On September 15, 2024, the Government issued Decree 114/2024/ND-CP ("Decree No. 114"), amending and supplementing certain provisions of Decree 151/2017/ND-CP ("Decree No. 151") detailing certain provisions of the Law on Management and Use of Public Property. Essentially, Decree No. 114 aims to enhance the flexibility of public asset management by state agencies and strengthen oversight of public service units engaging in commercial activities such as leasing, joint ventures, and partnerships. Key changes focus on the utilization of public assets by these units for business purposes:
1.Public service units which are exempted from land rent payments are not permitted to use the leased land for business purposes
Similar to Decree 151, Decree 114 stipulates that public service units that are leased land by the State for a one-time payment for the entire lease term, or that have been transferred the land use right with the land rent already paid, and the transfer fee paid from non-state budget sources, are allowed to use the land and attached assets for business purposes.
However, Decree 114 clarifies that if the land is leased from the State for a one-time fee and is exempt from annual land rent, such land is considered to be leased with state budget funds. Therefore, public non-business agencies cannot use this type of land for business purposes.
2.Public non-business agencies are obligated to remit at least 2% of their business revenue to the state budget
Decree 114 stipulates that public service units are obligated to contribute to the state budget a minimum amount equal to 2% of the revenue generated from their business activities, leasing, joint ventures, and partnerships, excluding taxes, fees, levies, and other charges as prescribed (the specific contribution rate shall be determined according to the Project on using public assets for business purposes).
Under the newly enacted regulations, all enterprises are required to pay an annual environmental protection fee. However, the following entities are exempt from this obligation:
+ Public service units operating in the fields of culture, health, education, physical education and sports, science and technology, and environment;
+ Public non-business units that pay land rent as prescribed.
3.Real estate assets that are a product of, or acquired through, a joint venture or partnership shall be transferred to the public service unit without any consideration.
Pursuant to Decree No. 151, upon termination of the joint venture or cooperation, the land use rights, buildings, structures, and other assets attached to the land that were involved in such activities shall belong to the State. Accordingly, the ownership of these assets shall be declared as state-owned property and shall be managed under the state ownership regime.
Under Decree No. 114, the Government has established the principle that any assets contributed to or formed through a joint venture, including real estate, must be returned to the public public unit that manages and uses them without any compensation upon the conclusion of the joint venture, even if the contract is terminated early.
This regulation is set out to ensure the rights of public service units, enhance the efficiency of public asset utilization, and minimize administrative procedures in the establishment and transfer of management and use rights for public assets (distinct from previously state-owned assets).
4.Public service units are limited to direct leasing for public assets, applicable only to leases with short terms or the total value of the leased assets is insignificant.
Decree No. 114 has significantly narrowed the scope of direct leasing for public assets of public non-business units. The new decree stipulates that direct leasing is only permissible for leases that do not exceed 30 days or 50 million VND in value. Any lease that does not meet these criteria must be conducted through a competitive bidding process, marking a more stringent approach compared to the previous regulations (Decree No. 151).
Moreover, Decree No. 114 outlines a rule regarding the disposition of additional investments made by a lessee to improve the value of a leased asset upon contract termination. Regardless of whether the lease ends early, the increased asset value due to such investments will revert to the public service entity owning the asset.
The aforementioned regulations enhance the efficiency in the exploitation and management of public assets. Moreover, the mandatory public auction requirement for the leasing of public assets ensures transparency in the revenue of public service units and minimizes state budget losses.
Decree No. 114 takes effect from October 30, 2024.
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