Which business received tax exemptions in LAO PDR?
Generally, no businesses in Lao PDR are completely exempt from all taxes. However, certain businesses can receive tax exemptions, tax reductions, or pay a simplified lump-sum tax instead of the standard profit tax, particularly if they are small or operate in a promoted sector.
💰 Tax Exemptions and Incentives
The primary way a business in Laos can receive a tax exemption is through the Law on Investment Promotion. This law provides a “tax holiday” or exemption from profit tax for a certain number of years for companies investing in specific promoted sectors and geographical zones.
- Promoted Investment Activities: These typically include:
- Clean, toxic-free agriculture, planting seeds, and animal breeding.
- Education, sports, human resource development, and vocational training.
- Construction of modern hospitals, pharmaceutical factories, and the production of traditional medicines.
- Environmentally friendly activities and industries that use new, innovative technology.
- Geographical Zones: The length of the tax exemption depends on the investment zone, with poor and remote areas receiving longer tax holidays than more developed areas.
📉 Tax Reductions for Small Businesses
Instead of being completely tax-exempt, micro and small enterprises may benefit from a lower, simplified tax system.
- Micro Enterprises: Micro enterprises, which are the smallest businesses in Laos, may be exempt from corporate income tax if their annual income is below a certain threshold (e.g., LAK 50 million).
- Lump-sum Tax: Small and medium enterprises (SMEs) that do not maintain proper accounting records and have an annual turnover below a specified amount (e.g., LAK 400 million) may be subject to a lump-sum tax. This is a simplified tax based on turnover rather than net profit, and it has lower progressive rates than the standard corporate income tax.
📜 Other Exemptions
- VAT Exemptions: While most goods and services are subject to a 10% Value Added Tax (VAT), certain items are exempt. These include unprocessed agricultural products, seeds, fertilizers, and specific medical and educational goods and services.
- Dividends: Interest on bank deposits is generally exempt from income tax.
- Diplomatic and International Organizations: Businesses or organizations with diplomatic status or those recognized as international organizations may be granted tax exemptions.