Corporate - Income determination

Last reviewed - 06 February 2020

The PT calculation is based on an entity's actual accounting profits, prepared in accordance with the Lao Accounting Manual, and adjusted for tax purposes. The Lao PDR tax regulations are silent on the treatment of many 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

Inventory valuation for tax purposes follows the method used for accounting purposes in Lao PDR. All allowances are non-deductible expenses.

Capital gains

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:

  • 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 on the gain on sale of shares listed in the LSX.

The buyer of shares, except shares listed in the LSX, is required to withhold and remit the tax.

The rate of income tax on sales or transfers of real property are as follows:

  • 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.

Dividend income

Dividends (including share in partnership income) received are taxed at a flat rate of 10%.  Dividends distributed by companies listed in the LSX are exempt from tax.

Interest income

Interest income (except exempt interest income) shall be appropriately subject to income tax of 10%. Exempt interest income includes:

  • interest income derived from money deposited with the commercial banks.
  • interest income from government bonds or debentures.

Rental/royalty income

Rental and royalty income are appropriately subject to income tax at the flat rate of 10% and 5%, respectively.

Unrealised exchange gains/losses

Unrealised exchange gains are not taxable and losses are not deductible.

Foreign income

Companies registered under Lao PDR Law are taxed on their worldwide income. Foreign income derived from a treaty country is taxed according to the applicable DTT.