Land and Factories on FDI Project Termination: Land Recovery, Asset Liquidation on Leased Land

A typical scenario: a Singapore investor decides to close a factory in an industrial park in Bac Ninh. The factory sits on 3ha, built in 2019, machinery still in good condition. He asks two questions: “Who do we return this land to?” and “The factory and machinery — who can we sell them to?”

Those two questions capture the entire land issue on FDI project termination. And the answer depends on a point many investors overlook: whether the project land is leased directly from the State or sub-leased from the industrial park infrastructure developer. Two situations, two completely different handling methods.

1. First determine: which type is your land?

Type 1: The enterprise leases land directly from the State. The State allocates or leases land to the enterprise for the project. When the project terminates, the State recovers the land through administrative procedures. This is a relationship between the land user and the State.

Type 2: The enterprise sub-leases land from the industrial park (IP) infrastructure developer. This is the most common case for manufacturing FDI: the enterprise signs a sub-lease contract with the IP infrastructure developer. When the project stops, handling the land is mainly liquidating the sub-lease contract with the IP developer — a civil contract relationship, not a State administrative recovery decision (unless the IP developer itself violates).

Misidentifying the land type leads to wrong procedures: some enterprises sub-leasing land in an IP filed applications to return land to the State, taking months to learn they knocked on the wrong door. Check the land lease contract and the land use right certificate from the start.

2. Land recovery on project termination (direct State lease case)

The Land Law 2024 (Law No. 31/2024/QH15, effective 01/8/2024) prescribes land recovery cases in Articles 78, 79, 81 and 82. For terminated FDI projects, two bases are directly relevant:

Basis 1: Land recovery on investment project termination (point d, clause 1, Article 82). When the investment project terminates operation under investment law, the State recovers the land. The current legal milestone for “project termination” is the Investment Law 2025 (Law No. 143/2025/QH15, effective 01/3/2026, replacing the Investment Law 2020): clause 1, Article 36 prescribes cases where investors terminate investment project operations, including where the investor voluntarily decides to terminate. On procedures, Article 66 of Decree 96/2026/ND-CP (effective 31/3/2026, guiding the Investment Law 2025) requires: the investor notifies and sends the project operation termination decision, the investment policy approval decision (if any), the Investment Registration Certificate (IRC) (if any) to the investment registration authority within 15 working days of the decision. Within the following 03 working days, the investment registration authority notifies relevant agencies of the termination — including the land management authority. In other words, the investor’s decision to stop the project “runs” to the land authority and triggers the recovery procedure.

Basis 2: The land user voluntarily returns the land (clause 2, Article 82). If the enterprise no longer needs the land, it may file a voluntary land return application. Voluntary return can help the enterprise control timing and avoid violation-based recovery; however, compensation, support and land-attached asset consequences must be fully calculated for each specific case. Note: the return must be in writing (an application), not just oral agreement — the written land return is the basis for state authorities to perform recovery.

Warning: do not let the land fall into violation-based recovery (Article 81). This is the biggest land risk when a project “hangs” — i.e. the investor has internally decided to stop but not completed legal procedures, leaving the land idle. Article 81 lists 08 cases of land recovery for land law violations, with clause 8 targeting investment projects directly: land leased by the State for a project that is not used for 12 consecutive months from on-site handover, or land use progress delayed 24 months against the project’s stated progress. In this case, the investor is granted an extension of no more than 24 months and must pay additional land rent for the extension period; if the land is still not used by the extension’s end, the State recovers the land with no compensation for land, land-attached assets and remaining land investment costs.

The consequences of the two basis groups differ significantly: when land is recovered for clause 8, Article 81 violations, the State recovers the land with no compensation for land, land-attached assets and remaining land investment costs. With recovery under Article 82 (project termination or voluntary return), handling of land-attached assets follows separate mechanisms for each recovery basis — enterprises should check current regulations (Decree 102/2024/ND-CP) for their specific case rather than assuming asset handling remains intact. Therefore, as soon as the project-stopping decision is made, land matters must be handled in parallel, not left for later.

Who issues the recovery decision? Under Article 83 of the Land Law 2024, the provincial People’s Committee decides land recovery for foreign-invested economic organisations under Articles 81 and 82. From 01/7/2025, Decree 151/2025/ND-CP decentralises as follows:

Land recovery for land law violations (Article 81): the provincial People’s Committee Chair decides (point a, clause 1, Article 9 of ND 151/2025).
Land recovery for termination of lawful land use, voluntary land return — including investment project termination (point d, clause 1, Article 82) and voluntary return (clause 2, Article 82): the commune People’s Committee Chair decides (clause 2, Article 10 of ND 151/2025).

This distinction is crucial for terminated FDI projects: recovery procedures in “clean” cases (project termination/voluntary return) are handled at the commune level, not the provincial level.

3. Assets on leased land: how are factories and machinery handled?

This is the part deciding how much the investor “recovers” on exit. The Land Law 2024 gives foreign-invested economic organisations leasing land with annual rent payments a fairly complete toolkit in Article 41. Each option:

Option 1: Selling the factory with the land lease right — usually the best capital recovery option. Point d, clause 2, Article 41 permits selling owned assets attached to land, with the lease right in the land lease contract, when meeting the conditions in Article 46 — including: – Assets lawfully created and registered as prescribed by law; – Construction completed in accordance with the detailed construction plan and the approved investment project; – Specifically for selling assets with the lease right in the land lease contract: advance compensation, support and resettlement payments not yet fully deducted from payable land rent must have been paid (point b, clause 2, Article 46).

The buyer of the assets and the lease right in the land lease contract may continue leasing the land for the determined purpose and the remaining land use term. In practice, this is the “factory handover” form many FDI investors perform: instead of demolishing the factory to return bare land, selling the whole asset + land lease right cluster to a new investor. The recovered value is far higher than selling scrap.

Option 2: Leasing land-attached assets and the lease right in the land lease contract (point dd, clause 2, Article 41). Suitable when the investor does not yet want to sell outright, or wants to hold assets waiting for better market timing. Note: leasing assets differs from sub-leasing land use rights — the object here is land-attached assets with the lease right in the contract.

Option 3: Mortgaging or contributing capital with land-attached assets (points b, c, clause 2, Article 41). Assets attached to leased land may be mortgaged at credit institutions permitted to operate in Vietnam, or contributed as capital to another enterprise. The recipient of the asset capital contribution continues to be leased land by the State for the right purpose within the remaining term. This option is rarely used on full exit, but useful in partial restructuring structures.

Option 4: Liquidating relocatable machinery and equipment. Machinery and equipment are the enterprise’s own assets, not attached to land in the legal real-estate sense — the enterprise decides to liquidate them under internal procedures (owner/Members’ Council decisions). Practical note: the import regime of the machinery (trading import, temporary import for re-export, investment incentive import) determines whether customs procedures are needed when liquidating domestically. This part is tightly linked to tax obligations — see tax finalisation on dissolution and FDI project termination.

A tax note: transferring land-attached assets triggers tax obligations (VAT, CIT). The transfer price must reflect market price: for related-party transactions, transfer price determination follows the market price principle under the current related-party transaction management framework (Decree 255/2026/ND-CP, effective 01/7/2026, replacing Decrees 132/2020/ND-CP and 20/2025/ND-CP) — the tax authority has the responsibility and power to review and re-determine related-party transaction prices under this Decree. Tax imposition risk when transaction prices do not follow the market price principle is determined under current tax law applicable to each specific transaction. Finalise the valuation plan before signing the transfer contract.

4. Financial obligations on land: settle before handover

Whatever the recovery basis, the enterprise must complete financial obligations on land:

Land rent must be fully paid up to the land handover point. Owing unpaid land rent is one of the violation-based land recovery cases (clause 6, Article 81: land users failing to fulfil financial obligations to the State).
Land rent prepaid for unused periods — whether refundable depends on each specific case and land rent regulations (Decree 103/2024/ND-CP) — check the specific dossier, do not assume refund or loss.
Fees owed to the infrastructure developer (management fees, outstanding IP infrastructure usage fees) are handled under the signed contract.

General principle: the earlier land financial obligations are “locked”, the faster the recovery/handover procedure. Outstanding land rent debts are among the common reasons project termination dossiers hang for months.

5. Land leased in industrial parks: working with the infrastructure developer

For most manufacturing FDI projects — sub-leasing land in IPs — the handling scenario is as follows:

Step 1: Reviewing the sub-lease contract. How many years remain? What do the early termination clauses say? How is prepaid rent handled? Are there early termination penalties? Is the developer’s consent needed to assign the sub-lease to a third party? This contract is the main “rulebook” — read it carefully before doing anything.

Step 2: Negotiating with the IP infrastructure developer. Practical options: – Liquidating the sub-lease contract, handing over the site to the IP developer (usually with or without site restoration conditions, as agreed); – Assigning the sub-lease contract (with the factory) to a new investor, if the IP developer agrees — this is common because the IP developer also wants to fill vacant area; – Sub-leasing part of the area while awaiting transfer.

Step 3: Note the sub-lessee’s own land use obligations. Article 202 of the Land Law 2024 sets the legal framework for industrial parks: the State leases land to economic organisations to invest in building infrastructure, then enterprises sub-lease land from the infrastructure developer. At the specific obligation level, clauses 2 and 3, Article 93 of Decree 102/2024/ND-CP provide: the infrastructure developer must determine land use progress in the sub-lease contract; inspect, monitor and urge the sub-lessee to use land on schedule; annually report to the provincial People’s Committee and publicise un-sub-leased areas; where the sub-lessee does not use the land or is behind schedule (except force majeure), the developer must require remedial measures and report to the provincial People’s Committee. In practice, sub-lessee enterprises should stick to the committed land use progress in the sub-lease contract and coordinate with the IP developer on inspection and urging requests — avoiding idle land while awaiting contract liquidation.

An important difference: when sub-leasing in an IP, the enterprise does not perform “returning land to the State” procedures. After handover, the land is managed by the IP developer for continued sub-leasing. Administrative procedures with state authorities in this case are mainly updating change registrations (if any) and investment and tax procedures — not a land recovery decision.

6. Checklist: handling land and factories on FDI project termination

Identify the land type: leased directly from the State or sub-leased in an IP — check the land lease contract and certificate.
Review land financial obligations: outstanding land rent, IP infrastructure fees — pay in full.
Complete investment project termination procedures (Article 36 of the Investment Law 2025; Article 66 of Decree 96/2026/ND-CP: notify the investment registration authority within 15 working days) — this is the “switch” triggering the land recovery procedure.
Choose the asset handling option: selling land-attached assets with the lease right (Articles 41, 46) / leasing / liquidating machinery — finalise valuation and tax plans before signing.
If leased directly from the State: file a voluntary land return application (clause 2, Article 82) or coordinate recovery procedures on project termination (point d, clause 1, Article 82); hand over land per the recovery decision.
If sub-leased in an IP: negotiate liquidating/assigning the sub-lease contract with the infrastructure developer; hand over the site as agreed.
Never leave land idle while awaiting procedures — risk of recovery under Article 81 with the consequence of no compensation for land, land-attached assets and remaining land investment costs (clause 8, Article 81).
Keep all land dossiers (lease contracts, land rent payment vouchers, recovery decisions/handover minutes) until dissolution and tax finalisation are complete.

See the overall picture at terminating an FDI investment project and the 12-step FDI project termination checklist. When land is handled, the next step is usually dissolving the FDI company. The land recovery process and asset handling on land on project termination are analysed in detail in Land and asset recovery on FDI project termination. If weighing exit options, the article FDI exit: bankruptcy, dissolution or transfer? helps compare.

7. When to have a lawyer alongside?

Valuing and structuring factory-plus-lease-right transfer transactions — one wrong clause in the contract can leave the buyer unable to continue leasing the land, collapsing the deal.
Negotiating with the IP infrastructure developer on sub-lease liquidation/assignment, especially with disputes over prepaid rent or early termination penalties.
Land dossiers with “blemishes”: incomplete financial obligations, construction not per approved plans, unregistered assets — these directly affect asset sale conditions under Article 46.
Risk of violation-based land recovery (Article 81) when the project has been delayed or idle for a while.
Transaction structures between related parties (selling to a parent/sister company) — risk of price imposition and tax reassessment.

Accompanying investors through the exit phase

Land and land-attached assets are usually the largest remaining asset block on FDI project termination — handled right, the investor recovers significantly; handled wrong, the asset handling right may be lost or procedures stuck for years. If support is needed, FLAT Law Firm can accompany investors through the entire exit process: from investment project termination procedures, land recovery/handover, factory transfer with land lease rights to negotiating with IP infrastructure developers.

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