Accrued expenses are deductible in Lao PDR. Reserves and provisions are not deductible until actually settled.
Depreciation
Depreciation rates prescribed under the Lao Tax Law No. 70/NA, dated 15 December 2015, may differ from financial accounting. Depreciation is on a straight-line basis over prescribed useful lives, as follows:
| Assets |
Years |
| Buildings used for industrial purposes: |
|
| With useful life of 20 years or less |
20 |
| With useful life over 20 years |
50 |
| Buildings used for commercial and residential purposes: |
|
| Permanent structures |
20 |
| Semi-permanent structures |
10 |
| Machinery, equipment, vehicles |
5 |
| Software |
2 |
| Land and water transport vehicles |
5 |
| Ships, cruises, ferries, and other similar boats |
10 |
| Office equipment |
5 |
| Passenger aeroplane and cargo |
Depending on flight hour |
Goodwill
There is no specific guidance on the deductibility of goodwill or amortisation in Lao PDR.
Start-up expenses
Start-up expenses are amortisable over two years in Lao PDR.
Interest expenses
Interest is deductible on an accrual basis following the accounting treatment. All interest payments must be supported by documents showing that the payments are commercially reasonable. Interest paid to a shareholder is not deductible.
Bad debt
Bad debt reserves are not deductible in Lao PDR. However, a deduction is allowed if a certain procedure has been followed, one still cannot recover the debt, and the debt is ultimately written off.
Charitable contributions
Charitable contributions in Lao PDR are limited to 0.30% of total annual business turnover.
Travel expenses
Travel expenses for administrative activities are limited to 0.60% of total annual business turnover.
Reception and telephone expense
Reception and telephone costs are each limited to 0.40% of total annual business turnover.
Entertainment expenses
Entertainment expenses are non-deductible in Lao PDR.
Advertisements
Advertisement costs are limited to 0.50% of total annual business turnover.
Pension expenses
Pension expenses are deductible when paid in Lao PDR.
Bribes, kickbacks, and illegal payments
Bribes, kickbacks, and illegal payments are not deductible in Lao PDR.
Fines and penalties
Fines and penalties are not deductible in Lao PDR.
Taxes
PT and input VAT paid when purchasing fixed assets are not deductible for PT calculation purposes.
Net operating and capital losses
Tax losses can be carried forward for three years, but no carryback is allowed. A change in control will not impact a company's loss carryforward. Capital losses are treated as ordinary losses.
Payments to foreign affiliates
Payments to foreign affiliates are deductible if in the ordinary course of business.