On January 22, Dong Nai Provincial People’s Committee and companies operating in Bien Hoa 1 Industrial Zone engaged in a constructive dialogue on the collection of land rent in accordance with Decree 142/2005/NĐ-CP and 135/2016/NĐ-CP. Mr. Nguyen Quoc Hung – Vice Chairman of Municipal People’s Committee – chaired the dialogues. Delegates in attendance at the dialogue included representatives of regulatory agencies, Sonadezi Corporation and 55 companies in Bien Hoa 1 Industrial Zone

At the dialogue, CEO of Sonadezi Corporation said:

According to the direction of the Prime Minister, Sonadezi was assigned as the implementor of the project designed to upgrade the technical infrastructure of Bien Hoa 1 Industrial Zone. Sonadezi and the Department of Land Administration and Real Estate of Dong Nai province (now is now Dong Nai Department of Natural Resources and Environment) entered into a Lease Agreement no. 583HĐ/TĐ for the lease of Bien Hoa 1 Industrial Zone. The lease term said Sonadezi agreed to pay the State in the amount of VND 800/m2/year. But there was no term that regulated the lease payment increase during the time that the contract was still in effect.

Sonadezi signed sublease agreements with domestic companies in Bien Hoa 1 Industrial Zone in which allowed companies to rent land and use infrastructure. Besides fees for infrastructure usage and management services, companies paid Sonazi in the exact amount that Sonadzi paid the State that was VND 800/m²/year.

On November 14, 2005, the Government issued the Decree 142/2005/NĐ-CP on the collection of land rents and water surface rents, in which adjusted the lease rate for all kinds of land, including the land in industrial zones.

According to Decree 142/2005/NĐ-CP, Dong Nai Provincial People’s Committee issued a provincial land price list, in which the lease rate of Bien Hoa 1 Industrial Zone increased substantially compared to the old one. In particular, from January 01, 2006 to December 31, 2010, the lease rate ranged from VND 5.250/m²/year to VND 17.500/m²/year depending on the location of the land in the industrial zones (six-fold to more than 20-fold increase). In the next five years, from January 01, 2011 to December 31, 2015, the lease rate increased to VND 20.500/m²/year for all the locations.

Since Decree 142/2005/NĐ-CP came into effect, Dong Nai Provincial People’s Committee repeatedly proposed a motion to the Ministry of Finance and the Prime Minister. The motion suggested that the rental adjustments applied to all industrial zones placed in Dong Nai province, including Bien Hoa 1 Industrial Zone, would be reviewed every 5 years and the adjusted lease rate did not exceed 15% compared to the previous rate.

After nearly 10 years of reporting and reviewing, on September 9, 2016, the Government issued Decree 135/2016/NĐ-CP on amendments and supplements to a number of articles of decrees on land levy, land and water surface rents. According to the decree, from January 01, 2006 to December 31, 2015, the lease payment on the land of Bien Hoa 1 Industrial Zone would be collected according to the land price list issued by Dong Nai Provincial People’s Committee. From January 01, 2016, the land price for Bien Hoa 1 Industrial Zone would be adjusted every 2 years. In each 2-year cycle, the land price would be increased by 15% compared to the land price set on January 01, 2006 (the average was VND 7.858/m2/year). Sonadezi had to pay the State in the total amount of more than VND 300 billion (it was the sum of land rent due from January 01, 2006 to December 12, 2017), in which the land rent due in 2016 and 2017 was more than VND 38 billion.

Sonadezi and companies operating in Bien Hoa 1 Industrial Zone engaged in numerous discussions on a new contract in which the lease rate would be adjusted in accordance with Decree 135/2016/NĐ-CP. However, no consensus was reached.

At the dialogue, plenty of company managers voiced the difficulties they encountered when paying the land rent due since 2006. Among them were the difference between the old price and the new price was significant; and companies, most of which were joint stock companies, had finalized their financial statements and paid dividends to shareholders.

On behalf of the Dong Nai Provincial People’s Committee, Vice Chairman Nguyen Quoc Hung said that the Provincial People’s Committee was aware of the difficulties facing companies. Therefore, over the years, the Provincial People’s Committee had relentlessly reported to the Prime Minister on the solutions to sort out companies’ difficulties. The Government recently issued Decree 135/2016/NĐ-CP stipulating solutions to sort out difficulties related to land rent incurred by Decree 142/2005/NĐ-CP and 135/2016/NĐ-CP was applied nationwide. For that reason, the Provincial People’s Committee proposed two solutions and hoped that companies could agree on as follows:

1. Pay the land rent due in which the land rent was calculated from January 01, 2006 to January 31, 2016. The amount may be paid in installments.

2. Re-sign land lease agreement in which from February 01, 2016, land rent would be charged according to the new lease rate.