Foreign tax credit
There is no foreign tax credit regime in the Law on Tax. However, certain tax treaties entered into by Lao PDR do have provisions for either deductibility of foreign tax or a credit.
PT incentives are provided under the Law on Investment Promotion 2016. This law divides investment areas into three zones, namely Zone 1, Zone 2, and Zone 3. The PT exemptions are as follows:
||PT exempted (years)
||Additional PT exempted (years)
||Poor zone, remote zone with socio-economic infrastructure unfavourable to investment
||Zone with socio-economic infrastructure favourable to investment
||Special economic zone
||Shall comply with the specific regulation.
* Note: If invest in the activities set out in item 2, 3, 5, and 6 of Article 9 of the Law on Investment Promotion, as follows:
- Item 2: Clean, toxic-free agriculture, planting seed production, animal breeding, industrial plantation, forestry development, protection of environment and bio diversity, activities promoting rural development and poverty reduction.
- Item 3: Environmental friendly agricultural processing industry, national traditional and unique handicraft processing industry.
- Item 5: Educations, sports, human resources development and labour skill development, vocational training institutions or centres, production of educational and sports equipment.
- Item 6: Construction of modern hospitals, pharmaceutical and medical equipment factory, production and treatment by traditional medicine.
PT exemption starts from the date of the investing enterprise generating business revenues. After finishing the period of PT exemption as mentioned above, the enterprise shall pay PT in accordance to the Law on Tax.
Concession business shall comply with relevant laws or according to the concession agreement.
Incentives related to customs duty and other taxes
In addition to the incentives related to PT, investors shall also be entitled to the following customs duty and other tax incentives:
- Exemption from PT in the accounting year after the incentives for PT exemption for a business that spends its net profit to expand its business.
- Import of materials, equipment, which may not be supplied or produced in Lao PDR, to form the fixed assets, and machinery and vehicles directly used for production will receive customs duty exemption and pay VAT at the rate of 0%. Importation of all types of fuel, gas, lubricant, administrative vehicles, and other materials shall comply with the relevant laws and regulations.
- Import of raw materials, equipment, and spare parts to be used in the production for export shall be exempted from customs duty at the time of import and granted the custom duty exemption at the time of export and pay VAT at the rate of 0%. Use of domestic raw materials that are not natural resources for producing finished and semi-finished products at the time of export shall pay VAT at the rate of 0%.
- Investors can transfer the annual losses to the next following year to be deducted from profit within the period of three years; however, the losses shall be audited and certified by the tax officer. After this period, the remaining loss is not allowed to be deducted from profit anymore.
- In the case of the Special and Specific Economic Zones, the incentives related to customs duties and other taxes shall comply with the Decrees on the establishment and management of each zone.
Specific promotion incentives
Investment in hospitals, kindergartens, academic schools, vocational schools, colleges, universities, research centres, and some activities related to public utilities shall obtain an exemption of rental or land concession as follows:
- Zone 1: Exemption of rental or land concession for a maximum of 15 years.
- Zone 2: Exemption of rental or land concession for a maximum of 8 years.
- Zone 3: Shall comply with the specific regulation.