Capital Contribution by Land Use Rights under the 2024 Land Law: Conditions, Valuation and the Risks Enterprises Must Control

Against a backdrop of increasingly scarce clean land and rising land access costs under the new land price tables, capital contribution by land use rights has become one of the most common forms of cooperation between the party holding land and the party holding capital: a local enterprise with a well-located parcel but limited financial capacity joins hands with an investor — domestic or foreign — possessing capital and project development experience. In theory, this is a win-win structure. In practice, capital contribution by land use rights is among the transaction types generating the most protracted disputes we encounter in our practice: land valuations lacking any proper basis, incomplete title transfer procedures, land contributors reclaiming their land when projects stall, or the recipient company mortgaging the very same parcel, leaving the contributor empty-handed when the bank enforces the security.

HTIC Law Firm analyses the current legal framework for capital contribution by land use rights under Land Law No. 31/2024/QH15 and the 2020 Law on Enterprises, together with the risks that both the contributing and the receiving parties must control.

Mục 01Conditions for capital contribution by land use rights under Article 45 of the 2024 Land Law

Article 45 of the 2024 Land Law sets out the general conditions for a land user to exercise the right to contribute capital by land use rights. First, there must be a Certificate of land use rights or another valid certificate of land use rights and ownership of assets attached to land. Second, the land must be free of disputes, or any dispute must have been resolved by a legally effective judgment or decision of a competent authority. Third, the land use rights must not be subject to distraint or other measures securing judgment enforcement. Fourth, the land must remain within its use term and the land use rights must not be subject to provisional emergency measures. In addition, where the land user has been permitted to defer or record as debt its financial obligations, those obligations must be fulfilled before the capital contribution.

These conditions may sound formalistic, but each is a potential deal-killer. Our due diligence experience shows the most common situation is land with unfulfilled financial obligations — land use levies recorded as debt or land rent not fully paid — making the capital contribution contract impossible to register; next come latent disputes in the form of boundary complaints or shared access claims that have not yet crystallised into formal cases but can flare up precisely when the transaction is underway. The receiving party should therefore not look only at the Certificate, but must conduct due diligence on the financial obligation records, the actual state of use and planning information before valuing and signing. One further point: for land leased with annual rent payment, the land user’s rights are considerably more limited than for land allocated with levy or leased with one-off payment — an issue we have analysed in our article comparing the two lease forms — so the contribution structure must be checked for compatibility with the specific form of land use.

Mục 02Contribution means transfer of rights: the legal consequence land contributors often fail to anticipate

The most essential — and most misunderstood — feature of contributing land use rights into an enterprise is the transfer of rights. Under Article 35 of the 2020 Law on Enterprises, members and shareholders contributing assets subject to ownership or land use right registration must carry out procedures to transfer ownership or use rights of those assets to the company. This means that once the contribution is complete, the land use rights belong to the corporate legal entity; the land contributor is no longer the land user but becomes the owner of the corresponding capital contribution portion or shares. From that moment the parcel is a company asset, sharing the fate of the company’s business: it may be mortgaged pursuant to a corporate resolution, distrained if the company loses a lawsuit, and included in the bankruptcy estate if the company becomes insolvent.

This consequence explains why so many disputes stem from mismatched expectations: the land contributor believes it still keeps the land and is merely letting the project use it, and only when the company runs into financial difficulty does it discover, to its shock, that the land has long been a company asset. If the parties’ true commercial intention is merely to let the project use the land for a limited period without transferring rights, the appropriate legal instrument is not a capital contribution into the enterprise but potentially a business cooperation contract (BCC) or a lease of land use rights — each option carrying its own tax profile and risks to weigh. Choosing the wrong instrument at the outset is the root of most of the years-long lawsuits to reclaim contributed land, which usually end unfavourably for the contributor.

Mục 03Valuation of contributed land: freedom to agree and liability for overvaluation

Under Article 36 of the 2020 Law on Enterprises, contributed assets that are not Vietnamese dong, freely convertible foreign currency or gold must be valued by the members or founding shareholders or by a valuation organisation, and expressed in Vietnamese dong; if an asset is valued higher than its actual value at the time of contribution, the members or founding shareholders must jointly contribute the difference, and are jointly liable for damage caused by intentional overvaluation. This provision sets an important limit on the practice of inflating contributed land values — a not uncommon phenomenon where the land contributor seeks a controlling stake in the joint venture without injecting additional cash.

Consider a numerical example. The parties agree to value a parcel at VND 120 billion so that party A’s contribution represents 60% of the joint venture’s VND 200 billion charter capital; party B contributes VND 80 billion in cash for 40%. Three years later the company goes bankrupt, and creditors prove that the parcel’s actual value at the time of contribution was only around VND 70 billion. The founding members must then jointly contribute the VND 50 billion shortfall — meaning party B, despite having contributed real money in full, can still be drawn into joint liability for party A’s inflated valuation. The lesson for the cash contributor: never accept a valuation figure merely to preserve negotiating harmony; insist on an independent valuation certificate, retain the valuation records and, where necessary, negotiate a mechanism to adjust the equity ratio if the land value is redetermined. On the tax side, capital contribution by land use rights also triggers separate declaration obligations that enterprises should review with the tax authority before implementation to avoid retrospective collection later.

Mục 04Procedures and completion timing: registration of changes is the decisive milestone

A contract for capital contribution by land use rights must be notarised or certified in accordance with Article 27 of the 2024 Land Law for land use right transactions where the law so requires, and the contribution must be registered with the land registration authority; the transfer of rights takes effect from the time of registration in the cadastral book. The standard sequence therefore comprises four consecutive steps: due diligence on land conditions under Article 45, execution of a notarised capital contribution contract, registration of the change of title into the name of the receiving legal entity, and recording of the contributed capital in the enterprise registration dossier. The most dangerous gap is the period between contract signing and completion of registration: on paper the land still belongs to the contributor, and there have been cases where the contributor, during this window, mortgaged or transferred the land to a third party, plunging the receiving company into complex priority litigation. The receiving party should minimise this gap and consider interim protective measures such as holding the original Certificate by agreement and registering security measures where appropriate.

Mục 05Frequently asked questions

Is income tax payable on a capital contribution by land use rights? A capital contribution by land use rights is in essence a transfer of rights and may give rise to income tax obligations depending on whether the contributor is an individual or an organisation; tax legislation contains specific rules on the timing of declaration and payment for income from capital contributions by real estate. As tax policy changes over time, enterprises should verify the prevailing regulations and guidance of the tax authority at the time of the transaction.

May FDI enterprises receive capital contributions by land use rights? Foreign-invested economic organisations may receive land use rights through capital contribution in the cases and under the conditions prescribed by the 2024 Land Law, tied to the project scope and the appropriate form of land use. Because the rules on FDI-sector acquisition of land use rights interlock with investment and real estate business legislation, each specific structure requires separate legal due diligence before any commitment.

Can contributed land be withdrawn from the company? Once the transfer of rights is complete, the land is a company asset; a member has no automatic right to reclaim the specific parcel contributed. Recovering assets can occur only through statutory mechanisms such as transferring the capital contribution portion, reducing charter capital under the strict conditions of the 2020 Law on Enterprises, or distribution of assets upon dissolution after all obligations are settled. This point warrants careful advice before deciding to contribute capital rather than choosing another form of cooperation.

Mục 06Contact HTIC

HTIC Law Firm advises on structuring capital contributions by land use rights, legal due diligence on land parcels, and drafting and negotiating joint venture contracts for both land contributors and cash investors, including transactions with foreign elements. See our real estate lawyer services in Vietnam. Fixed fee quotations per matter/project — Hotline +84 379 044 299.