Inheritance tax and inheritance law in Vietnam
Taxation Researcher | January 10, 2021
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Vietnam: what restrictions there are and whether making a will is advisable.
How high is income tax on residents in Vietnam?
Inheritance exceeding VND10 million (US$439) is taxed at a flat rate of 10%.
Income from inheritances of real property are exempt for the following: (1) husband and wife, (2) parents and children, including foster parents and adopted children, (3) parents-in-law and children-in-law, (4) grandparents and grandchildren, and (5) siblings.
Thanks to Pham Thi Cuc of Vision & Associates
What inheritance laws apply in Vietnam?
Foreigners are not entitled to keep inherited immovable property in Vietnam
Regulations governing inheritance issues of foreigners in Vietnam are:
- The Civil Code of 2005,
- The Civil Proceedings Code of 2004,
- The Law on Land of 2003,
- The Law on Investment of 2005 and
- The Law on Residential houses of 2006.
Separate international private law does not exist in the Vietnamese legal system, but bilateral treaties signed between Vietnam and other countries directly relate to property and inheritance matters.
Vietnamese land belongs to the Vietnamese people as a whole. Individuals, households, and organizations are only entitled to land use rights, and such rights can be inherited under Vietnamese law. All individuals in Vietnam have equal rights to bequeath property to others, and also to inherit estates. Although no discrimination exists between people of different nationalities or religions in Vietnam, there are some differences between the inheritance regulations applicable to Vietnamese citizens and foreigners.
If a deceased person leaves immovable property in Vietnam to beneficiaries, only Vietnamese nationals and organizations are entitled to become legal owners of the property. If the beneficiaries are:
- Foreign individuals or organizations;
- Overseas Vietnamese living in Vietnam for less than 6 months;
- Overseas Vietnamese living in Vietnam for more than 6 months, and already owners of property in Vietnam; then the property must be sold, and the foreign beneficiaries can only inherit an amount of money equal to the value of the property.
The Civil Court is in charge of inheritance settlements and handles disputes concerning allocation of estates.
Inheritance regulations vary depending on testate or intestate succession
For testate succession (with a will) the principle of lex rei sitae (the law of the place where the property is situated) governs the process of establishing, conducting, changing, or concluding the ownership of real estate in Vietnam.
If the deceased did not make a will, the property is devolved according to the laws of intestate succession. The applicable laws are determined on the basis of the following principles:
- Lex nationalist or lex patriae (the law of the nationality of the deceased).
- Lex loci actus (the law of the place where the act occurred that resulted in the legal claim)
It is possible for inheritance issues of foreigners with assets in Vietnam to become subject to renvoi (i.e. the issues are referred back to Vietnam by the law of the the country of the deceased´s nationality). For the determination of the jurisdiction and laws applicable to foreigners, bilateral treaties to which Vietnam is a party are given priority. Most treaties stipulate that jurisdiction belongs to the competent authorities in the country where the property of the deceased is located. Vietnamese laws are therefore applicable to issues of inheritance by foreigners in Vietnam, and conflict with the laws of the foreigner´s nationality are avoided.
Certain persons inherit, regardless the contents of the will
Shares in the estate of the deceased are reserved for certain heirs. The compulsory heirs include:
- Minor children, father, mother, and spouse.
- Adult children who are incapable of working.
The numbers and proportions of shares in an estate vary depending on the numbers and categories of surving heirs.
If the deceased:
- Does not grant shares in the estate to any of the compulsory heirs, or
- Grants less than two-thirds of the share an heir should have received, if the estate had been distributed according to intestate succession; then the heirs are entitled to claim their reserved portions (up to two-thirds of the share); unless they have disclaimed their inheritance, or are not entitled to inherit.
A testator may grant the residual part of an estate as a gift to other persons in a will. If the whole estate is insufficient to satisfy the obligations of the testator to the compulsory heirs; then the residual part of the estate granted to the other persons must be applied towards satisfying the testator´s obligations to the compulsory heirs.
Certain persons cannot inherit
Certain persons are not allowed to inherit, unless the deceased knew the actions of these persons, but still wished to select them as his heirs:
- Persons convicted of having intentionally caused the death or harmed the health of the deceased, of having seriously mistreated or tortured the deceased, or of having harmed the honor or dignity of the deceased;
- Persons having seriously breached their duty to support the deceased; * Persons convicted of having intentionally caused the death of another heir in order to obtain all or part of the entitlement of that heir to the estate;
- Persons deceiving, coercing or obstructing the deceased into/from making the will, or forging, altering or destroying the will.
Making a will is common in Vietnam
Pursuant to the Civil Code of Vietnam, the capacity to make a will, and to alter or rescind a will, must comply with the law of the country of the testator´s citizenship, but the form of a will must comply with the law of the place where the will is made. The rights of ownership of the testator are governed by the laws of the country where the property is located. Husband and wife can jointly make a will on their shared assets in Vietnam or prepare separate wills.
A Vietnamese will should be made in writing, and indicate the date, full name, and address of the testator and beneficiaries, the bequeathed properties, their locations, and any obligations or conditions for the beneficiaries. The will must not include abbreviations, and the signature of the owner must appear on all numbered pages. A written will may be witnessed or unwitnessed, notarized or certified. If the deceased makes a will at a public notary office, he/she must do so personally.
If the will cannot be written, it can be dictated orally, before at least two witnesses, who minute the decisions of the deceased, and certify this fact with their signatures.
The form of a will does not affect its legality in Vietnam, but if a dispute arises, it can directly affect the the legal status of the will before the competent State body. A notarized or certified will made in Vietnam is deemed to be the most convincing by the Civil Court, and is more acceptable than an uncertified, unnotarized, or oral will.
A person is entitled to give property as a donation before death
A donation of real estate made during the lifetime of the owner must be made in writing, and notarized or certified. The receiver is required to register ownership of the gift, but is not responsible for carrying out the property rights of the donor, unless this condition is required by the donor.
Ownership and land use right certificates determine property ownership
It is compulsory to determinate the ownership of inherited properties in Vietnam. To determine the ownership of property, especially that for which registration is compulsory, the competent authorities primarily look at documents that prove the identity of the legal owner; such as a residential house ownership certificate, or a land use right certificate. If the owner does not have such instruments, the Vietnamese authorities also accept other kinds of papers (e.g. offer agreements, sale contracts, wills) provided that such papers show expressly the rights of ownership of the paper holder.
Spouses are joint owners of property
Properties acquired before marriage in Vietnam remain under separate ownership, unless the spouses have agreed otherwise. Marriage creates joint ownership status, therefore the names of both husband and wife are included by default on the owner registration certificate of real estate. If one or both spouses are foreigners, the international treaty containing regulations for their case is applicable in Vietnam. Most treaties stipulate that the jurisdiction and applicable laws are those of the competent authorities in the country of residence, or last place of residence, of the spouses.
Guardians are required to assist minors
A guardian can be assigned to protect the rights of minors (under 15 years old) who have no parents, or where the parents are incapable. The guardian represents the minor for inheritance issues, civil transactions, and managing properties. The guardian is normally a relative of the minor, but if there is no relative, a guardian is nominated by the communal People´s Committee.