Overview of Business Taxes in Laos

Every business operating in Laos must navigate the country’s tax system. Below is a brief overview of three major taxes applicable to business entities:

1. Personal Income Tax;
2. Corporate Income Tax; and
3. Value-Added Tax.

Personal Income Tax (PIT)

Employers are responsible for calculating and withholding personal income tax from employee salaries on a monthly basis, prior to payment. The withheld tax must be declared and paid to the tax authority by the 20th day of the following month.

Unlike many jurisdictions, individual employees are not required to file annual tax returns in Lao PDR. The employer’s monthly calculation, withholding, and submission is considered final.

The PIT rates for both Lao and foreign individuals are progressive and based on monthly income. For a full breakdown, please refer to our PIT rates table:

‍

Corporate Income Tax (CIT)

All companies registered under the laws of Lao PDR are subject to CIT on their worldwide income.

The standard CIT rate in Lao PDR is 20%. CIT is calculated based on net profit, as determined in accordance with the Income Tax Law and Lao Accounting Manual.

Most ordinary business expenses are deductible when calculating taxable profit.

CIT is payable in two advance installments:

• By 20 July of the current tax year; and
• By 20 January of the following year.

Value-Added Tax (VAT)

VAT in Lao PDR is generally applied at a rate of 10% on the following activities:

• Importation of goods and services
• Supply of goods and services within Lao PDR by companies registered and operating under the VAT system
• Export of services by companies registered and operating under the VAT system

Exports of goods are generally zero-rated.

Businesses registered under the VAT regime must:

• Add VAT to the selling price of taxable goods and services;
• Collect VAT from customers; and
• Declare and pay the net VAT to the the tax authority by the 20th day of the following month.

The amount of VAT payable is calculated as:

Output VAT – Input VAT = VAT Payable

Input VAT must be claimed within three months from the date it is incurred.

VAT is also imposed on services rendered by overseas service providers to domestic service users. In such cases, domestic service users are required to withhold VAT on the service fees paid to overseas providers and remit the VAT to the tax authority. The withholding VAT rate is 10%.

Withholding Taxes

Withholding tax rates in Lao PDR are generally as follows:

• Dividends: 10%
• Interest: 10%
• Rental income: 10%
• Royalty: 5%
• Capital gains: 2% (applicable to the sale of shares or land)

How We Can Help

Our legal and tax advisory team can support your business by providing:

• Advice on tax laws, regulations, and double taxation agreements (DTAs);
• Tax-efficient investment and business structuring;
• Preparation and filing of PIT, VAT and CIT returns;
• Preparation and submission of annual financial reports to the Tax Department;
• Tax due diligence for acquisitions or compliance reviews; and
• Advice on customs duties and import/export procedures.