Sale and Leaseback of Industrial Assets in Vietnam

Sale and leaseback has become one of the most practical liquidity tools for manufacturers in Vietnam. A factory that has spent years building a production line can sell that equipment to a lessor, receive cash immediately and keep running the same machines under a lease.

For foreign-invested manufacturers facing capex cycles, working-capital pressure or a parent-level push to lighten the balance sheet, a well-built sale and leaseback can unlock capital without a share sale or new bank debt. The legal design of a sale and leaseback is not simple, however. Licensing, tax, accounting, land and security issues all pull in different directions.

This article explains how a sale and leaseback of industrial assets works under Vietnamese law and where it most often goes wrong.

In this article

Table of Contents

Why Manufacturers Use Sale and Leaseback

At its core, a sale and leaseback is two linked contracts: the owner sells an asset to a lessor, and the lessor immediately leases the same asset back to the seller for a fixed term. The seller becomes the lessee, keeps using the asset and pays rentals. In industrial practice the assets are typically production lines, injection-moulding machines, CNC equipment, boilers, generators, solar rooftop systems or warehouse handling equipment.

The liquidity case for FDI manufacturers

Foreign-invested manufacturers in Vietnam often hold large fixed-asset bases funded by equity and parent loans. A sale and leaseback converts that dormant value into cash, which can repay shareholder loans, fund a new line or smooth a downturn. It is a form of machinery financing that is secured by the asset itself, so it can price differently from a general corporate loan and may sit outside the covenants of existing bank facilities, subject to what those facilities say.

Local lessors, foreign lessors and bank-affiliated lessors

Lessors in a sale and leaseback fall into three groups. The first is licensed finance leasing companies, including bank-affiliated and foreign-owned ones. The second is non-bank commercial lessors that offer an operating lease. The third is offshore lessors, often related to the manufacturer’s group or to an equipment vendor. The choice of lessor is a legal choice, because it determines which regulatory regime, tax withholding and security tools apply.

The Legal Framework: Credit Institutions Law and Finance Leasing

Finance leasing as a licensed credit activity

Under the Law on Credit Institutions 2024 (Law No. 32/2024/QH15), finance leasing is a form of credit granting, and carrying it on as a business requires a licence from the State Bank of Vietnam (SBV). The activity is conducted by finance leasing companies or by licensed credit institutions, and the detailed operating rules have long sat in Decree 39/2014/ND-CP and SBV Circular 30/2015/TT-NHNN, together with their amending and replacement documents following the 2024 Law.

Because the rules have been moving, check the instruments in force on the signing date.

This licensing perimeter is the first gating question for any sale and leaseback. An unlicensed company that regularly provides what is in substance finance leasing in Vietnam risks being viewed as conducting a restricted credit activity. The risk is greatest for offshore or intra-group lessors that finance Vietnamese entities on a recurring basis.

What the rules say about lessee-owned assets

Finance leasing regulation recognises that, in a sale and leaseback, a lessor may acquire an asset the lessee already owns and lease it back. Regulated lessors verify title, valuation, insurance and the lessee’s creditworthiness. For movable machinery there is usually no ownership register, so title evidence comes from import files, customs declarations, purchase invoices, fixed-asset registers and physical inspection. Weak title evidence is one of the most common reasons a deal stalls.

Cross-border lessors and foreign exchange

Where the lessor in a sale and leaseback is outside Vietnam, foreign exchange control, foreign contractor tax and the rules on foreign borrowing may all be engaged. Rentals paid abroad must go through authorised banks with supporting documents, and depending on characterisation the arrangement may be treated as offshore financing with registration or reporting expectations. Discuss it with the paying bank before signing.

Finance Lease or Operating Lease?

The classification tests

For a sale and leaseback, Vietnamese rules and accounting standards distinguish a finance lease from an operating lease by substance. Indicators include transfer of ownership at the end of the term, a bargain purchase option, a lease term that covers most of the asset’s useful life, and rentals whose present value approximates the asset’s value at inception. A non-cancellable lease under which the lessee bears the risks and rewards of ownership is usually a finance lease, whatever the contract calls it.

Why the label matters

If the structure is a finance lease, the lessor generally must be a licensed credit institution and the regime of Decree 39/2014/ND-CP and its successors applies. If the arrangement is a genuine operating lease, an ordinary leasing company may be the lessor under the Civil Code 2015 and the Law on Commercial Law 2005, but the lessor then keeps residual-value risk and cannot rely on a locked-in full-payout return. The table compares the three structures a manufacturer usually considers.

Feature	Finance lease (sale and leaseback)	Operating lease (sale and leaseback)	Secured loan
Typical lessor or lender	Licensed finance leasing company or credit institution	Commercial lessor, sometimes offshore or group company	Bank or licensed credit institution
Legal owner of asset	Lessor	Lessor	Borrower, with mortgage or pledge
Term versus useful life	Long, near full payout	Shorter, lessor bears residual value	Set by loan tenor
Lessor security tool	Ownership, plus registration and guarantees	Ownership, plus deposit and guarantees	Registered security interest
Recovery on default	Repossession of leased assets as owner	Repossession and re-letting	Enforcement of security under security rules
Main legal risk	Licensing and recharacterisation	Recharacterisation as disguised finance	Perfection and enforcement

True Sale Versus Secured Financing

The recharacterisation risk

A sale and leaseback only delivers its promised benefits if the transfer is a true sale. If a court, an arbitral tribunal, a tax authority or an insolvency administrator concludes that the parties really intended a loan secured by the asset, the lessor may be treated as a secured creditor rather than an owner. Civil law looks to the parties’ real intention, and a disguised transaction is governed by the rules that apply to the real arrangement.

Factors that support a true sale

Several features help evidence a true sale in a sale and leaseback: a price supported by an independent valuation at fair value, actual delivery and transfer of title documents, the lessor’s own invoicing and payment trail, asset tagging and a lessor right to inspect, and no lessee right to repurchase at a price that merely returns the lessor’s principal plus a yield.

Conversely, a repurchase obligation at a fixed price, a sale price well under or over fair value, or the lessee retaining all residual risk are warning signs.

Why insolvency makes this decisive

Under the Law on Bankruptcy 2014, assets owned by third parties are not part of the debtor’s estate, so a lessor with a genuine title to leased machinery can seek to take it back. A recharacterised sale and leaseback would leave the lessor competing with other creditors. In addition, transactions made shortly before bankruptcy proceedings begin at a clear undervalue may be declared invalid.

A sale priced too low to the lessor, or a sale made when the seller is already distressed, is therefore exposed on both fronts.

VAT and Corporate Tax Consequences

VAT on the sale and on the rentals

Under the Law on Value Added Tax 2024 (Law No. 48/2024/QH15, effective 1 July 2025) and its implementing decree, the sale leg of a sale and leaseback is generally a taxable supply, and the lessor’s rentals are also taxable. This creates two cash-flow questions: whether the lessor can recover input VAT on its purchase from the seller, and whether the lessee can deduct input VAT on rentals.

Deduction depends on valid invoices and non-cash payment for transactions at or above the statutory threshold. Where the structure is treated as financing rather than a true sale, the VAT outcome can differ, so the position should be settled with the tax authority’s guidance in mind and documented before signing.

Corporate income tax on gain and on rental

In a sale and leaseback, the difference between the sale price and the tax book value of the asset is normally taxable income in the year of sale, unless the arrangement is characterised and accepted as financing. On the lessee side, rentals under a genuine operating lease are generally deductible as incurred. Under a finance lease, tax rules on fixed assets generally lead to depreciation and interest treatment instead.

Where the lessor or the financing is related-party, the interest deduction limit in Decree 132/2020/ND-CP, as updated under the new Law on Corporate Income Tax and its guidance, and transfer pricing documentation requirements need to be tested.

Foreign contractor tax for offshore lessors

If an offshore lessor charges rental or finance charges to a Vietnamese entity, foreign contractor tax may apply on payments, subject to any relief under an applicable double tax treaty. Gross-up clauses shift that cost onto the manufacturer. Review the current FCT circular (Circular 103/2014/TT-BTC as amended) and treaty relief deal by deal.

Accounting Under VAS and IFRS 16

Vietnamese Accounting Standard 06

Most Vietnamese enterprises still report under the Vietnamese Accounting Standards and the corporate accounting regime. Under VAS 06 on Leases, a sale and leaseback that results in a finance lease does not allow immediate recognition of the excess of sale proceeds over carrying amount as profit. The excess is deferred and amortised over the lease term. If the result is an operating lease and the sale price equals fair value, the gain or loss can be recognised immediately.

IFRS 16 for groups reporting internationally

Many FDI manufacturers also report to foreign parents under IFRS or US GAAP, and Vietnam’s Ministry of Finance has set a roadmap for IFRS adoption (Decision 345/QD-BTC). Under IFRS 16 Leases, the seller-lessee first tests whether the transfer qualifies as a sale under IFRS 15. If it does not, the asset stays on the balance sheet and the cash received is recorded as a financial liability.

If it does, the seller-lessee recognises a right-of-use asset and a lease liability, and books only the gain related to the rights actually transferred. IFRS 16 removes the operating and finance split for lessees, so nearly every lease sits on the balance sheet. A manufacturer expecting an off-balance-sheet result may therefore be disappointed at group level.

Land-Use Rights and Plant Assets

Machinery and fixtures versus real estate

A sale and leaseback of loose machinery is legally straightforward. A sale and leaseback of a factory building is not, because buildings are tied to land-use rights. Under the Land Law 2024 and the Law on Real Estate Business 2023, the ability to transfer buildings or land-use rights depends on the land status, the form of land payment, the investment licence and the nature of the buyer.

Leased land and industrial parks

Most industrial plants in Vietnam sit on land leased from the State or sub-leased from an industrial park developer. Where land rent is paid annually, the occupier generally cannot transfer the land-use right itself and can deal only with assets attached to the land. Where rent was paid upfront for the whole term, transfer may be possible but is subject to conditions and often to developer consent.

Review the developer’s consent, step-in rights and sublease terms early. Fixtures that are hard to detach may be treated as part of the real estate, which affects what the lessor truly owns.

Mortgaged land and existing lenders

Many plants are already mortgaged to banks, which complicates any sale and leaseback. A sale of attached assets can breach negative pledge and mortgage covenants, so obtain lender consent or a partial release before closing.

Lessor Security and Repossession

Protecting the lessor’s title

In a sale and leaseback, the lessor’s main protection is title. Still, title must be visible. Practical steps include registering the lease and, where available, the lessor’s interest with the national registry for secured transactions under Decree 99/2022/ND-CP, affixing ownership plates to machines, obtaining a landlord or industrial park waiver of any lien, and securing insurance with the lessor as loss payee. Parent guarantees and cash deposits are also common.

Repossession of leased assets in practice

The leasing contract should give the lessor clear termination rights, the right to enter the premises and the right to remove the equipment. In practice, repossession of leased assets in Vietnam is rarely a simple self-help exercise. Machines are bolted into a production line, access to the plant depends on the occupier and the industrial park, and forcible removal without a court order can create civil or even criminal exposure.

Many lessors in a sale and leaseback therefore pursue a negotiated surrender first, backed by arbitration or court action and enforcement through the civil judgment enforcement system if the lessee does not cooperate. Choose a forum, such as the Vietnam International Arbitration Centre, that can order interim measures.

operating lease — Photo: Wikimedia Commons (public domain / CC0)

Competing creditors and bankruptcy

Competing claims decide who gets the asset in a failed sale and leaseback. A general bank security over all present and future assets, a landlord’s rights and tax authority claims can each collide with the lessor’s claim to a leased machine. Encumbrance warranties, negative pledges and a pre-signing title search reduce that risk.

A Practical Roadmap for a Sale and Leaseback in Vietnam

Before you approach lessors

List the assets with title evidence, existing security, location, land status and insurance. Decide whether the objective is cash, tax efficiency or balance-sheet presentation, since each points to a different structure.

Documents and terms to settle

The core documents of a sale and leaseback are an asset sale agreement, a master lease or finance lease agreement, an independent valuation, a lender consent, any guarantees, insurance endorsements and a landlord or industrial park acknowledgement. Settle the purchase option or return conditions, default triggers, insurance, relocation limits, maintenance, tax gross-up and governing law and forum. For a related-party deal, prepare transfer pricing support.

Talk to IVLF Advisors About Your Sale and Leaseback

IVLF Advisors LLC advises manufacturers, lessors and lenders on structuring, documenting and closing equipment financing in Vietnam, including banking and finance mandates and the tax analysis behind them. Learn more about our banking and finance practice and our tax advisory team, or request a confidential preliminary consultation to review your assets and objectives before you approach any lessor.

Frequently Asked Questions

Can any company act as a lessor in a sale and leaseback?

A lessor providing finance leasing as a business needs an SBV licence. A genuine operating lease can be offered by an ordinary leasing company. Substance prevails over labels, so structure carefully.

Does a sale and leaseback keep debt off the balance sheet?

Often not. Under IFRS 16 nearly all leases are recognised on the balance sheet, and under VAS 06 a finance lease is capitalised. Confirm the outcome with your auditors.

Can we sell and lease back our factory building?

Only if land status, payment form, investment licence and any industrial park developer consent allow it. Many plants can deal only with attached assets, so equipment-only structures are often simpler.

What happens if the lessee becomes insolvent?

A lessor with genuine title to leased machinery can seek its return, since third-party assets sit outside the bankruptcy estate. A transaction recharacterised as a loan leaves the lessor competing with other creditors.

Is foreign contractor tax payable to an offshore lessor?

It may be, on rental or finance charges, subject to treaty relief and the current guidance. Contracts often contain gross-up clauses, so model the after-tax cost before agreeing a rate.

Before approaching any lessor, list your candidate assets with their title evidence, existing liens and land status, and send that list to your counsel for a first structuring review.

Disclaimer: this article provides general information only and is not legal, tax or financial advice. Please consult qualified advisers about your specific circumstances. For primary sources, see the State Bank of Vietnam and the IFRS Foundation page on IFRS 16.