Laos is one of the fastest growing economies in Asia, but remains heavily reliant on foreign direct investment.
In recent years, the government has implemented a value-added tax system (to generate much-needed revenue for public infrastructure development) but has also lowered its corporate tax rate and developed special economic zones which offer generous tax incentives, to keep it attractive to foreign investors.
Here are the key tax rates:
Corporate Tax: 24% standard rate
All companies registered in Laos and foreign companies operating in Laos are taxed the standard corporate tax rate of 24 per cent, as long as they are registered under Laos’ valued added tax (VAT) system.
Businesses that produce, import or supply tobacco products are taxed a higher rate of 26 per cent.
Small and medium enterprises with an annual revenue of less than 12 million Lao Kip are not registered under the VAT system. Instead of the standard corporate tax rate, they pay a progressive lump-sum tax of between 3 per cent and 7 per cent, depending on the amount of income and type of business.
Companies registered on the Lao Securities Exchange get a 5 per cent reduction in the standard corporate tax rate for the first four years from their date of registration.
Indirect Tax: 10% VAT
A value added tax (VAT) of 10 per cent on the sale of goods and provision of services in Laos. Companies with an annual business turnover of 400 million Lao Kip or more are subject to VAT and must register with the tax authority.
Dividends: Dividends paid to domestic and foreign persons are subject to a 10 per cent withholding tax.
Interest: Interest paid to domestic and foreign persons is subject to a 10 per cent withholding tax. Interest earned on deposits, government bonds and debentures are exempt.
Royalties: Royalties paid to domestic and foreign persons are subject to a 5 per cent withholding tax.
These rates may be lower under various tax treaties, for dividends paid to individuals or entities registered abroad.
Personal Tax: 24% top marginal rate
Laos has a progressive personal income tax schedule, with rates ranging from 0 per cent to 24 per cent. All income earned in Laos (salary, benefits in kind, etc) by locals and expatriates alike, regardless of the length of their employment or stay in Laos, is taxed.
However, expatriates with a work contract that started before March 1, 2011, may still benefit from a flat personal income tax of 10 per cent. This does not include expatriates employed in general investment activities.
Need more information?
Official: Laos Tax Department’s website (http://tax.gov.la/Eng_WebPages/Taxes.aspx)
Deloitte: Laos Tax Highlights 2018
EY: Laos Tax Guide
KPMG: Laos Tax Profile (Updated June 2015)
PwC: Lao PDR Tax Summary