For an FDI project, the largest value on a land plot is often not the land use right but the assets attached to the land: factories, warehouses, internal technical infrastructure, even permanently installed machinery. When the State recovers the land, how these assets are treated decides the investor actual loss.
Current legal basis
The 2024 Land Law (31/2024/QH15), effective 1 August 2024, provides in Article 102 for compensation of assets attached to land upon State recovery: lawful asset owners are compensated at the asset remaining value. Details follow Decree 88/2024/ND-CP (effective 1 August 2024) on compensation, support and resettlement.
Conditions: which assets qualify?
Not everything on the land is compensated. The core conditions: the asset was lawfully created (proper construction permits, correct land-use purpose) and formed before the land recovery notice. Excluded: illegally built structures; assets created after the recovery notice; assets already subject to a violation-handling decision requiring demolition. The most disputed boundary in practice is “renovation and upgrading” after the notice — the enterprise must show it was ordinary maintenance, not new creation to inflate compensation.
Calculation and notes
Compensation follows the asset remaining value at recovery (historical cost less depreciation), determined by a valuation organisation or the compensation council. For machinery: only equipment permanently fixed to the structure counts as on-land assets; relocatable equipment is moved by the enterprise itself with relocation-cost support, not value compensation. An important note: alongside asset compensation, the enterprise should also claim production stabilisation and vocational retraining support under the plan — do not overlook these when reviewing the compensation plan.
Frequently asked questions
1. Is an unlicensed factory on leased land compensated upon recovery?
No. Illegally built structures (lacking mandatory construction permits) are not eligible for attached-asset compensation. This is why enterprises must complete construction legalities from the start.
2. Is machinery inside the factory compensated?
Only machinery permanently fixed to the structure (not removable without damage) is compensated as on-land assets. Relocatable machinery is moved by the enterprise, with support for dismantling, transport and reinstallation costs.
3. At what value is compensation calculated?
At the asset remaining value at recovery (historical cost less statutory depreciation), determined by a valuation organisation or the compensation, support and resettlement council.
4. Who receives compensation for mortgaged assets?
Compensation for mortgaged assets is first applied to the obligation to the mortgagee under the mortgage agreement and civil law — only any remainder goes to the enterprise. Coordinate with the bank as soon as the recovery notice arrives.
Key takeaways for investors
- Assets attached to land are compensated at remaining value (Article 102, 2024 Land Law).
- Conditions: lawfully created and before the recovery notice.
- Illegal structures and post-notice assets are not compensated.
- Relocatable machinery gets relocation-cost support, not value compensation.
This article has been quality-reviewed by the FLAW AI Legal Council. Content is for legal reference only and does not replace lawyer advice for specific cases.
