Corporate - Tax credits and incentives

Last reviewed - 26 January 2022

Foreign tax credit

A credit is not allowed for foreign tax paid on foreign income. However, certain DTTs have provisions for either deductibility or credit of foreign tax.

PT incentives

PT incentives are provided under the Investment Law for investments in the prescribed business activities (concession businesses), subject to certain conditions. The law divides the investment areas into three zones. The PT exemptions are as follows:

Zone Areas PT exemption (years) Additional PT exemption (years)*
1 Poor zone, remote zone with socio-economic infrastructure unfavourable to investment 10 5
2 Zone with socio-economic infrastructure favourable to investment 4 3
3 Special economic zone Shall comply with the specific regulations

* Applicable to investment in the following concession businesses set out in item 2, 3, 5, and 6 of Article 9 of the Investment Law, 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: Environmentally friendly agricultural processing industry, national traditional and unique handicraft processing industry.
  • Item 5: Education, sports, human resource 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 of and treatment by traditional medicine.

The PT exemption period may be extended by one more accounting year if the company re-invests its net profits to expand its business.

PT exemption starts from the date the investing enterprise starts generating business revenue.

Companies availing of the concession should comply with the relevant laws and/or the concession agreement.

Customs duty and other tax incentives

In addition to the incentives in relation to PT, the above investors shall also be entitled to the following customs duty and other tax incentives:

  • Duty-free and VAT-free entry of materials and equipment (that may not be supplied or produced in Lao PDR), which would form part of the fixed assets, and machinery and vehicles directly used for production. Importation of all types of fuel, gas, lubricant, administrative vehicles, and other materials shall comply with the relevant laws and regulations.
  • Duty-free and VAT-free entry of raw materials, equipment, and spare parts to be used in the production for export.
  • Zero-rated VAT on the supply of certain domestic raw materials (which are not natural resources) used in the production of finished and certain semi-finished products for export.

In the case of the Special and Specific Economic Zones, the customs duty and other tax incentives shall comply with the Decrees on the establishment and management of each zone.

Specific promotion incentives

Companies in the concession businesses shall receive exemption from rental or royalty concession of state land as follows:

  • Zone 1: Exemption on rental or royalty concession for a maximum of 15 years.
  • Zone 2: Exemption on rental or royalty concession for a maximum of 8 years.
  • Zone 3: Shall comply with the specific regulations.