Value-added tax (VAT)
VAT of 10% generally applies on the following activities:
- Importation of goods and services;
- Supply of goods and services in Lao PDR by companies registered and operating a business in the VAT system; and
- Export of services by companies registered and operating a business in the VAT system.
The supply and importation of certain goods and services are exempt from VAT; including unprocessed agricultural products, seeds, fertilisers, equipment for agricultural purposes, international transportation services, educational goods and services, certain medical goods and services, certain bank services, and financial institution services.
Exports of goods are zero-rated, except the export of natural resources that are not finished goods, which are subject to 10% VAT.
The conventional credit method is used to calculate the VAT payable (i.e. output VAT less allowable input VAT). Input VAT can be claimed within three months from the date incurred. Input VAT incurred in relation to the supply of goods for exports may be refundable.
There is no concept of export services in the VAT Law. It appears that all services from all sources are subject to the standard VAT of 10%.
Companies who register an enterprise and obtain their taxpayer identification number (TIN) and/or get investment approval from the relevant authorities shall automatically be registered in the VAT system except for the micro enterprises.
One unique feature of the Lao PDR VAT is that VAT is imposed on the services rendered by overseas service providers to domestic service users. Domestic service users have an obligation to withhold VAT on the service fees paid to overseas service providers and pay the VAT to the tax authority. 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 from an ASEAN country or another country.
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 the customs declarations at the customs checkpoints. Domestic producers and service suppliers shall file their monthly excise tax returns no later than the 20th (previously 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 meter.
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 allowances, over-time pay, 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 25% (previously 24%). Personal income tax (PIT) is calculated based on gross revenue, on a monthly basis, and is recalculated again on an annual basis.
Social Security Scheme contributions
The government is encouraging all enterprises to register itself and its employees in the Social Security Scheme and make contributions 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 issued by the 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 the 20th (previously 15th) day of the following month.
Under the Lao Tax Law, environmental tax is imposed on companies operating a business involving certain prescribed activities, which are considered to cause pollution; damage the health and lives of any human, animal or plant; or disrupts the balance of the ecosystem. The taxable amount and tax rate depend on the business activity.
Fees and administrative charges
Under the Lao 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.