In case there is no need to deposit a deposit to ensure project implementation when land is allocated

In case there is no need to deposit a deposit to ensure project implementation when land is allocated applies to many special situations that the State regulates in the investment field. Investors need to understand this regulation to avoid unnecessary costs when implementing the project. The following article will analyze specific regulations on cases where the investor is exempted from depositing to guarantee project implementation when land is allocated.

What is the deposit?

According to Clause 1, Article 330 of the Civil Code 2015, deposit is when an obligated party deposits a sum of money or precious metals, gemstones or valuable papers in cash into a blocked account at a credit institution to secure the performance of the obligation.

Thus, escrow in investment is the investor’s payment of a sum of money to ensure the fulfillment of obligations during the implementation of an investment project. The deposit will be returned to the investor when the project is completed on schedule, or will be handled if the investor violates the commitment.

In case there is no need to deposit a deposit to ensure project implementation when land is allocated

Pursuant to Clause 1, Article 43 of the Law on Investment 2020, investors are not required to make a deposit to ensure the implementation of the investment project when allocated land in the following specific cases.

• Investors who win an auction of land use rights to implement an investment project are allocated land by the State with land use fees collected, or leased land with a one-time land rental fee for the entire lease period;
• The investor wins the bid to implement an investment project using land;
• Investors are allocated or leased land by the State on the basis of receiving transfer of investment projects that have made deposits or have completed capital contributions and capital mobilization according to the schedule specified in the investment policy approval document and Investment Registration Certificate;
• Investors are allocated or leased land by the State to implement investment projects on the basis of receiving transfer of land use rights and assets attached to land from other land users.

Thus, if your land-allocated investment project falls into one of the four cases above, you do not need to make a deposit to ensure project implementation.

What is the deposit level to ensure project implementation upon land allocation?

The deposit level to ensure project implementation is an important factor that investors need to determine when implementing an investment project. Pursuant to Clause 2, Article 26 of the Decree 31/2021/ND-CP, the deposit level to ensure project implementation when land is allocated is calculated as a percentage of the project’s investment capital according to the principle of partial progression as follows:

• For capital up to 300 billion VND, the guarantee level is 3%;
• For capital over 300 billion VND to 1,000 billion VND, the guarantee level is 2%;
• For capital over 1,000 billion VND, the guarantee level is 1%.

Note: The investment capital of the project determined as a basis for calculating the deposit does not include land use fees, land rent paid to the state and construction costs of works under the investment project that the investor is obliged to hand over to the state for management after completion (if any).

In case at the time of signing the Agreement to ensure the implementation of the investment project, the exact costs of construction of the works handed over to the State have not been determined, the investment registration agency will base on the cost estimate in the Project Proposal prepared by the investor to determine the amount of money guaranteed to implement the investment project.

Thus, depending on the investment capital of the project, the deposit level will be different according to the progressive principle of 1%, 2% or 3%.

How much is the penalty for not depositing a deposit to ensure project implementation when handing over land?

Failure of the investor to fulfill the deposit obligation to ensure project implementation upon land allocation will be subject to administrative sanctions according to the provisions of law.

Specifically, according to Point a, Clause 1, Article 19 of Decree 122/2021/ND-CP, for acts of not making a deposit or not having a bank guarantee on the deposit obligation to ensure the implementation of an investment project requiring the State to allocate land, lease land, or allow change of land use purpose (unless otherwise prescribed by law), the applicable fine is as follows:

• For violating organizations: Fine from 50 million VND to 70 million VND;
• For individual violators: according to Clause 2, Article 4 of Decree 122/2021/ND-CP, the fine for individuals is equal to 1/2 of the fine for organizations, from 25 million VND to 35 million VND.

Thus, the act of not depositing a deposit to ensure the implementation of an investment project when land is allocated by the state will be subject to an administrative penalty of up to 70 million VND for organizations and 35 million VND for violating individuals.

Deposit consulting service to ensure project implementation when land is allocated at Long Phan Consulting Company

Long Phan Consulting Company provides in-depth consulting services on deposit to ensure project implementation when land is allocated. We provide the following consulting services to investors:

• Consulting on determining cases where a deposit is required to ensure project implementation when land is allocated;
• Support calculating accurate margin levels according to legal regulations;
• Drafting documents and contracts related to escrow to ensure project implementation;
• Authorized representative of the investor works with the competent state agency on deposit;
• Advise on procedures for refunding or releasing the deposit when the project has been implemented on schedule.

Above are some work items that we will perform when you use the services at Long Phan Consulting Company. With practical experience in the investment field, Long Phan Consulting Company is committed to providing optimal solutions, helping investors save time and costs during investment project implementation.

Some frequently asked questions about deposits to ensure implementation of investment projects when land is allocated

We would like to provide some common questions about depositing a deposit to ensure project implementation when land is allocated. Please refer!

In case of winning an auction for land use rights, will the deposit be deducted from the land use fee payable?

Normally, the deposit amount is not automatically deducted from the land use fee that the investor must pay after winning the auction. Investors need to fulfill financial obligations related to separate land use fees. After the project is completed as committed, the deposit will be refunded according to regulations.

What is the process for refunding the project implementation security deposit?

The deposit refund process usually includes the investor submitting a written request for refund along with documents proving the project was completed on schedule (for example, construction completion certificate, acceptance record). The competent state agency will evaluate and decide on the refund. Refund time may vary depending on local regulations.

If the project’s investment capital changes during implementation, will the margin level adjust?

Normally, the margin level is determined based on the approved initial investment capital. If there is a large change in investment capital, the investor may have to adjust the corresponding deposit level according to legal regulations at the time of project adjustment.

How is “receiving transfer of investment projects with deposits” understood?

This is the case where an investor receives back an ongoing project from another investor, which has previously fulfilled its deposit obligations according to regulations. When the transfer is approved, the investor receiving the transfer does not need to make a deposit again.

Does “Receiving transfer of land use rights and assets attached to land from other land users” include the case of buying and selling existing factories?

Yes, in the case of an investor receiving the transfer of land use rights, works and assets already on the land from another legal land user to implement a new investment project, the deposit is exempted.

What specific legal basis regulates cases where a deposit is not required when being allocated land?

These regulations are mainly stated in Clause 1, Article 43 of the Law on  Investment 2020.

Which agency has the authority to manage and resolve issues related to deposits to ensure project implementation?

Normally, the investment registration agency (Department of Planning and Investment or Management Board of Economic Zones and Industrial Parks) is the agency with authority to monitor, manage and resolve procedures related to deposits to ensure project implementation.

With the above answers, we hope to have partly answered your questions surrounding the issue of signing a guarantee for project implementation when land is allocated by the State.

Conclude

Thus, when you fall into the cases in Clause 1, Article 46 of the Law on Investment 2020, you do not need to carry out deposit procedures to ensure project implementation. If you need in-depth advice on the case of no need to deposit a deposit to ensure project implementation when land is allocated, please contact us immediately via the hotline 0906735386 to receive timely and effective support from a team of experts.