Lao PDR

Corporate - Deductions

Last reviewed - 07 August 2026

Generally, business expenses (including accrued expenses) are deductible unless specifically indicated as non-deductible under the Lao Income Tax Law. Reserves and provisions are not deductible until actually incurred, with certain exceptions (see Provisions below for more information).

Depreciation

Depreciation rates prescribed under the Lao Tax Law may differ from financial accounting. Depreciation shall commence from acquisition date. Depreciation may be calculated on the cost of a business asset by straight-line, double-declining, or activity-based methods over the prescribed useful lives, as follows:

Fixed Assets of Enterprise Eligible for Depreciation	Useful Life	Annual Deduction Rate
Tangible Fixed Assets:
1. Buildings used for industrial purposes:
With useful life of 20 years or less	-	2
With useful life over 20 years	-	5
2. Structure of electricity projects, excluding assets depreciation seperatly	-	Depreciation based on concession period or technical utilisation standards of each asset type
3. Buildings used for commercial, residential, cultivation and animal purposes:
Permanent type	20	5
Semi-permanent type	10	10
4. Machinery, excavation vehicles, clearing machinery and towing vehicle used in	5 years or based on technical utilisation standard	-
5. Land and water transport vehicles	5	20
6. Full sets of equipment or tools used to perform professional services or any specific work	5	20
7. Office equipment	5	20
8. Ships, cruises, ferries, and other similar vessels	10	10
9. Passenger and cargo air planes	-	Based on flight hours
10. Planted tress	-	Based on the lifespan of each yielding tree type
11. Breeding livestock (sires and dams) and dairy cows	-	Based on the lifespan of each animal type
Intangible Fixed Assets:
1. Expenses for the design and establishment of the enterprise	2	50
2. Expenses for mineral exploration, surveying and techno-economic feasibility studies	5	20
3. Software used for specific professional work	5	20

Goodwill

There is no specific guidance on the deductibility of the amortisation of goodwill. However, the Lao Income Tax Law states that depreciation of intangible assets with undetermined useful life is not allowed.

Start-up expenses

Start-up expenses can be amortised over a two-year period.

Interest expenses

Interest that is not capital in nature is generally deductible, subject to certain conditions.

Provisions

Provisions for expenses not yet incurred and reserves (e.g. bad debts) are not tax-deductible. A deduction for bad debts is allowed if a certain procedure has been followed.

Provisions entered by banks or other financial institutions based on the accounting standards and requirements of Bank of Lao PDR can be claimed as tax deductions.

Charitable contributions

Charitable contributions are not deductible.

Entertainment expenses

Entertainment expenses are not deductible.

Pension expenses

Pension expenses are deductible.

Bribes, kickbacks, and illegal payments

Bribes, kickbacks, and illegal payments are not deductible.

Fines and penalties

Generally, fines and penalties are not deductible.

Taxes

Taxes levied on income and VAT on fixed assets used in the business are not deductible for PT purposes.

Net operating and capital losses

Tax losses accepted by the authority may be carried forward for five years (previously three years) but need independently audited financial statements. A change in control will not impact a company's loss carryforward. Capital losses are treated as ordinary losses.

Payments to foreign affiliates

Subject to the normal and specific rules on deductibility, a deduction may be claimed for payments to foreign affiliates.

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