TAX SYSTEM OF LAO PDR
I. Personal Income Tax
1. Who is Liable?
Pursuant to the article 55 of the Tax Law No.04/NA, date 19 May 2005:
Scope of Income Tax and Income Tax Obligations:
Organizations, individuals or legal entities whether Lao, [resident]
aliens, foreigners, including apatrids[,] generating income in the Lao PDR in
accordance with the provisions of the Article 56 of the Tax Law No.04/NA, date
19 May 2005 must pay income tax to the state budget.
A resident of the Lao PDR who works abroad for less than 180 days
and who earns income has the duty to declare and pay income tax in the Lao PDR
if that person is exempt from having to pay income tax abroad.
Lao employee working in embassies, consular offices or international
organizations abroad must declare and pay income tax in accordance with the
regulations of the Lao PDR.
Foreign persons working in Lao PDR who receive their salaries abroad
must pay income tax in Laos if they reside in Laos for more than one hundred
eighty days in [any] tax year, unless there is a separate agreement between the
government of the Lao PDR and the relevant party.
According the article 14 of Foreign Investment No.11/NA, 22 October 2004:
Foreign employees working in a foreign investment enterprise must
pay personal income tax at the rate of ten percent (10%) of their total income to
the Lao Government, except employees of a company with which the Lao
Government has signed a double taxation agreement.
2. Income subject to tax:
1. Income from salaries , general labor wages, bonus, position and title
honoraria, annual allowance, allowance related to broad of directors
meetings of a company and other benefits received in cash or in kind;
2. Income from movable property such as: distribution of dividends or other
benefits to the partners or shareholder of a company, profit from the sale of
shares, interest income from loans, guarantee fees received according to a
contract or other binding obligations except when there is a separate
agreement between the government of the Lao PDR and relevant party;
Income from dividends or other benefits which are subject to tax,
including profits which have been used in any form whether directly or
indirectly, except profits which have been maintained in the reserve or
which have been [re] invested in the company capital; annual allowances,
allowances relating to broad of directors meeting, benefits received from
the increase or decrease of the company’s capital, merger, the transfer of
shares, value added arising from the winding up or liquidation of a
company;
3. Income from immovable property such as: lease of land, house, or other
property or other benefits in kind;
4. Income from patents, copy rights, trademarks or other intellectual
property.
3. Capital gains
There is no separate capital gains tax in Laos. Capital gains are taxed in the
same manner as other operating profit for corporate and withholding from
income tax for individual.
4. Taxation of employer – Provided stock option
Income from provided stock option will be the other benefits of employee and
it will be taxed as same as income from salary, wage and fringe benefits.
5. Deduction
Persons who receive salary 1,500,000 Kip and below must pay
monthly tax [shall] prior to calculation, deduct the monthly exemption
amount in the amount of 300,000 Kip from the salary subject to tax.
Persons who receive a salary of more than 1,500,000 Kip must paid in
accordance with the progressive rates stipulated in Table 2 of Article
60 of the Tax Law No.04/NA, 19 May 2005(see table No.1,2);
Before calculation the from salary shall deduct the allowance
according to the Ministry of Finance’s provision No. 2137/MOF, date
28 September 2005, Article 30:
- 6% of basic salary for government officers;
- 4,5% of total monthly income of employee from all kind of
enterprises for social security pursuant notification of Ministry of
Labor and Social Security No.1374/MOLS, date 28 May 2001.
- Spouse and Children.
6. Rates:
(1) Income from salary is subject to a progressive rate as provided in
the table below:
Table No.1 is for persons who have an income of not more than
one million five hundred thousand Kip:
Levels
1
2
Taxable Salary at each level
300,000 Kip and below
300,000 [Kip] to 1,500,000 Kip
Basic of
Calculation
Tax
Rates
300,000
1,200,000
0%
5%
Salary Tax
at each
Level
0
60,000
Table No.2 is for persons who have an income of more than
one million and five hundred thousand Kip:
Levels
1
2
3
4
5
Taxable Salary at each level
From 1 [Kip] to 1500,000 Kip
1,500,000 [Kip] to 4,000,000 [Kip]
4,000,001 [Kip] to 8,000,000 Kip
8,000,001 [Kip] to 15,000,000[Kip]
15,000,000 Kip and up……….
Basic of
Calculation
1,500,000
2,500,000
4,000,000
7,000,000
…….
Rates
5%
10%
15%
20%
25%
Salary Tax at
each Level
75,000
250,000
600,000
1,400,000
……
(2) Income from patents, copyright, trademarks and other intellectual
property of individuals or legal entities 5%
(3) Income from dividends, profits from the sale of share, interest from
loan, security fees of individuals or legal entities 10%
(4) Income from non-commercial operation of the Lao Front for
National Construction, mass organizations and social organizations
10%
(5) Income from the lease of houses, land or other assets. 15%
7. Tax Filling and Payment Procedures
-
Self- Assessment for Large and medium size business monthly
before 15;
Official assessment for small business.
8. Tax Treaty
Thailand, Vietnam, China, Korea Republic, Kuwait.
II. Corporate Income Tax
1. Profit Subject to Tax
Profit from business operation [refer to] the profit which arises from conducting
agricultural and forestry production business, industry and handicrafts [business],
including exploitation of natural resource, import-export trade, wholesale, retail
and general services such as: logging, mining, transportation, postal[service],
telecommunications, construction, repair, land development for sale of the right to
use, contracting for or operating markets, bidding and construction of various
projects sponsored by state funds, aid funds or foreign loans, banking activities,
activities of financial institutions, insurance, hotel activities, tourism, food and
beverage operations, casino activities, lottery activities, artistic activities, sports,
agency or brokerage activities.
2. Asset Depreciation
Fixed Asset Depreciation: article 37, 2
A depreciation deduction [refer to] a deduction of the reduction in value of fixed
assets which have depleted over their period of use or whose technical [capacity]
has changed in order to accrue funds to purchase a new asset in the future to
replace the old one.
The calculation of the depreciation deduction base on the period of use shall be
performed in accordance with the rates provided in the table below:
3. Royalties and Technical Assistance fee
These kinds of income will be taxed according income tax for both personal and
corporate.
4. Management Assistant
5. Permanent Establishment
The Law on Enterprise No.11/NA, date 9 November 2005 article 3:
Tax Law article 3, the tax law applies to individuals, legal entities [and]
organizations including foreign persons which carry out business or make a living
on a permanent or temporary basis in the Lao PDR as well as those which reside
or have a place of business located in Laos [but] carry out activities in foreign
country which generate income.
VAT:
The term of Permanent Establishment is also defined on the Tax Treaties.
6. Representative Office
The Foreign Investment promotion Law No. 11/NA, 22 October 2004
A foreign legal entity establish under the law of another country may establish a
representative office in the Lao People’s Democratic Republic to collect
information, study the feasibility of investment and coordinate matters for the
purpose of applying for investment.
Representative offices or agents which operate for commercial purposes do
not come under this law.
After a foreign legal entity had issued the approval paper from Ministry of
Planning and Investment, and business certificate, Tax Department or local Tax
authorities will issue the temporally tax certificate and that foreign representative
office will liable to pay tax withheld from resident employee’s salary,
wage…others.
III. Value Added Tax
1. Tax Rate
Article 19 of the Value Added Tax Law No.04/NA date 26 December 2006;
1. A 10% rate is applied to imported [goods and services] and domestically
produced and consumed goods and services liable to value-added tax;
2. A 0% rate is applied to goods and services for export.
2/3. Export /Import of Service
According to the article 10, Decree on the Implementation of the Law on Value
Added Tax:
Place of Supply of Services
In general, the place of supply of service is the place where the receiver of the
service established or has his usual residence within the Lao PDR.
However, the supply of the following services applies special rules according to
each case:
1. The supply of services include design, construction, maintenance and repair work,
services to prepare and co-ordinate construction work, such as: the services of
architects and of firms providing on-site supervision, services of estate agents and
expert and any other work directly relative to an immovable good, as well as the
provision of hotel or similar accommodation are regarded as the place of supply of
service;
2. The hiring of any movable good, including means of transport(car, boat, ship, air
plan, etc) take place where the movable good actually mainly used by the
customer;
3. Transportation of the passengers and goods takes place where it is actually carried
out, proportionate to the distances covered;
4. The supply of the following services takes place where the services are physically
carried out;
4.1 services and ancillary services relating to cultural, artistic, sporting, scientific,
educational, entertainment or similar activities, including the supply of services
of the organizers of such activities;
4.2 restaurant and catering services;
4.3 any services not mentioned elsewhere in this paragraph provided to foreign
travelers, whether charged to the traveler directly or to a Travel Agent or similar
organization, including but not limited to services usually provided by hotels, the
work of tourist guides, the rental of any tangible, movable goods and the
provision of Spa and other health and beauty treatments;
4.4 ancillary transport activities such as loading, unloading, handing and similar
activities; valuation of and work on movable tangible property;
4.5 logging, extraction and transportation by or for the account of the concession
holder of the natural resources;
5. Post and telecommunication services to any organizations, legal entities and
individuals established outside the Lao PDR are deemed to take place where the
provider of these services is established;
5.1 A package tour sold for a single global price by a seller who is established and/or
registered for VAT in the Lao PDR is deemed to take place in the Lao PDR to the
extent that any or all constituent elements of the package tour takes place or is
deem to take place in the Lao PDR, the package tour is deemed to take place
abroad.
IV. Custom
Tax Department not collects revenue from custom duties and it is administrative by
the Custom Department for importation while the domestic revenue is collected by
Tax Department.
According to the General Agreement on Tariff and Trade GATT, the Lao
custom and duties collect from importation will use Custom Valuation method.
V. Local Tax
We have not specific local tax which separated some revenue for local authorities, all
revenue from Taxes will directly to national treasury.