I. The role of appraisal services
Appraisal services play a vital role in a modern market economy, especially in transactions involving high-value assets. Specifically:
- Determining the true value of assets: It ensures transparency and objectivity in transactions such as purchase, transfer, capital contribution, equitization, etc.
- Serving as a basis for investment decisions and bank loans: Many credit institutions require that collateral assets be appraised.
- Supporting State management purposes: In activities such as valuation of public assets, land recovery, compensation for site clearance, taxation, and fees.
- Supporting accounting–auditing activities and dispute resolution: It provides documentary evidence in civil and commercial litigation.
II. Legal regulations on appraisal services
1. What are appraisal services?
According to Clause 19, Article 4 of the Law on Prices 2023:
- Appraisal is an activity implemented by organizations or individuals who meet the legal requirements to determine the monetary value of an asset in accordance with the market at a specific time.
- Appraisal services are considered conditional and professional services, which must be executed by licensed appraisal enterprises in accordance with the Vietnamese Valuation Standards (VVS).
2. Why is appraisal necessary?
- To protect the lawful rights and interests of parties in a transaction.
- To ensure objectivity through third-party evaluation.
- To prevent fraud, including overvaluation or undervaluation of assets.
- To fulfill legal requirements in certain transactions, such as the equitization of State-owned enterprises (SOEs).
3. How is the fee of appraisal services determined?
Under the Law on Prices 2023, the appraisal fee is determined based on the agreement between the appraisal enterprise and the client, subject to the following principles:
- Cost recovery and reasonable profit: The fee must reflect the actual costs incurred by the appraisal enterprise while ensuring a reasonable profit in line with market rates.
- Based on content, scope, nature, and time of service: The fee should accurately reflect the workload, complexity, and time required.
- Reasonable business costs: It includes wages, survey costs, data collection and processing costs, financial costs, sales, business management expenses, and other lawful costs.
- Professional liability insurance or risk reserve fund: It ensures operational security and protects client interests.
- Financial obligations under the law: It includes taxes, fees, and charges payable by appraisal enterprises.
Appraisal enterprises are responsible for issuing and publicly posting their appraisal service fees, which may be in the form of fixed fees, a percentage (%) of the asset/project value, or other lawful pricing models.
Where selection of appraisal auctioneers falls under the scope of the Law on Bidding, service fees must comply with the bidding regulations.
Thus, while appraisal service pricing schedule is based on mutual agreement, it must adhere to applicable laws and ensure transparency, publicity, and market alignment.
III. Questions on appraisal services
1. What are business conditions for appraisal services?
- General requirements on professional staff:
- To be issued a Certificate of Eligibility for Appraisal Service Business, the enterprise must have at least five (05) appraisers who meet all requirements under Clause 1, Article 45 of the Law on Prices 2023 and are registered to practice at the enterprise. It is a mandatory requirement to ensure that the enterprise has sufficient professional capacity and number of personnel to perform independent and objective valuation services.
- Specific conditions by the business type:
- Private enterprises, single-member Limited Liability Companies, partnerships:
+ The owner, legal representative, Director or General Director must meet the standards under Article 51 of the Law on Prices 2023.
+ If the owner or general partner is an individual, they must possess a valid appraiser’s card and be registered to practice at the enterprise.
- Multi-member Limited Liability Companies, joint-stock companies:
+ The legal representative, Director or General Director must also meet Article 51 of the Law on Prices.
+ Must have at least two capital-contributing members or shareholders who hold valid appraiser’s cards and are registered to practice at the enterprise.
+ If a shareholder or member is an organization, its authorized representative must be a licensed appraiser practicing at the enterprise.
+ Total capital contribution by organizations must not exceed 35% of charter capital.
+ Capital contributed by practicing appraisers must account for more than 50% of the charter capital.
2. What documents are required to establish an appraisal company?
- Application for enterprise registration
- Company charter
- List of founding members/shareholders
- Identity documents/passports/business licenses of capital-contributing individuals/organizations
- Professional licenses ( appraiser’s cards) of at least three individuals
- Proof of legal capital (e.g., bank confirmation letter)
Once issued the Enterprise Registration Certificate, the enterprise must submit an application to the Ministry of Finance for the Certificate of Eligibility for Appraisal Services.
3. Which authorities issue licenses to establish appraisal companies?
- The Department of Planning and Investment of the province/city where the enterprise is located shall issue the Enterprise Registration Certificate.
- The Ministry of Finance shall issue the Certificate of Eligibility for Appraisal Services.
4. What valuation standards apply in Vietnam?
Currently, Vietnam’s Valuation Standards (VVS) include sets of standards issued by the Ministry of Finance. Main principles include:
- Market-consistent valuation
- Based on the appraisal’s purpose
- Objectivity and honesty
- Consideration of market, legal, and technical factors
5. What conditions must appraisal enterprises meet under the law?
In addition to the aforementioned requirements, appraisal companies must:
- Have a distinctive, non-duplicated name
- Be equipped with appropriate technical tools
- Implement a clear operational procedure
- Submit periodic reports as required by the Ministry of Finance
- Fully participate in professional liability insurance schemes
6. Are appraisal services mandatory in large-asset transactions?
Not all transactions require appraisal, but certain cases are strictly regulated:
- Auction of State-owned assets
- Equitization of State-owned enterprises
- Transfer of State capital in enterprises
- Assets used as collateral or guarantees in banking transactions
In these cases, appraisal is mandatory and must fully comply with relevant standards, methods, and documentation requirements.
IV. Legal consultancy services for appraisal activities
To ensure that appraisal activities comply with the law and avoid potential legal risks, seeking legal consultation is essential. NPLAW offers professional legal services, including contract drafting, regulatory guidance, and support throughout the implementation process. This comprehensive support helps clients save time and achieve successful transactions.
