The PT calculation is based on an entity's actual accounting profits, prepared in accordance with the Lao Accounting Manual, as adjusted for tax purposes. The Lao PDR tax regulations are silent on the treatment of a large number of items. Generally, in such cases, the tax treatment will follow the accounting treatment. Some of the more common differences are depreciation, entertainment expenses, and the non-deductibility of reserves and provisions (until actually paid). In addition, there is a limitation on some expenses, such as travel expenses and charitable contributions.
Inventory valuation for tax purposes follows the method used for accounting purposes in Lao PDR. All allowances are non-deductible expenses.
There is no separate tax on capital gains in Lao PDR. However, profits from the sale of shares are subject to tax at the following rates based on the Law on Tax No. 70/NA, dated 15 December 2015:
- In case there is evidence of a cost certificate: 10% of the gain.
- In case there is no evidence of a cost certificate: 2% of the value of the selling price.
There is no tax for the gain on sale of investments in listed companies in Lao PDR.
The buyer of shares, except for purchase/sale of shares of a company listed in the stock market, is required to withhold and remit the tax.
The rate of income tax on sales or transfers of real property are as follows based on Law on Tax No. 70/NA, dated 15 December 2015:
- In case there is evidence of the cost of trading or transfer certificate: 5% of the gain.
- In case there is no evidence of the cost of trading or transfer certificate: 2% of the selling price.
Dividends received from another Lao PDR company or a foreign company are taxed at a flat rate of 10%, except for dividend income of listed companies in Lao PDR.
Interest income is taxable in Lao PDR, except for interest income derived from loans lent by commercial banks and interest income derived from money deposited with commercial banks. The rate of income tax on interest income is 10%.
Rental income and royalties income are taxable in Lao PDR. The rate of income tax on rental income is 10%, and the rate of income tax on royalties income is 5%.
Unrealised exchange gains/losses
Unrealised exchange gains are not taxable and losses are not deductible in Lao PDR.
There is no controlled foreign company (CFC) or similar regime in Lao PDR. Profits of a foreign subsidiary are taxable when remitted as dividends.