Lao PDR

Corporate - Deductions

Last reviewed - 06 February 2020

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 the Provisions section for more information).

Depreciation

Depreciation rates prescribed under the Lao Tax, 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:

Assets

Years

Buildings used for industrial purposes:

 

With useful life of 20 years or less

20

With useful life over 20 years

50

Buildings used for commercial and residential purposes:

 

Permanent structures

20

Semi-permanent structures

10

Machinery, equipment, vehicles

5

Software

2

Land and water transport vehicles

5

Ships, cruises, ferries, and other similar boats

10

Office equipment

5

Passenger and cargo airplanes

Based on flight hours

Goodwill

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

Start-up expenses

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

Interest expenses

Interest that are not capital in nature are 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 when paid in Lao PDR.

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 may be carried forward for five years (previously three years), but loss carry backs are not allowed. A change in control will not impact a company's loss carry forward. 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.