LaosTax Obligations Detailed

In Laos, employers face various tax and social security obligations related to their employees' compensation.

Employer Obligations: Overview

• Payroll Tax: Employers withhold income tax from employee salaries and remit it to the tax authorities by the 20th of the following month. The tax rate is progressive, ranging from 0% to 25%, calculated based on annual income.
• Social Security Contributions: Employers contribute 6% of each employee's monthly salary, capped at LAK 4.5 million, towards social security. The maximum monthly contribution per employee is LAK 270,000.
• Skills Development Fund (SDF): Employers are expected to contribute 1% of the employee's salary to the SDF. This brings the total employer contribution to 7%.
• Annual Tax Return: Companies must submit an annual tax return by January 20th of the following year, even if no income was realized. Financial statements are due by March 31st.
• Tax Registration Certificate Renewal: Companies must renew their Tax Registration Certificate (TRC) annually by March 31st.

Income Tax Details

Income tax is withheld monthly and reconciled annually based on progressive rates:

• 0%: Annual income up to LAK 15,600,000. Also, monthly income up to LAK 1,300,000 is exempt.
• 5%: Annual income between LAK 15,600,001 and LAK 60,000,000.
• 10%: Annual income between LAK 60,000,001 and LAK 180,000,000.
• 15%: Annual income between LAK 180,000,001 and LAK 300,000,000.
• 20%: Annual income between LAK 300,000,001 and LAK 780,000,000.
• 25%: Annual income exceeding LAK 780,000,001.

Social Security

• The social security system requires both employer and employee contributions.
• Employees contribute 5.5% of their monthly salary up to the LAK 4.5 million cap.
• The employer's contribution of 6% is also calculated on the employee's salary up to the same cap.

Additional Taxes

• Land Tax: Levied annually based on the location and size of the land.
• Stamp Duty: Applies to various documents, with rates ranging from LAK 2,000 to LAK 20,000.

This information is based on the available data as of today, February 5, 2025, and might be subject to change due to legal updates or revisions in regulations. It is recommended to consult with a tax advisor for the latest information.

In Laos, employees face deductions for income tax and social security contributions, calculated based on their earnings and applicable thresholds.

Personal Income Tax (PIT)

The personal income tax rate in Laos is 25% as of 2025. A progressive tax system is employed, meaning different income levels are taxed at different rates. Specific thresholds and rates are as follows:

• 0%: Up to LAK 1,300,000
• 5%: LAK 1,300,001 to LAK 5,000,000
• 10%: LAK 5,000,001 to LAK 15,000,000
• 15%: LAK 15,000,001 to LAK 25,000,000
• 20%: LAK 25,000,001 to LAK 35,000,000
• 25%: Over LAK 35,000,000

Deductions:

Taxpayers can claim an annual deduction of up to LAK 5 million per dependent, for a maximum of three dependents (spouse, parents, or children under 18 who are unable to work and have no income). This caps the total annual deduction at LAK 15 million.

Social Security Contributions (SSC)

Both employers and employees contribute to the social security system.

• Employer Contribution: 6% of the employee's gross salary.
• Employee Contribution: 5.5% of the employee's gross salary.

These contributions are capped for salaries exceeding LAK 4,500,000 per month. The maximum monthly SSC payment is LAK 270,000 for the employee and LAK 247,500 for the employer.

Other Considerations

• Tax Year: The tax year in Laos follows the calendar year.
• Filing and Payment: PIT is typically withheld monthly by the employer. Annual filing and payment requirements may also apply. Consult a tax professional for specific requirements.

This information is current as of February 5, 2025, and may be subject to change. Consulting with a Lao tax advisor is recommended for the most up-to-date and personalized guidance.

In Laos, the Value Added Tax (VAT) is a consumption tax levied on most goods and services.

VAT Rates

• Standard Rate: 10% (As of March 19, 2024). This rate was previously reduced to 7% in January 2022 but has since been reverted.
• Zero-Rated: Exports of goods are generally zero-rated. However, unfinished natural resources are subject to the standard 10% VAT.
• Exempt: Certain goods and services are exempt, including unprocessed agricultural products, seeds, fertilizers, agricultural equipment, international transportation services, educational goods and services, specific medical goods and services, and particular banking and financial institution services.

VAT Registration

• Threshold: Businesses with annual revenue exceeding LAK 400 million (approximately USD 24,000 as of February 5, 2025) must register for VAT. Micro-enterprises are exempt from this requirement.
• Automatic Registration: Companies receiving a Taxpayer Identification Number (TIN) or investment approval are automatically registered in the VAT system, excluding micro-enterprises.
• Digital Services: Non-resident providers of digital services meeting the LAK 400 million threshold must also register. Simplified registration is available via the DTax system.

VAT Filing and Payment

• Returns: VAT returns are filed and payments are made three times a year, covering the periods January to April (due May 31), May to August (due September 30), and September to December (due January 31 of the following year).
• Digital Platforms: Filing and payment for non-resident e-commerce and digital platform providers are due twice a year: by July 20 and January 20 of the following year.
• Monthly Filing (Previous Regulation): Note that some sources mention monthly filing requirements. However, the most recent information indicates a thrice-yearly filing schedule.
• Payment Methods: Payments for VAT deductions must be made through a bank in Laos.
• Input VAT Refunds: Input VAT incurred on goods for export may be refundable and can be claimed within three months of the date incurred. For digital service providers, VAT refunds are only allowed for commercial reasons (such as cancellations) and can only be used as a credit for offsetting within 183 days.

VAT Invoices

Invoices must meet Lao requirements and include the following:

• Supplier's name, address, and VAT registration number
• Invoice date and sequential number
• Buyer's name, address, and VAT registration number (if applicable)
• VAT amount and rate per item
• Total amount after VAT
• Currency used

Other Indirect Taxes

While not part of the VAT system, it's important to note that other taxes exist in Laos, including excise tax and customs duty, which are payable upon customs clearance.

Additional Considerations

• Withholding Tax: Domestic service users must withhold 10% VAT on service fees paid to overseas service providers and remit this amount to the tax authority.
• Foreign Contractors: Foreign companies providing services in Laos are subject to VAT collection through a withholding tax mechanism. They are required to register in the Lao VAT system.

This information is current as of February 5, 2025, and is subject to change. Always confirm current regulations with official Lao government resources or a qualified tax advisor.

Laos offers various tax incentives to attract investment and stimulate economic growth. These incentives target specific sectors and zones, aiming to promote sustainable development and reduce reliance on imports.

Tax Incentives in Laos for 2025

As of February 5, 2025, Laos' tax incentives system includes the following:

• Profit Tax Incentives:

  • Exemptions for investments in the education sector.
  • Exemptions for investments made in the educational sector throughout the duration of the investment.
  • Exemptions or reductions may be available for investments in certain sectors in particular areas in accordance with articles 9 through 12 of the Law on Investment Promotion No. 14/NA.
  • Exemption from profit tax in the next accounting year if net profits are reinvested for business expansion.

• Income Tax Incentives:

  • Reduced personal income tax rate of 5% for experts working in promoted sectors.

• Customs Duty Incentives:

  • Exemption from import duties for raw materials, equipment, and components used in production for the domestic market, substituting imported goods.
  • Exemption from export duties for local agricultural products, processed industrial products, and handicrafts (excluding specific items).
  • Exemption from import duties on raw materials, equipment, spare parts, and vehicles directly used in production (subject to specific regulations).
  • Exemption from export duties for general goods and products.

• Value Added Tax (VAT) Incentives:

  • Zero-rated VAT for export-oriented factories.
  • 50% VAT reduction for construction of infrastructure, electricity, and water supplies.

• General Tax Rates:

  • Corporate Income Tax: Generally ranges from 20% to 35%. Rates may vary for different industries, although new tax regulations might bring changes.
  • Business Turnover Tax: 5% - 10%.
  • Excise Tax: 5% - 90%.
  • Personal Income Tax: Progressive rates from 0% - 25%.

• Other Tax Considerations:

  • Dividends: Received dividends are subject to a 10% withholding tax.
  • Interest: Interest earned on bank deposits is exempt from income tax.
  • Capital Gains: Income from the sale of shares (excluding those listed on a securities exchange) is subject to a 2% income tax on the selling price. Income from the sale of land and property is subject to corporate income tax.
  • Losses: Taxpayers can carry forward losses for five years (ten years for plantation and agriculture businesses affected by natural disasters) with proper documentation. Loss carryback is not permitted.

Promoted Sectors and Zones

• Promoted sectors encompass a wide range of activities across various economic sectors:

  • Eco-friendly and sustainable farming.
  • Eco-friendly agro-processing.
  • Handicraft industries.
  • Manufacturing of export products and import substitutes.
  • Hospitals, pharmaceutical and medical equipment factories, and traditional medicine development.
  • Education, physical sports, and human resource development.

• Investment Promotion Zones: Specific geographical areas designated for preferential treatment are also stipulated in the legislation.

Eligibility and Application Procedures

Specific eligibility criteria and application procedures for each incentive are detailed in the relevant laws and regulations, including the Investment Promotion Law. Concession agreements might offer incentives based on negotiations. Investors should consult official resources for up-to-date information.

Additional Notes

Laos has a focus on attracting foreign direct investment. Incentives offered can vary depending on the nature and scale of the investment, as well as negotiations with the Laotian government. Public services are a priority area for foreign investment, with incentives provided for ventures in education, energy, transport, and healthcare. Long-term land leases (up to 50 years) are offered as non-tax incentives, with renewable 10-year multiple-entry visas available for foreign investors and their families who purchase real estate worth over US$100,000 within Special Economic Zones.