In Laos, employers are required to register with the social security scheme and make contributions for both themselves and their employees. The employer's share of the contribution is 6% of an employee's gross salary, while the employee's share is 5.5%. However, social security contributions have a salary cap of LAK 4.5 million per month, meaning that income exceeding this amount will not be subject to social security calculations.

Skills Development Fund (SDF)

Employers may also be required to contribute to the Skills Development Fund, depending on the type and size of their business. The SDF contribution is typically 1% of an employee's gross salary.

Personal Income Tax (PIT)

Employers are responsible for withholding personal income tax (PIT) from employee salaries. This is done based on a progressive tax rate structure. Employers must calculate and submit the withheld PIT to the tax authorities on a monthly basis.

Other Potential Taxes

Stamp duty may be applicable on certain legal documents or transactions, with rates varying depending on the instrument. Land taxes may also apply, with rates differing based on the location and type of land.

Important Considerations

Employers must register with the relevant tax and social security authorities in Laos. It's important to be mindful of the specific deadlines for tax and social security contribution filings, as late payments may lead to penalties. Additionally, expatriates working in Laos for longer than 12 months must also be registered under the social security scheme.

Laos uses a progressive income tax system, which means the tax rate increases as an employee's income goes up. The current tax brackets are as follows:

• 0% for income up to LAK 1.3 million per month
• 5% for income between LAK 1.3 million and LAK 5 million per month
• 10% for income between LAK 5 million and LAK 15 million per month
• 15% for income between LAK 15 million and LAK 25 million per month
• 20% for income between LAK 25 million and LAK 65 million per month
• 25% for income over LAK 65 million per month

Employees who reside in Laos for 183 days or more in a year are considered tax residents and are subject to taxation on their worldwide income.

Social Security Contributions

Employees are required to contribute to the Lao social security system. The contribution rate for employees is 5.5% of their gross salary. Social security contributions are calculated on a salary cap of LAK 4.5 million. Income exceeding this limit won't be subject to additional social security deductions.

Other Potential Deductions

In some cases, union dues may be deducted from employee salaries. Employees may also make voluntary contributions to retirement plans or other savings schemes.

Important Note

It's essential for employees to keep track of their payslips and tax records to ensure that deductions are being made correctly.

In Laos, businesses providing taxable services must generally register for VAT if their annual turnover exceeds LAK 400 million. However, businesses with lower turnovers can choose to register for VAT voluntarily.

The standard VAT rate in Laos is currently 7%. This rate applies to most supplies of goods and services within the country.

Services that are exported from Laos are generally zero-rated for VAT purposes. This means that no VAT is charged on the supply, but the business can still claim input VAT credits for related expenses. To qualify, the service must be both used and consumed outside of Laos. Other specific services may also be designated as zero-rated.

VAT is charged on the total value of taxable services supplied. Output VAT is calculated as 7% of the sales price (or other applicable rate). Businesses can generally claim input VAT credits for VAT paid on expenses directly related to taxable business activities.

VAT returns must be filed monthly. VAT payments are due with the filing of the monthly VAT return.

Non-resident businesses providing B2C digital or electronic services to customers in Laos may be required to register for and charge VAT, even without a physical presence in the country. There is a registration threshold of LAK 400 million per annum for these businesses.

VAT regulations can be complex, so it's advisable to consult with a tax advisor in Laos for guidance specific to your business and the services you provide.

VAT Registration

• Obligation: Businesses providing taxable services in Laos must generally register for VAT if their annual turnover exceeds LAK 400 million.
• Voluntary Registration: Businesses with lower turnovers can choose to register for VAT voluntarily.

Standard VAT Rate

• Rate: The standard VAT rate in Laos is currently 7%. This rate applies to most supplies of goods and services within Laos.

Zero-Rated Services

• Exported Services: Services that are exported from Laos are generally zero-rated for VAT purposes.
• Other Zero-Rated Services: Other specific services may be designated as zero-rated.

VAT Calculation

• Output VAT: VAT is charged on the total value of taxable services supplied.
• Input VAT: Businesses can generally claim input VAT credits for VAT paid on expenses directly related to taxable business activities.

VAT Filing and Payment

• Filing Frequency: VAT returns must be filed monthly.
• Payment Deadlines: VAT payments are due with the filing of the monthly VAT return.

Special Considerations– Non-Resident Service Providers

• VAT Liability: Non-resident businesses providing B2C digital or electronic services to customers in Laos may be required to register for and charge VAT.
• Registration Threshold: There is a registration threshold of LAK 400 million per annum.

Businesses operating within designated Special Economic Zones (SEZs) may be eligible for Corporate Income Tax (CIT) exemptions or reductions for a specified period, often ranging from 4-10 years. Additionally, these businesses often benefit from exemptions or reductions on import and export duties on raw materials, equipment, and other goods related to their business activities.

Promoted Sectors

The Lao government prioritizes investment in specific sectors, including clean agriculture, processing industries, handicrafts, eco-tourism, energy and power generation, education, and healthcare. Businesses investing in these promoted sectors may enjoy CIT holidays for a certain number of years. Additional incentives may be available, such as import duty exemptions or accelerated depreciation allowances.

Concession Agreements

For large-scale investment projects, businesses can negotiate concession agreements with the Lao government. These agreements may offer longer CIT holidays, additional import duty exemptions, and land use concessions.

Other Potential Incentives

Small and Medium Enterprises (SMEs) may be eligible for specific tax incentives and support programs. Investments in underdeveloped areas of Laos may qualify for additional incentives.

Important Considerations

Specific eligibility criteria and application procedures will apply to each incentive program. It's essential to consult with relevant Lao government authorities or tax advisors to understand the requirements. Tax incentives and regulations in Laos are subject to change, so it's crucial to stay updated on the latest developments.