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VDB Loi Laos Alert – Hot off the presses: The New Income Tax Law

VDB Loi Laos Alert – Hot off the presses: The New Income Tax Law

February 3, 2020

The new Income Tax Law No. 67/NA dated 18 June 2019 (“New Income Tax Law”) has been promulgated by the President of the Lao PDR and was published on the Lao Official Gazette on 3 February 2020. It will come into force on 18 February 2020, i.e. 15 days from the date of its publication in the Lao Official Gazette.Are you aware of and ready to move forward with the new calculations?

What are the changes in the new law?

The New Income Tax Law replaces Tax Law No. 70/NA dated 15 December 2015 (“Tax Law 2015”), and covers the following:

  • Profit tax (“PT”) – Levied on micro-enterprises, small- to large-scale enterprises, and freelancers, with generally lower rates for most activities and a change in the filing period.
  • Personal income tax (“PIT”) – Collected on a monthly basis and audited on an annual basis, with better progressive rates and a larger deduction base.
  • Income tax on other income, including:
    • Freelance income
    • Online trading income
    • Dividends
    • Enterprise-share sale
    • Non-banking loan interest
    • Guarantee fees
    • Commission fees
    • Rental income
    • Intellectual property fees
  • New and more precise penalties

The following table summarizes the main changes in rates and penalties:

Tax

New Income Tax Law

Tax Law 2015
PT

Activities

Rates
General activities

20%
Tobacco activities

22%
Mining activities

35%
Human resource development and certain medical activities

5%
Activities using new innovative technology, and those that are environmentally friendly, use natural resources frugally, and use clean energy for their production

7%
Lao stock exchange

13% (4 years), then 20%

Filing due date: On a semiannual basis – by 10 July and 10 January

Activities

Rates
General activities

24%
Tobacco activities

26%
Mining activities

35%
Lao stock exchange

5% (4 years), then 24%

Filing due date: On a quarterly basis – by 10 April, 10 July, 10 September, and 10 January
PIT

Level

Monthly income basis (LAK millions)

Calculation basis (LAK millions)

Rates
1 1.3 or below

1.3

0%
2 Over 1.3 – 5

3.7

5%
3 Over 5 -15

10

10%
4 Over 15 – 25

10

15%
5 Over 25 -65

40

20%
6 Over 65

………..

25%
Filing due date: On a monthly basis – by the 20th of the following month

Level

Monthly income basis (LAK millions)

Calculation basis (LAK millions)

Rates
1 1 or below

1

0%
2 Over 1 – 3

2

5%
3 Over 3 -6

3

10%
4 Over 6 – 12

6

12%
5 Over 12 -24

12

15%
6 Over 24 – 40

16

20%
7 Over 40

…..

24%
Filing due date: On a monthly basis – by the 15th of the following month
Income taxes

Transactions

Rates
  • Share transfer

2%
  • Land/house/building transfer
  • Repairs/construction
  • Online trading
  • Agriculture land transfer

1%
  • Intellectual property

5%
  • Commissions
  • Consultancy/other services
  • Dividends

10%
  • Non-banking loan interest
  • Guarantee fees
  • Rentals
Filing due date: On an occasional basis – within 15 working days from the date the income is generated Notably, PIT and income taxes on repairs/construction, commissions, and consultancy and other services will be re-audited on an annual basis by 31 March of the following year, at which time certain expenses will be allowed for deduction, and the taxes will be recalculated on the annual income base.

Transactions

Rates
  • Share transfer

2% or10%
  • Land/house/building transfer

2% or  5%
  • Intellectual property

5%
  • Commissions

10%
  • Dividends
  • Guarantee fees
  Filing due date: On an occasional basis – within 10 days from the date of withholding
Loss carry forwards

5 years continuously

3 years continuously
New and more precise penalties

Violations

Fines (LAK)
Not including the tax identification number on the tax declaration 100,000
Late declaration of income tax 500,000
Not responding to the first demand notice for supplying information 1,000,000
Failure to declare income tax 1,500,000
Failure to provide information on the enterprise’s corporate changes 3,000,000
 

The numerous changes in the New Income Tax Law, particularly with regard to rates, and calculation bases and methods, mean that businesses will have to redo their tax compliance processes.
If you would like more information on what these changes will mean for your business, or require assistance with reviewing your processes and adjusting them for the New Income Tax Law requirements, please contact the undersigned or your usual VDB Loi adviser.

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