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Lao People’s Democratic Republic: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
March 2002
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Lao P.D.R.: Summary of Tax System as of December 31, 2000

TaxNature of TaxExemptions and DeductionsRates
1. Taxes on income and profits
1.1 Tax on enterprise profits (profit tax)Annual levy on profits derived in the Lao P.D.R. by enterprises from business operations (production, trade, and service), payable in advance on a quarterly basis.a. Expenses normally incurred in producing income with limits for gifts (0.15 percent) and travel costs (0.20 percent for each trip) of annual income.General rateTax Rate (In percent)
35
b. Asset amortization of each asset permitted, using fixed line or declining balance methods and using the following four annual rates: 50 percent: business formation; 20 percent: land transportation, machines and other equipment; 10 percent: sea transport equipment, office improvement, supplies and temporary trade premises; 5 percent: industrial, permanent trade premises and air transport. Unallowed residue is deducted from the sale price to compute the profit or loss.Foreign investors20
Discount rates:
For enterprises in designated areas/city20
For enterprises in rural and lowland areas15
For enterprises in mountain and remote areas.10
c. Carry-forward of losses available for up to 3 years.
d. Three computational regimes. Full real regime: based on extended accounting system for foreign investors, import-export traders and businessmen with annual turnover greater than KN 240 million; partial real regime: based on ordinary or common accounting system, for other businessmen with annual turnover between 24 million and 240 million kip; contract regime: for those with primary accounting system, based on agreed estimation for turnover less than 24 million kip with progressive rates for production, construction, and transport (1–7 percent), trade (2–8 percent), and services, drinking bars (3–9 percent).
e. Amounts appropriated to savings or recapitalization accounts, bonuses, meeting allowances or received from capital reduction, enterprise merging, share transfer, bankruptcy or debt liquidation.
f. Reliefs: Case-by-case tax relief given to new and rehabilitated domestic enterprises (1–5 years) under Decree 47/SNA of June 1989 and to foreign and jointly owned enterprises (2–4 years), under Law 1/94 of March 1994.
1.2 Minimum profit tax (Impôt minimum fiscal)Applicable to gross turnover of the previous year of those enterprises subject to the extended or ordinary accounting system. Payment on an annual basis. Creditable against final profit tax liability but no reimbursement of over payment.Foreign and local investors who are in a system of annual profit tax exemption.1.0 percent
1.3 Tax on social/religious/cultural organizations and associationsIncomes from immovable property leasing and non-business activities.None10 percent
1.4 Tax on personal income from employmentLevied on wages, salaries, bonuses, and other emoluments derived from employment in Lao P.D.R. or, when deputed to international organizations, by Lao citizens receiving emoluments abroad on which they are not taxed. Withheld at source by the employer on a monthly basis.All persons with monthly wages or salaries below KN 30,000.Monthly Wage or Salary

(In kip)

30,001–125,000

125,001–250,000

250,001–500,000

500,001–1,000,000

1,000,001–2,000,000

2,000,001–3,000,000 3,000,001–5,000,000 5,000,001 and above
Tax Rate

(In percent)

5

10

15

20

25

30

35

40
Exemptions are granted to a selected list (12) of incomes, including income from agricultural production by peasants themselves, from cultural events, etc.
1.5 Tax on personal incomes of persons in self-employmentLevied on net profits made by individuals from business operations, and immovable property leasing. Payment on an advance quarterly basis.First KN 360,000 is exempt.General activities

(In kip)

360,001–1,500,000

1,500,001–3,000,000

3,000,001–6,000,000

6,000,001–12,000,000

12,000,001–24,000,000

24,000,001–36,000,000

36,000,001–60,000,000

60,000,000 and above
Tax Rate

(In percent)

10

15

20

25

30

35

40

45
1.6 Tax on personal incomes from immovable property leasingLevied on incomes received by individuals from immovable property leasing.House with domestic lease holder:
Permanent house-30 percent of rent price
Half permanent (wooden) house-25 percent of the rent price
House with foreign leaseholder:
If rent paid exceeds US$2,000/month
House with 2 floor or building-US$2.0 /M2/Month
House with 1 floor- US$1.7/M2/Month
Block house with 2 floor or more -US$1.2 /M2/Month
Block house with 1 floor- US$1.0 /M2/Month
If rent paid lower than US$2,000/month-30 percent of rent paid
Incomes from leasing land and other property25 percent
1.7 Tax on investment incomeLevied on incomes of entities and individuals from gross market-based rents, dividends, lending interest rates, and guarantee fees on a global basis, where appropriate.Interest on bank deposits10 percent
1.8 Tax on property rightsLicenses and other intellectual property rights.None5 percent
2. Taxes on land and propertyTax Rate

(In percent)
2.1 Transfer taxesApplied to the market value of real estate property transferred between private persons through inheritance, sale, or gift.NoneTransfers between:
  • Direct descendants

  • Second-degree relatives

  • Third-degree relatives

  • Other land and houses

  • Undeveloped land

0.5

1

2

3

4
2.2 Land laxAnnual tax levied on land area. Tax is collected from January to end-April.
  • Land occupied by temples, public welfare buildings, embassies, and housing for disabled persons (for extensions of less than 5,000 sq km).

  • Agricultural land, not exceeding two hectares per family, occupied by disabled military personnel and civilians.

  • Agricultural land situated in mountainous areas yielding less than 150 kg rice per person per year.

  • Agricultural land affected by natural disaster or other damages in accordance to the damage.

  • Newly cleared rice fields in mountainous (5 years) and flat land (3 years).

  • Industrial orchards (2–3 years).

1. Occupied land:

Rates vary from KN 0.5 to KN 30 per square meter per year in accordance with the use (housing, production factories, business or service and unused open land) and location.
Taxable land is divided in three categories:
  • Occupied land (i.e., land occupied by buildings and factories)

  • Agricultural land

  • Other

2. Agricultural land:

Rates vary from KN 500 to KN 6,000 per hectare per year in accordance with: (i) land use (rice land, garden land, and farm land); (ii) location (level field and mountainous areas); and (iii) type of production (for rice, number of crops per year and for garden, type of trees).
3. Other land:

KN 1,000-6,000 per hectare per year
3. Taxes on goods and servicesTax Rate

(In percent)
3.1 Turnover taxThe tax is collected from imports of goods to the Lao P.D.R, first time sale of imported goods or domestically produced products, and general servicesThe following activities are exempt from turnover tax:
  • Import of crop seeds, animal breeds and insecticides.

  • Import of materials, instruments and chemical components for research purposes.

  • Import of gold for the notes issuing institution.

  • Import of bank notes or coins.

  • Import or activity relating to tax or post stamps.

  • Import of planes and instruments for international air transportation.

  • Import of goods or accessories for components of international air transportation.

  • Import of goods for selling to diplomats and international organizations in the Lao P.D.R. according to permissions of Ministry of Foreign Affairs.

  • Import of goods with tax exemption or temporary import.

  • Import and sales of animal treating medicines.

  • Sales of self-produced agricultural products by peasants.

  • Forestation activities, industrial trees and fruits planting.

  • Sales of agricultural and handicraft products by government employees or cooperative members on family basis or limit.

  • Export of goods and services.

  • Sales of allowed text books, newspaper and magazines.

The turnover tax is levied at 5 percent and 10 percent.
Illustrations of items subject to these rates follow:
Importers, producers or servers who operate sales or services inside the Lao P.D.R. and have paid the initial tax (e.g., at customs checkpoints) shall have the right to get a deduction of initially paid turnover tax. Deductions are not allowed for service charges, purchases of transport vehicles, including accessories and spare parts which are not used directly by the companies, and purchases of consumer goods for personal utilization by the company.Category
Agricultural products, fertilizers, and insecticide5
Chemicals and mineral products5
All foodstuff5
Machinery and equipment5
Medical services5
Agricultural services5
Goods and services not specifically mentioned in 10 percent rates5
Electricity and fuel5
Consumer durables5
Furniture, clothes, tea and coffee5
All imports, not exempt from import duties, are subject to turnover tax and the base of taxation is customs value, plus customs duty, plus excise duty, if any. In case of the first time sale of goods imported or manufactured inside the country, that tax shall be calculated during its selling or delivery by importers or domestic manufacturers. The calculation shall be based on the actual sales amounts without turnover tax.Capital equipment raw materials, and spare parts5
Construction and land development10
Soft drinks and non-alcoholic drinks10
Transportation10
Motorcycle, trucks, minibus, bus and their spare parts10
Imports and sales of TV, radio and other electronic equipment10
Passenger car, jeep, pickup, plane ship, motorboat for recreation10
The tax on services shall be calculated after completion of the work. The calculation shall be based on the actual service charges without turnover tax.
  • International transportation and relevant services (international transportation-transportation of passengers or cargoes from abroad or to abroad by land, air and sea/river).

  • Transport by people, animals and boats without engines.

  • Provision of leasing immovable properties, such as land, houses and others by persons who do not have business activities.

  • Export services.

  • Independent job-occupation by one’s own labor.

  • Educational activities: child schools, primary schools, secondary and high schools, universities and technical schools.

  • Activities for public benefits held by government authorities and international organizations; and banking and insurance activities.

  • Rice.

  • Fertilizer.

  • Wheelchairs.

  • Fire trucks.

Precious metals and jewelry10
Hotels and tourism10
Telecommunication services10
Alcoholic drinks and cigarettes10
Turnover tax declarations must be submitted monthly and turnover tax collected must be paid monthly (turnover tax on imports is collected at custom checkpoints). All purchase and sales must be substantiated by tax invoices.Games10
Entertainment activities10
3.2 Excise dutiesLevied equally on imports and domestic supplies of petroleum products and selected consumer goods. Imported items are subject to tax on customs duty-inclusive values while domestic suppliers are subject to tax on ex-factory costs.The following are exempt:
  • Purchases by embassies and international organizations.

  • Kerosene.

  • Alcohol (90) for medical purposes.

  • Purchases of petroleum products for externally-funded projects.

  • Exports of excisable goods.

The ad valorem excise duties are as follows:
Item
Petroleum products:
Premium gasoline23
Regular gasoline24
Diesel12
Kerosene Hydraulic, brake, lubricating, and grease oil5
Item
Alcohol:
All types with 15 proof and more60
All types with less than 15 proof50
Soft drinks30
Cigarettes and cigars50
Cosmetics and perfumes20
Play cards, and the like70
Vehicles-Cars
Pick up two doors25
Pick up four doors30
All types of vans20
Bus15
All types of freight hauling vehicles15
Jeep30
Cars hp less than 1000cc60
1000-1500cc62
1500-3000cc72
more than 3000cc104
Motorcycles Miscellaneous items:50
Electrical appliances (freezer, heater, a.c. unit, washing machine, vacuum, color TV, camera, VCR, VCR camera)12
Entertainment tools and services, hunting guns10
There is an additional excise duty on:
Premium gasoline30kip/ltr
Regular gasoline20kip/ltr
Gasoline20kip/ltr
Alcohol
All types with 15 proof or more
Domestic500kip/ltr
Imported5,000kip/ltr
All types with less than 15 proof
Domestic300kip/ltr
Imported3,000kip/ltr
Beers
Domestic900kip/ltr
Imported2,000kip/ltr
Other drinks:
Carbonated drinks
Domestic300kip/ltr
Imported600kip/ltr
Soda water
Domestic300kip/ltr
Imported600kip/ltr
Other imported drinks:
Invigorating drinks700kip/ltr
Mineral water2,000kip/ltr
Mixed drinks in cans (e.g., coffee, fruit juice, etc.)1,000kip/ltr
Cigarettes
Domestic800kip/pck
Imported1,500kip/pck
3.3 Business and professional licenseLevied annually on registered industrial and commercial enterprises, based on turnover and on import-export enterprises, based on capital. Payable during the first three months of the year on a current basis.NoneDifferent rates apply to enterprises producing for the local market and import-export enterprises.
TurnoverRates applicable to local enterprises
(In million of kips)(In kip)
0–10.0
1–56,000
5–1010,000
10–2020,000
20–5040,000
50–10070,000
100–200100,000
200 and above150,000
CapitalRates applicable to import-export
(In million of kips)(In kip)
10–50100,000
50–100200,000
100–150300,000
150–200400,000
200 and above500,000
3.4 Road taxLevied annually on all motor vehicles (motorcycles, cars, trucks, etc.)The following are exempt:
  • Government cars.

  • Cars of the diplomatic corps, international organizations, and foreign experts.

  • 50 percent reduction for government staff, soldiers, policemen, students for one vehicle.

  • 60 percent reduction for pensioners.

Fees vary according to size of engine (for cars and motorcycles), weight (for trucks), and number of seats (for buses).KN 2,000 to KN 360,000
3.5 Air travel feesLevied annually for:NoneFees vary according to weight.
(i) Civil aviation registrationKN 7,000 KN 70,000
(ii) Examination issuance and renewal of permitsKN 5,000 KN 40,000
3.6 Airspace overflight feesLevied on all aircraft without regard to nationality overflying the territory of the Lao P.D.R.
  • VIP special aircraft.

  • Hospital aircraft carrying patients.

US$160–$250 per overflight
3.7 River transport feesLevied annuallyNoneFees vary according to size of boatsKN 200-KN 20,000
3.8 Border entry and exit fees
  • Diplomatic personnel and relatives.

  • Foreign experts and relatives.

Lao nationals: ForeignersKN 500 $5
Persons VehiclesLand and water vehiclesKN 1,500-KN 11,000
3.9 Fees for extended residence in Lao P.D.R.
  • Diplomatic corps, foreign experts, and their relatives.

Fees vary according to length of stayKN 6,000-KN 12,000
3.10 Fee for temporary border passesNoneKN 2,000-KN 3,000
3.11 Fees on delivery of passports, visas, and laissez-passer documentsNoneFees vary according to nature of document and applicant:
Foreigners:US$ 10-80
Lao nationals:KN 300-KN 10,000
3.12 Consular fees overseasLevied every five yearsNoneFees vary in accordance with the location of the consular office and type of documentUS$2-32
3.13 Fees on possession of personal armsLevied annuallyNoneKN 3,000-KN 4,000
3.14 Television and audio use feesNoneTelevision sets: Video cassette recorders:KN 500-KN 1,000
4. Taxes on international trade
4.1 Import dutiesUntil recently, imposed on values fixed in U.S. dollar terms. Such values were fixed for most items, jointly by the Ministry of Trade and the Customs Department. The main exceptions are motor vehicles and selected computer equipment, for which invoice values are accepted. The U.S. dollar values are converted into local currency at the market rate. As of November 2000, customs duties and taxes on all imports and exports are calculated on the basis of an exchange rate of $1=kip 8,000.Imports of diplomats and army/police are exempt. Goods imported by the Government for use in externally-financed development projects are also exempt; the Government otherwise pays duties on its other imports. Imports of fuel by Lao Aviation for international transport is exempt. Also exempt are imports under bilateral grants and externally-funded humanitarian imports.Six rates ranging from 5 to 40 percent. The kinds of goods subject to these rates are as follows:Tax Rate

(In percent)
Raw materials, chemicals (including fertilizers), packaging materials, some machinery (incl. tractors and tools for agriculture), and essential consumer goods (rice, wheat flour, salt, baby foods, medicines, books and printed materials), cameras5
Imported inputs (raw materials, machinery and equipment, building materials) for approved foreign-financed private sector and joint venture investment projects are subject to an import fee of 1 percent.
Raw materials and intermediate components imported for the purpose of processing and then re-exported are fully exempt from import duties. In highly exceptional cases and by specific decision of the Government, foreign investors may also be exempt from the 1 percent duty rate because of the large size of their investments and the significant positive impact which those investments are expected to have upon the socio-economic development of the country.Other machinery and spare parts, and less essential goods (sugar, cheese, butter, chocolate, cooking oils, footwear, garments, photographic films, refrigerators, dishwashers, household electrical appliances, stereo systems, carpets, pearls and diamonds).10
There are no discretionary exemptions. The Minister of Finance does not have the power to grant duty exemptions.Selected luxury consumer goods (premium petrol, cosmetics and toiletries, TVs and VCRs, radio cassette players, table games and funfair articles, buses, minibuses, a.c. units).20
Currently, there is no drawback scheme for import duties paid on inputs for exports.
Other luxury consumer goods (prepared meats and fish, cereals and prepared foods, white chocolate confectionery, toilet soaps and deodorants, perfumes, wines, and spirits), pick up trucks.30
Soft drinks, liquors, beer, tobacco, detergents, processed wood, jeeps, cars, motorbikes, cigarettes, cigars.40
4.2 Export dutiesAll exported finished products produced from raw materials and intermediate components imported free of import duty under Article 17 of the Law on the Promotion and Management of Foreign Investment in the Lao P.D.R. are exempt.Electricity: 20 percent of invoice value; coffee: 5 percent of FOB value; livestock: 5 percent of FOB value; logs: specific rates; saw wood: specific rates; semifinished wood products (lumber, parquet): 30 percent of FOB value; finished wood products (plywood): 3 percent of FOB value.
4.3 Transit taxImposed on “transit” vehicles shipping traded commodities between Thailand, Vietnam, and China via the Lao P.D.R.
5. Taxes on timber and other natural resources
5.1 Timber royaltiesLevied as a fixed dollar amount per cubic meter of timber sold, both for domestic consumption and export. Timber royalties incorporate other taxes previously levied on timber products, i.e., the reforestation tax, the resource tax levied on the timber production rate, and the export duties, levied by the Customs department on exported timber.NoneRoyalties established by the Ministry of Commerce and the Forestry Department of the Ministry of Agriculture. Since February 1995, royalties average about US$15,650 per cubic meter, depending on the timber quality.
5.2 Taxes on natural resourcesLevied in the form of specific duties on volume of mineral extraction, or ad valorem duties on sale price of mineral products.• Ferrous metals2 percent of sale value
• Non-ferrous metals2–5 percent
• Coal2–3 percent
• Construction materialsKN 50 per 100m3
Source: Ministry of Finance.This summary incorporates the revised tax rates and revisions in other aspects of the tax system which are part of the new tax law, adopted by the National Assembly at the end of 2000.
Source: Ministry of Finance.This summary incorporates the revised tax rates and revisions in other aspects of the tax system which are part of the new tax law, adopted by the National Assembly at the end of 2000.

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