Sale and leaseback lets an FDI company withdraw capital ‘frozen’ in real estate back into production, while the factory keeps operating on site without interruption. But in Vietnam the hard part is not the idea — it is whether the FDI company’s leased land use rights can be transferred at all, and the tax bill of each step in the structure.
Transaction structure and tax impact
- The transferable object depends on the land lease form — land leased with one-off rent for the whole remaining term: the company may transfer land use rights and assets on land under Land Law 31/2024/QH15; land leased with annual rent: land use rights may not be transferred — only assets on land can be sold, with the buyer stepping into the land lease; confusing this point makes the deal unregistrable.
- Corporate income tax on the transfer — real estate transfer income is subject to corporate income tax under separate rules (separately declared, standard 20% rate), computed on the transfer price less cost basis and related expenses; the buyer’s side capitalises it as an asset depreciating over the leaseback and use period.
- VAT and registration fee — transferring assets on land bears VAT under the deduction method with the taxable price being the transfer price less the deductible land price or land rent portion as prescribed; the transferee pays the registration fee when registering ownership and use rights at the prescribed rate for houses and land (0.5% under the current frame).
- The leaseback phase and land-rights loss risk — leaseback rent is deductible for the company with a valid contract and invoices; the largest risk is the buyer (lessor) going bankrupt or reselling to a less friendly third party — the leaseback must be structured long-term, duly registered and notarised as appropriate, with buy-back priority and clauses barring transfers that change lease conditions.
Steps of an FDI sale-leaseback deal
- Land legal diligence first: rent payment form, remaining term, transfer conditions in the land lease contract and industrial park rules — the result decides the feasible transaction structure.
- Independent valuation of the factory and land use rights (where transferable) as the pricing basis against related-party price adjustment and later tax disputes.
- Design one synchronised contract set: the transfer contract, a protective long-term leaseback, maintenance and asset insurance agreements, and a registration and tax declaration schedule for each transaction step.
A successful sale-leaseback in Vietnam is land structure first, tax second, and a tenant-protective leaseback in the middle. FDI companies that diligence their own land lease form, value independently and lock a long-term leaseback release capital from real estate without gambling the factory’s operations — the most precious asset in any financial structure.
Frequently asked questions
What is the purpose of sale and leaseback?
To release capital frozen in factory real estate for production use, while the company leases back the same factory and operates continuously without interruption.
What taxes arise when selling the factory?
Corporate income tax on real estate transfer income (separately declared, 20% rate), VAT on the transferred asset value as prescribed, and the registration fee on the buyer side when registering.
Is there a risk of losing land use rights?
Yes if structured wrongly: annually rented land cannot transfer land use rights; and after selling, the company needs a protective long-term leaseback to avoid changed conditions or loss of premises if the buyer resells.
This article has been quality-reviewed by the FLAW AI Legal Council
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