitation, use, and business of golf courses); headquarters and representative offices of economic organizations; warehouses and storage yards of economic organizations located outside production areas; and beaches associated with commercial and service establishments.

• Land for non-agricultural production establishments, being land used for the construction of industrial, small-scale industrial, and handicraft production facilities other than those specified under Point (a) above, including headquarters and other facilities serving production activities or employees attached to such production establishments, as well as yards, warehouses, and storage areas associated with production sites.

• Land used for mineral activities, being land used for mineral exploration, mining, or mining in conjunction with mineral processing; land for the construction of facilities serving mineral activities, including offices, workers’ rest houses, and other facilities for employees associated with mining areas, as well as safety corridors for mineral activities duly licensed or approved by competent state authorities in accordance with the laws on minerals, investment, and other relevant laws.

2. In What Circumstances Does the State Lease Land for the Implementation of Investment Projects?

Pursuant to Clause 1, Article 120 of the 2024 Law on Land, the State leases land with either a one-off land rental payment for the entire lease term or annual land rental payments in cases that do not fall within the land allocation regimes prescribed under Articles 118 and 119 of the Law.

For ordinary production and business investment projects, such as the construction of factories, manufacturing plants, warehouses, logistics centers, or other facilities serving production and business operations, investors are generally required to lease land from the State rather than being allocated land.

3. How May Investors Choose the Land Rental Payment Method?

Not all land lease cases allow investors to choose their preferred land rental payment method.

Pursuant to Clause 2, Article 120 of the 2024 Law on Land, the State leases land with a one-off land rental payment for the entire lease term in the following cases:

• Land used for investment projects in agricultural production, forestry, aquaculture, or salt production;
• Land located within industrial parks, industrial clusters, or high-tech parks; workers’ accommodation within industrial parks; land used for public purposes with commercial objectives; and commercial and service land used for tourism activities or office leasing businesses;
• Land used for the construction of social housing for lease.

Meanwhile, pursuant to Point (a), Clause 3, Article 120 of the 2024 Law on Land, land lease cases not falling within Clause 2 of this Article are subject to annual land rental payments.

Accordingly, for ordinary investment projects involving the construction of non-agricultural production establishments (for example, the construction or expansion of factories located outside industrial parks), investors are, in principle, required to lease land under the annual land rental payment regime, unless such projects fall within a special mechanism prescribed by law.

Conclusion

Based on the foregoing provisions, before applying for a land lease from the State to implement an investment project, investors should carefully determine three key issues: (i) the specific category of non-agricultural land required for the project and whether such land use is consistent with the approved land use planning and land use plan; (ii) whether the project falls within the cases in which the State leases land under the Law on Land; and (iii) whether the applicable land rental payment regime is annual payment or a one-off payment for the entire lease term. A comprehensive assessment of these issues during the project preparation stage will not only assist investors in selecting an appropriate land use structure but will also directly affect their land use rights, financial obligations, as well as their ability to exploit the land, mobilize capital, and transfer the project during its implementation.