The revelation that two major industrial parks—VSIP II Industrial Park and Dai Dang Industrial Park—were required to pay zero land lease fees after converting to a one-time land lease payment scheme has attracted widespread attention from investors, businesses, and policymakers.

According to the inspection conclusions regarding long-standing delayed and problematic projects in Ho Chi Minh City following the administrative merger, authorities determined that the land price applied when converting the lease payment method may not have complied with applicable legal regulations, creating a potential risk of state budget revenue loss.

The case has become one of the most closely watched issues involving Vietnam’s industrial real estate sector and the country’s land administration policies.

VSIP II: A 2,045-Hectare Industrial Park with Zero Land Lease Payment

A Large-Scale Industrial Development Since 2006

VSIP II Industrial Park was developed within the Binh Duong Industrial – Service – Urban Complex, covering approximately 2,045 hectares, including:

• Phase 1: 345 hectares
• Phase 2: Approximately 1,700 hectares

Construction progressed rapidly after its launch in 2006. The project successfully completed:

• Land acquisition and site clearance
• Infrastructure development
• Attraction of secondary investors
• Commercial operation

Today, all commercial land has been fully leased. Tenant companies have received Land Use Rights Certificates and continue to conduct stable manufacturing and business operations.

Why Did the Land Lease Fee Become Zero?

After changing from annual land lease payments to a one-time payment covering the entire lease period, the tax authority calculated VSIP II’s financial obligations in 2012 as follows:

• Land lease fee: More than VND 75 billion
• Reduction for lease terms under 70 years: More than VND 18 billion
• Deduction for land compensation and site clearance costs: More than VND 57 billion

Final Outcome

Amount payable to the State budget: VND 0

This result created a remarkable paradox. Despite being one of Vietnam’s largest industrial parks, VSIP II incurred no additional land lease payment after converting to the one-time payment mechanism.

Authorities Believe the Land Valuation Was Inconsistent with Regulations

According to the Ho Chi Minh City Department of Agriculture and Environment, the issue arose because:

• The 2006 land price was used to calculate the one-time land lease fee.
• However, the conversion from annual payment to one-time payment occurred in 2011.

The department therefore recommends:

• Revoking previous land lease payment notices.
• Adjusting the project’s financial obligations.
• Recalculating the land lease fee in accordance with current legal regulations.

The objective is to protect State budget revenues while ensuring the legitimate rights and interests of the project developer.

VSIP II Developer Responds

The project developer maintains that every stage of the investment process complied with regulations in force at the time.

According to the company:

• Compensation costs were advanced nearly 20 years ago.
• Between 2006 and 2009, the project operated under the annual land lease payment mechanism.
• After receiving official approval in 2011 to convert to one-time payment, the company fulfilled all financial obligations based on notifications issued by the tax authority.

At present, the industrial park has reached 100% occupancy, and all manufacturers continue to operate normally.

Inspectorate Recommends a Comprehensive Review

The inspection conclusion states that recalculating VSIP II’s land lease fee has legal grounds but requires a comprehensive assessment of several factors, including:

• Land policies applicable during each period
• Timing of land allocation
• Project implementation history
• Investment progress
• Legitimate rights of the investor

The Inspectorate recommends that the Department of Agriculture and Environment coordinate with the Tax Department, the Department of Finance, and relevant agencies to thoroughly review the project in order to prevent potential State budget losses.

Dai Dang Industrial Park Faces a Similar Situation

VSIP II is not the only industrial park involved.

Dai Dang Industrial Park, covering more than 237 hectares, experienced a nearly identical situation.

Beginning in 2005, the project developer:

• Invested more than VND 200 billion in land compensation and site clearance.
• Received land allocation through multiple decisions between 2006 and 2009.
• Started subleasing land to secondary investors in 2007.

Today:

• The entire commercial land area has been leased.
• Tenant manufacturers continue stable production and business operations.

Dai Dang’s One-Time Land Lease Payment Was Also Reduced to Zero

In 2012, the tax authority calculated the project’s one-time land lease payment as follows:

• Total land lease fee: More than VND 56.6 billion
• Reduction: More than VND 14 billion
• Deduction for compensation costs: VND 42.6 billion

Final Result

No additional land lease payment was required.

It was not until 2025 that the former Binh Duong authorities instructed relevant agencies to review the project’s land-related financial obligations.

However, by the time the Ho Chi Minh City Inspectorate conducted its inspection, the review process had not yet been completed.

Why Is a Recalculation Necessary?

According to the relevant authorities, determining land lease obligations should be based on:

• The correct timing of the lease payment conversion.
• Land prices applicable under current regulations at the time the financial obligation arose.
• Lawful reductions and exemptions.
• Proper deductions for land compensation and site clearance expenses.

The review is intended not only to prevent potential State budget losses but also to:

• Improve transparency in land administration.
• Ensure fairness in investment policies.
• Strengthen confidence among domestic and foreign investors.

Impact on Vietnam’s Industrial Real Estate Market

Importantly, the issues surrounding VSIP II and Dai Dang do not reflect operational difficulties at either industrial park.

Both projects have already achieved:

• Full occupancy
• Stable operations by secondary investors
• Completed infrastructure systems
• No reported disputes with tenants

Nevertheless, if land-related financial obligations are calculated incorrectly for many years, the consequences may include:

• Reduced effectiveness of land administration.
• Lower transparency in Vietnam’s investment environment.
• Potential losses to State budget revenues.
• Reduced investor confidence in land policies.

For Vietnam’s industrial real estate market, transparent and consistent land pricing remains a key factor in maintaining long-term investment attractiveness.

Outlook Following the Inspection

The Ho Chi Minh City Inspectorate has recommended that relevant agencies continue reviewing all project documentation for both industrial parks in order to:

• Determine the correct land lease obligations.
• Protect the lawful rights and interests of project developers.
• Minimize potential State budget losses.
• Standardize the application of land policies for future industrial park developments.

The final resolution of these cases is expected to become an important reference for improving Vietnam’s land administration framework, particularly for large-scale industrial park projects implemented over multiple legal and policy periods.

As Vietnam continues attracting high-quality foreign direct investment and expanding its industrial infrastructure, ensuring transparency and consistency in land valuation and lease policies will play a crucial role in maintaining the country’s competitiveness as one of Asia’s leading manufacturing destinations.