For many foreign manufacturers in Vietnam, the factory is the largest asset on the balance sheet and the least liquid. A real estate sale and leaseback turns that frozen capital into cash while production continues under a long-term lease. In Vietnam, however, a real estate sale and leaseback is never a plain property sale.
The State owns the land, land-use rights come in different legal forms, and the Land Law 2024, the Law on Real Estate Business 2023 and the tax rules each decide what a foreign-invested enterprise can actually sell. This guide explains how to structure, price and protect the transaction.
Table of Contents
- Why FDI Companies Consider a Real Estate Sale and Leaseback
- The Legal Framework in 2026
- Land-Use Right Transfer Limits
- Industrial Zone Sub-Lease Structures
- Foreign Ownership Constraints on Real Estate
- Tax Treatment: CIT, VAT and Registration Fees
- Valuation and the Investor’s Yield Lens
- Lease Term, Renewal and Landlord Insolvency
- Execution Roadmap and Alternatives Compared
- Frequently Asked Questions
Why FDI Companies Consider a Real Estate Sale and Leaseback
The arrangement has two steps that must be designed together. The owner sells a factory, warehouse or office building to an investor, and at closing the same parties sign a lease under which the seller keeps operating the premises. The seller receives cash at market value. The buyer receives a tenant with an operating history and a stream of rent.
Typical motivations
Foreign-invested manufacturers use the structure to fund expansion, repay bank debt, return capital to the parent, or move toward an asset-light model that global investors prefer. Logistics operators and regional headquarters use it to release capital tied up in offices. Because the transaction is a form of lease finance, it is often compared with a term loan, but the accounting, tax and legal consequences differ materially.
Where Vietnam is different
In most common-law markets the structure transfers freehold title. Vietnam has no private land ownership. What the seller can sell depends on how it holds the land, so the first diligence question is never price, but which rights the seller actually owns.
The Legal Framework in 2026
Three layers of law apply to any such transaction by an FDI company. Missing one of them is the most common cause of delay.
Core statutes
The Land Law 2024 (Law No. 31/2024/QH15) and its implementing decrees govern the nature of the land-use right, the conditions for transfer, sub-lease and mortgage, and registration. The Law on Real Estate Business 2023 (Law No. 29/2023/QH15), effective together with the Land Law 2024 from 1 August 2024, governs the sale, lease and lease-purchase of buildings and the conditions for businesses doing so.
The Civil Code 2015 supplies the general rules on sale, lease, simulated transactions and security. Alongside these sit the Investment Law 2020, the Law on Enterprises 2020, and the tax statutes covered below.
Investment-licence layer
The factory is usually part of an investment project recorded in an Investment Registration Certificate (IRC). The project’s land, location and operating commitments continue to bind the seller after the sale. Selling the building does not end the project, so the IRC, any incentive conditions and the lessee’s right to continue using the site must all remain consistent after closing.
Land-Use Right Transfer Limits for a Real Estate Sale and Leaseback
In this structure, the central legal question is whether the seller may make a land use right transfer together with the building, or only sell the building. The answer follows the way the seller obtained the land.
Land allocated or leased with one-time payment
A foreign-invested enterprise that was allocated land with land-use fees, or that leased land from the State and paid rent once for the entire term, generally holds a transferable right, subject to the conditions in the Land Law 2024: a land-use certificate, no dispute, no enforcement attachment, and a term that has not expired. In these cases the investor can acquire both building and land-use right, or the seller can transfer the right and take back a sub-lease.
Land leased with annual rent
Where the seller pays annual rent to the State, the land-use right itself is not freely transferable. The seller can generally dispose of the assets it owns on the land, including buildings, and the buyer steps into the lease only with the consent of the competent authority or under the conditions of the Land Law 2024. This structure usually yields a sale of the building plus a land-lease novation, which is slower and more approval-dependent.
The practical test
Before any term sheet is signed, check three documents: the land-use right certificate (or the combined certificate for land and assets), the land lease or allocation decision with its payment method, and the project’s IRC. A mismatch between them, such as a certificate that records only the land but not the factory, is a common blocker. It should be corrected before marketing the asset.
Industrial Zone Sub-Lease Structures
Most FDI factories sit in industrial parks. There the seller rarely holds a direct State lease. It holds a sub-lease from the infrastructure developer, and the industrial zone sub-lease determines what can be sold.
How the sub-lease works
The developer leases land from the State and sub-leases serviced plots to tenants, typically for the remaining term of its own land lease. The tenant’s rights are defined by the sub-lease agreement, the land-lease terms of the developer and the Land Law 2024. If rent was paid in a lump sum for the full term, the tenant normally has stronger rights to transfer or further sub-lease. If rent is paid annually, rights are narrower.
Consents and notifications
Industrial zone sub-lease agreements frequently contain restrictions: developer consent to transfer, pre-emption rights, restrictions on use, and conditions that the transferee must be an eligible industrial-zone investor. The industrial zone management authority should be notified where project details change. A buyer who is a pure property investor, rather than a manufacturer, may not satisfy the zone’s permitted-activity rules unless the structure is built carefully, for example through a leasing company registered to carry on leasing of industrial buildings.
Structuring options
Three structures recur: transferring the building and the sub-lease to the investor, who then grants a lease under the real estate sale and leaseback; transferring the building only, with a back-to-back arrangement approved by the developer; or transferring shares in a special-purpose company that owns the property. Each answers the consent problem differently, and the right choice depends on the developer’s attitude and the sub-lease wording.
Foreign Ownership Constraints on Real Estate
Foreign ownership constraints apply on both sides of the transaction, and the rules differ for the seller and the buyer.
The seller side
A foreign-invested enterprise is a Vietnamese legal entity. It may hold land-use rights and own buildings for the purposes of its approved project, and the Land Law 2024 recognises foreign-invested economic organisations as eligible land users. Foreign shareholders themselves do not own the factory; the company does. This is why this is a corporate asset sale and not a foreign purchase of land.
The buyer side
A buyer that will lease the premises out is carrying on real estate business. Under the Law on Real Estate Business 2023, the buyer should be an enterprise or cooperative with real estate business registered, and an FDI buyer must also meet the market-access conditions of the Investment Law 2020 and Vietnam’s international commitments. Foreign investors may invest in real estate business in Vietnam, but typically through a locally established enterprise, with the permitted activities set out in the IRC.
Housing rules do not apply to factories
The ownership restrictions in the Housing Law 2023 concern residential units, and the quotas and tenure limits that apply to foreigners in apartments and villas do not govern industrial or commercial premises. Offices and warehouses are treated as commercial works, so the relevant limits come from the land-use right and the buyer’s business licence, not from housing quotas.
Seller registration
A seller disposing of its own assets as part of a one-off financing is generally not treated as engaging in real estate business, so it does not need a separate real estate business registration for this alone. Counsel should still confirm this against the current implementing decrees.
Tax Treatment: CIT, VAT and Registration Fees
Tax is the main cost driver, and the real estate sale and leaseback term sheet should allocate it explicitly.
Corporate income tax on the gain
The gain is the sale price less the net book value of the building (and land-use right, where transferred) and deductible transaction costs. The gain is taxable under the corporate income tax law at the standard rate of 20 percent unless an incentive applies.
Companies should check whether the current corporate income tax rules separate real estate transfer income from other income and restrict loss offsets, because that treatment affects whether operating losses can shelter the gain. Tax-incentive projects should also confirm that a disposal does not trigger clawback of incentives or of import duty exemptions on assets related to the project.
Value-added tax
The transfer of a land-use right is not subject to VAT, while the sale of a building is, generally at 10 percent, calculated on the price excluding the land value under the VAT rules. Rent under the real estate sale and leaseback is also subject to VAT, which is normally recoverable by a VAT-registered tenant. Reduced rates introduced in recent years have largely excluded real estate, so the standard rate should be assumed unless confirmed.
Registration fees and other costs
Registration of the transfer attracts a fee, commonly 0.5 percent of the registered value for land and buildings. Notarial and land-registry costs should be budgeted separately. If the buyer is related to the seller, tax authorities may test whether the price and the rent are at arm’s length under the transfer pricing rules, so supporting valuation evidence matters.
Accounting treatment
Under Vietnamese Accounting Standard 06 on leases, the real estate sale and leaseback is classified as a finance lease or an operating lease. For a finance lease, any gain is deferred and amortised over the lease term. For an operating lease at fair value, the gain may be recognised immediately. Groups reporting under IFRS 16 may reach different results, so both tracks should be modelled before signing.
Valuation and the Investor’s Yield Lens
A leaseback succeeds when seller and investor can agree on a price and a rent that are consistent with each other.
How investors price the asset
Investors look at the property as a bond-like income stream. They divide the net annual rent by the purchase price to reach an initial yield, and compare it with government bond yields, bank funding costs and yields for comparable industrial or office assets. This is the same logic behind a REIT, although Vietnam’s listed property fund framework remains thin, so most buyers are private funds, developers, family offices or finance leasing companies.
Seller’s perspective
The seller pays for liquidity through rent. A higher price increases rent, and the economics only work if the capital released earns more than the rent cost. Sellers should compare the all-in cost with a term loan or a finance lease, and include tax leakage and the loss of control over the building.
Lender view
Banks financing the investor will examine tenant credit, lease length, the strength of the land-use right, and whether the lease can be registered. Where the seller’s own lender holds a mortgage over the factory, the mortgage must be released at closing, usually with the sale proceeds. The structure can also be arranged as lease finance through a finance leasing company, which then owns the asset and leases it back.
Lease Term, Renewal and Landlord Insolvency
Once the transaction closes, the seller’s operating future depends on the lease. Protection must be written into the documents, because the seller no longer controls the property.
Term and renewal
The leaseback term cannot exceed the remaining term of the underlying land-use right or sub-lease, and a buffer is prudent. Tenants should negotiate renewal options with a rent-setting mechanism, a right of first refusal on any later sale, and a repurchase option. Because Vietnamese law can recharacterise a transaction that is a disguised loan under the Civil Code’s rules on simulated transactions, a repurchase option should be priced and structured so that the sale is a genuine transfer.
Landlord insolvency protection
Landlord insolvency is the main risk a tenant carries after the sale. Practical protections include using a ring-fenced special-purpose landlord with no other business, restrictions on mortgaging the property, registering the lease with the land authority where possible, and non-disturbance undertakings from any lender that takes a mortgage over the property. Tenants should also seek step-in rights and a clause allowing them to purchase the asset on a landlord default.
Rent currency and payment
Between Vietnamese residents, rent is generally payable in dong, since foreign-exchange rules restrict domestic transactions in foreign currency. Indexation can be agreed by reference to a foreign-currency benchmark, but payment is in dong.
Execution Roadmap and Alternatives Compared
A well-run transaction typically proceeds through diligence on land rights, structuring, valuation, tax clearance modelling, developer or authority consents, signing, and registration. Allow several months, with consent timing driving the schedule.
Comparing a real estate sale and leaseback with other financing
| Criterion | Real estate sale and leaseback | Mortgage term loan | Finance lease |
|---|---|---|---|
| Capital released | Close to full market value | Typically a share of appraised value | Depends on lessor appetite |
| Title | Transferred to investor | Retained by company | Held by lessor until option exercised |
| Tax on gain | CIT and VAT on sale | None | Depends on structure |
| Land-use constraint | Transfer conditions apply | Mortgage conditions apply | Transfer conditions apply |
| Balance sheet effect | Asset removed; lease recorded | Debt added | Lease liability recorded |
| Control of premises | Contractual only | Full | Contractual until purchase |
Where to start
Start with a short feasibility review of the land documents and the tax cost, because those two items decide whether this structure beats a conventional loan. Official texts can be checked on the national legal document database and tax guidance on the General Department of Taxation website. Our banking and finance team and real estate team work on these transactions together.
Executing a Real Estate Sale and Leaseback: Workplan and Documents
A real estate sale and leaseback is documented as two linked contracts, and the sequence in which they are signed matters. A FDI company that runs the real estate sale and leaseback as a single workstream, with one counsel team and one timetable, avoids most of the delays described in this article.
Pre-Signing Diligence for a Real Estate Sale and Leaseback
Before launching a real estate sale and leaseback, the seller should confirm the land-use right status of the site, the investment registration, the construction permits and any mortgage or lender consent. The buyer in a real estate sale and leaseback will ask for the same documents and will price any gap.
A real estate sale and leaseback of a factory in an industrial zone also needs the zone developer’s confirmation that the transfer and the sub-lease are permitted, so the real estate sale and leaseback timetable should include a consent window.
Key Documents in a Real Estate Sale and Leaseback
The core documents are the transfer agreement, the lease agreement, a deed of guarantee or security deposit, and, where relevant, the lender’s release. In a well-drafted real estate sale and leaseback the lease term, the renewal right, the rent review formula and the buyer’s step-in rights are settled before the transfer closes.
Because the seller continues to operate the plant, the real estate sale and leaseback should also set maintenance, insurance and capital expenditure responsibilities, and should state what happens to improvements installed by the tenant.
Closing and Post-Closing Steps
After signing, the parties complete the registration steps, update the investment registration where the project’s site or ownership changes, and notify the tax authority. The seller should book the real estate sale and leaseback under the applicable accounting standard and align its covenants with its remaining lenders.
A buyer that plans to hold the real estate sale and leaseback asset for the long term should also consider insurance, property management and a clear exit route, because the resale value of the asset depends on the quality of the lease. When each step is planned in advance, a real estate sale and leaseback in Vietnam can close within a predictable period and give both parties the certainty they need.
In practice, the best real estate sale and leaseback outcomes come from early agreement on the lease, not the price.
Frequently Asked Questions
Can a foreign-invested enterprise sell its factory and lease it back?
Yes, subject to the nature of its land-use right, the conditions in the Land Law 2024, any industrial-zone developer consent, and consistency with its investment registration. The company sells assets it owns and signs a lease for continued use.
Does a real estate sale and leaseback require a real estate business licence?
The buyer-lessor usually should be registered for real estate business under the Law on Real Estate Business 2023. A seller making a one-off disposal of its own assets generally need not register for that alone.
What taxes apply to a leaseback deal?
Corporate income tax on the gain, generally at 20 percent, VAT on the building (not on the land-use right), registration fees, and VAT on future rent. Incentive clawback and transfer pricing should also be reviewed.
Can the buyer be a foreign company?
Typically through a locally established enterprise licensed for real estate business, meeting Investment Law 2020 market-access conditions. Foreign buyers do not hold land directly. They hold the building and land-use right through a Vietnamese entity.
How can the tenant protect itself if the landlord becomes insolvent?
Use a ring-fenced landlord in any real estate sale and leaseback, register the lease where possible, obtain lender non-disturbance undertakings, restrict further mortgages, and negotiate purchase and step-in rights on default.
Request a Confidential Preliminary Consultation
IVLF Advisors LLC advises foreign-invested enterprises on real estate financing, tax and structuring in Ho Chi Minh City and Hanoi. Contact us to discuss your premises and objectives in a confidential preliminary consultation, without obligation.
Your next step: gather the land certificate, land lease or sub-lease, and IRC for the premises you are considering, and ask your adviser for a written feasibility note on whether a real estate sale and leaseback is achievable before approaching any investor.
This article provides general information only and is not legal, tax or financial advice. Laws and regulations change, and the application of any rule depends on specific facts. Please obtain professional advice before acting.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
