Value-added tax (VAT)
The standard VAT rate is 10%.
VAT is imposed on the final consumer of goods and services. Domestic goods and services used for production, trading, and consumption in Lao PDR, goods imported into Lao PDR, and services rendered by foreigners to Lao PDR customers are subject to VAT.
Certain goods and services are exempt from VAT. Exempted items include unprocessed agricultural products, seeds, fertilisers, textbooks, education services, medical services, certain bank services, and financial institution services.
Exported goods are zero-rated, except export of natural resources that aren’t finished goods, which are subject to 10% VAT. The conventional credit method is used to calculate the VAT payable (i.e. output VAT less input VAT). Excess input VAT can be carried forward for six months (extendable) relating to goods and services. Excess input VAT arising from the capital expenditures that are regarded as fixed assets can be claimed until it is fully utilised. Input VAT for exports is refundable.
There is no concept of export services in the VAT Law. It appears that all services from all sources are subject to VAT.
Business operators engaged in production or trading of taxable goods and services must register in the VAT system if their annual revenue is 400 million Lao kip (LAK) or more. Companies below this threshold may voluntarily register. Only registered VAT payers may claim VAT refunds.
One unique feature of Lao PDR VAT is that VAT is imposed on the services rendered by overseas service providers to domestic service users (withholding VAT). Domestic service users have an obligation to withhold VAT on top of the service fees paid to overseas service providers. The rate of withholding VAT is 10%.
All goods imported into Lao PDR are subject to import duty. Exemptions are available to enterprises operating promoted investment activities (see the Tax credits and incentives section for more information).
Lao PDR has adopted the General Agreement on Tariffs and Trade (GATT) valuation principles.
Duty rates are based on the Association of Southeast Asian Nations (ASEAN) harmonised tariff nomenclature for imports from ASEAN member countries (ASEAN Trade in Goods Agreement [ATIGA]).
Lao PDR has also signed free trade agreements (FTAs) with ASEAN dialogue countries: Australia and New Zealand (under their Closer Economic Relations FTA), China, India, Japan, and Korea; otherwise, normal rates are applied. Duty rates range between 0% and 40%, depending on whether the goods are ASEAN or other source.
Excise tax is levied on consumers of certain imported goods, domestic produced goods, and services within the territory of Lao PDR. The rates range from 5% to 90%. Importers file and pay excise tax at the time of filing at the customs declarations at the customs checkpoints. Domestic producers and service suppliers shall file their monthly excise tax returns no later than the 15th day of the following month.
The land tax is based on both the location and the size of the land and is levied at annual rates per square metre. Land tax is payable in the first quarter of the relevant calendar year.
There are no transfer taxes in Lao PDR.
The stamp taxes in Lao PDR range from LAK 2,000 to LAK 20,000, depending on the types of documents.
Income from salaries and wages, including extra allowances, over-time work, position allowances, career allowances, annual bonuses, meeting allowances for members of the executive board of the companies, and other benefits received in cash and in kind, is subject to income tax withholding by employers at the progressive rates ranging from 0% to 24%. Personal income tax (PIT) is calculated based on gross revenue, as mentioned above, on a monthly basis, and is not recalculated again on an annual basis.
Social Security Scheme contributions
An enterprise with ten or more employees must register itself and its employees in the Social Security Scheme and make contribution to the scheme. Both the enterprise and its employees are obligated to contribute to the Social Security Scheme a combined 11.5% of the employees’ basic salaries or wages. The enterprise contributes 6%, and each employee contributes 5.5%.
According to Notification No. 0824/NSSFO of Ministry of Labour and Social Welfare, the basic amount for Social Security Scheme calculation is LAK 4.5 million.
The Social Security Scheme contribution shall be paid by 15th day of the following month.
Under the Tax Law, government sectors can collect fees for issuing fiscal licences, business licences, permits, visas, advertisement boards, broadcasting rights, and other services. The charges and service fees are set periodically by Presidential Decree.