Tax and Duty Incentives
Investment Promotion Zoning in Lao PDR
I. General Customs and Tax System and Fiscal Incentives
- Regular Custom and Tax Systems in the Lao PDR:
- Regular Import duty rates are between 3% - 40%
- Indirect taxes include: (1) Business turnover tax between 5% - 10%; (2) Excise tax between 5% - 90%
- Existing law on tax: Foreign (20%) and Domestic (35%).
- As of November 2011, the law on tax is in course of revising to unity the general profit tax for foreign and domestic investors. The new tax rate is speculated in the range of 24% - 28%.
- Minimum tax at the rate of 0.1% of total revenue.
- Personal income tax between 0% - 25% (progressive rate) after revising the law on tax.
- Fees and service charges.
- Investment Promotion Incentives:
According to Article 49 of the Investment Promotion Law (IP Law), the promoted sectors are agriculture, industry, handicraft and services. Details of promoted activities under the sectors are determined by the Government and classified into three different levels based on prioritized activities of the Government, the activities related to the poverty reduction, the improvement of living conditions of people, construction of infrastructure, human resource development, jobs creation, etc. The Government has established the following fiscal incentive systems:
1. Incentive or Corporate Profit Tax (Based article 50 and 51 of the IP Law)
Note: Refer to Investment Promotion Zoning Map
- Zone 1: Mountainous, Plateau zones with no economic infrastructure to facilitate investments;
- Zone 2: Mountainous, Plateau zones with a moderate level of economic infrastructure to accommodate investments;
- Zone 3: Plateau zones with good economic infrastructure available for investments;
2. Specific Promotion Incentives (According to Article 54 of IP Law)
Investments in the construction of hospitals, kindergartens, schools, vocational schools, colleges, universities, research
centers and some public utilities shall obtain the exemption rental or land concession as follows:
3. Other Promotion Incentives (According to Article 52 of IP Law)
In addition to the profit tax incentives, investors shall be also entitled to customs duty and tax incentives, as follows:
1. Exemption from profit tax in the next accounting year, if the net profit derived from business activities is used for business expansion.
2. Exemption from import duties for the importation of raw material, equipment, spare parts and vehicles which are directly used for production. However, exemption of import tax shall comply with specific regulations.
3. Exemption from export duties for exportation of general goods and products. The exportation of natural resources and natural resources-made products shall comply with concerned regulations and laws. The importation of all types of fuel is not exempted from duties and taxes.
4. If an investor suffers losses after completion of tax finalization with the tax office, the investor shall be permitted to carry the losses forward to three consecutive accounting years. After ending of the period, any remaining losses shall not be allow to be deducted from profit. For special economic zones and specific economic zones, the provision of incentive treatment shall be in compliance with the Decree on the Establishment and Activities of respective zone.