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Laos is looking forward to graduating from the least developed country by opening opportunities for investors, both Lao citizens and foreigners in order to raise the GDP and developing various infrastructures. In case you are interested in investing in any business in Laos, let us introduce you to Investment Promotion Law (IP)

Investment Promotion Law (IP) regulates in order to bring convenience, punctual, fair, and proper domestic and foreign investment promotion and administration, as protected by the Lao Government to guarantee the rights, benefits for all that involved. This law supports the integration and the growth of the country’s sustainable socio-economic development.

IP Law formulates to promote policies for a fair investment climate and allows investors to conduct the business in a convenient yet lawful way.

The IP Law provides the investment in terms of Incentives, Support, and Protection. For the investment incentives there three parts below: 

1. Incentives by business sector

2. Incentives by zone

3. Incentives on duty, tax, incentives related to land use, and other incentives.

The mentioned businesses sector presented in the amendment are: advanced technology, scientific research, and research and development; ecotourism; education and training centers; construction of modern hospitals and medical equipment; investment, services, and development of public infrastructure in city centers; microfinance; and modern department stores

An investment in any business sector that qualifies for incentives should have minimum investment capital of 1,200,000,000 kips or employ at least 30 Lao technical staff or 50 or more Lao employees with an employment contract of at least 1 year.

As for incentives by zones, it defines into three zones as below:

Zone 1: Poor and remote areas with socio-economic infrastructure unfavorable to investment

Zone 2: Areas with socio-economic infrastructure favorable to investment

Zone 3: Special economic zones.

The investors who invest in the business mentioned above should receive the profit tax exemption depending on the zones described below: 

Zone 1: Exemption for 10 years, with additional 5 years for investments in designated sectors

Zone 2: Exemption for 4 years, with additional 3 years for investments in designated sectors

Zone 3: Comply with the specific regulations set in each SEZ

(see “5 Reasons To Invest In Laos” for the incentives in SEZ investment)

The above exemption periods will be counted from the year the investment starts to generate business revenues. Upon expiration of the above exemption periods, the business will follow the Taxation Law as usual. 

Apart from tax incentives by zones, the IP law also promotes tax exemption for 0% of VAT and tariff for vehicles or raw materials that are not available in Laos to be used for domestic construction or manufacturing products. Vat and tariff exemption also covered materials imports uses for manufacturing products for exports, as well as non-natural domestic materials, use for finished and semi-finished goods for exports.

This is the summary of the Investment Promotion Laws in Laos. In order to move forward economically, Laos has eased the restrictions on foreign investment and amended the law to facilitates such investments. Any businesses anyone wishes to operate are possible if it’s not against Laos’s economic and social values.

Source:

https://www.tilleke.com/insights/new-law-investment-promotion-laos/

https://investmentpolicy.unctad.org/investment-laws/laws/177/lao-people-s-democratic-republic-investment-law

Written By: Vanida Souvannavong