COVID-19: The Lao PDR Government Announces New Economic Policy Measures

With the recent drastic measures taken by the government of the Lao PDR to control the spread of COVID-19 in the community, the economy is in a precarious position as trade, investment, tourism, and growth have come to an indeterminate halt. As per the World Bank, the global economy could shrink by 1 per cent this year, and even further if restrictions on economic activities are extended by governments without adequate fiscal responses.

In the latest attempt to keep the economy afloat and help out the affected micro-, small- and medium-sized enterprises (“MSMEs”) in the country, the Prime Minister of the Lao PDR announced on 2 April 2020 various fiscal and monetary policy measures under the Decision on Policies and Measures to Reduce the Impact of the COVID-19 Pandemic on the Lao Economy No. 31/PM. We have outlined below the key policy responses of the government:

Key Fiscal Measures

Corporate Income Tax

All microenterprises falling under the scope of Article 29(2) of the Law on Income Tax No. 67/NA dated 18 June 2019 are exempt from having to pay income tax for a period of three months – from April to June 2020.

Personal Income Tax

All employees earning LAK5,000,000 (approx. US$550) or less per month are exempt from having to pay personal income tax for a period of three months – from April to June 2020.

Customs duty

All essential items that are imported to prevent, and protect and fight against the COVID-19 pandemic (e.g. masks, hand soap, medical equipment, and other necessary items) are exempt from customs duties, taxes, and government service fees related to importation into the Lao PDR.

The Ministry of Industry and Commerce, and the Ministry of Health have been instructed to prepare a comprehensive list of the specific items that will be exempted for the Ministry of Finance’s use as a reference for implementation.

Other taxes and measures

The tax collection for tourism business operators has been delayed for a period of three months from April 2020. The Ministry of Information, Culture and Tourism is to notify the specific businesses that will be entitled to this benefit.

The road tax payment deadline has been extended from 31 March 2020 to 30 June 2020.

The decision also reaffirms the earlier decision of the Ministry of Finance to extend the deadline for the submission of financial statements for the 2019 fiscal year from 31 March 2020 to 30 April 2020.
The Prime Minister has also asked the relevant government agencies to consider delaying the payment dates for electricity and water consumption bills by individuals and businesses.

Key Monetary and Macroeconomic Measures

• Approval for the Bank of the Lao PDR (“BOL”) to reduce its base interest rate and reserve requirements (from 10 percent to 8 percent on foreign exchange, and from 5 percent to 4 percent on local currency) for the banks and financial institutions under BOL’s supervision.
• Approval for the BOL to instruct the commercial banks to implement loan-related measures, such as extending the loan payment period, restructuring existing loan arrangements, and issuing targeted credits to businesses that are adversely affected by the COVID-19 pandemic, in accordance with Decision No. 238/BOL dated 26 March 2020.
• Instruction to the National Social Security Fund Office to delay the social security contribution payment period for businesses affected by the COVID-19 pandemic for a period of three months – from April 2020 to June 2020.

The Prime Minister has also issued instructions to all ministries to take the necessary actions and implement control measures to ensure macroeconomic stability and prioritize public revenue collection from businesses that are not affected by COVID-19, control inflation for essential commodities, foreign currency reserves, and manage budget deficit and debts.

Implementation Instructions

All government ministries are instructed to issue the necessary regulations for implementation of the above-stated fiscal and non-fiscal measures as per their responsibilities and scope of governance. The Ministry of Planning and Investment will act as the main coordinator for other ministries, the BOL, and other relevant stakeholders to support, monitor, and inspect the implementation of necessary policies in a transparent and accountable manner and to report to the Prime Minister. The ministries and other provincial and regional government authorities are also instructed to cut unnecessary expenses and reassess their budget and requirements in light of the COVID-19 pandemic.

The Lao PDR government has already allocated LAK10 billion for implementing measures to prevent and control the spread of COVID-19 in the country. The Prime Minister’s Cabinet has also endorsed a proposed 13-measure economic stimulus package that includes establishing a specific taskforce to address the adverse economic impact of COVID-19. Furthermore, a new electricity tariff has been approved which will come into from 1 May 2020 aimed to reduce the tariff rate.

For more information, visit the Lao PDR government’s dedicated COVID-19 website

https://www.covid19.gov.la/

If you have any concerns related to legal, tax, or accounting, or need more information on the above, please get in touch with your usual contact at the firm directly for a timely response.