Flash Report on Amended Investment Promotion Law

The amended Investment Promotion Law No. 62/NA dated 28 June 2024 (“Investment Promotion Law 2024”) was published in the Lao Official Gazette and came into effect on 16 December 2024, replacing the Investment Promotion Law 2016 and the Law on Amendment of Article 12 of the Investment Promotion Law 2019.

The law was amended to better align it with the current economic and investment situation in the Lao PDR. We provide below an update of the key changes investors should be aware of.

Promoted Sectors and Zones

Article 9 of the Investment Promotion Law 2024 updates the promoted sectors and investment zones eligible for investment incentives from the Lao government, as shown below.

Promoted sectors

1. Eco-friendly and sustainable farming
2. Eco-friendly agro-processing (such as of animal feed, natural fertilizer, organic fertilizer, scientific fertilizer), handicraft industries, manufacturing of products for export and as a substitute for imported goods
3. Hospitals, pharmaceutical and medical equipment factories, and traditional medicine development
4. Education physical sports, human resource development, and skilled labor development
5. Those using of digital technologies, scientific research and development, and eco-friendly and sustainable innovations
6. Eco, cultural, and historical tourism
7. Public infrastructure development, such as construction of highways and rail systems, water supply management
8. Infrastructure development for promoting investment opportunities in special and specific economic zones
9. Logistics, dry port operation, state-to-state transit, and passenger transportation

Removed promoted sectors

The following sectors have been removed from the list of promoted business sectors:

• Rural area development and poverty reduction related sectors;
• Policy banks and micro-finance institutions; and
• Modern commercial centers and exhibition centers.

Interplay of promoted sectors and zones

The Investment Promotion Law 2024 designates Zones 1 and 2 as investment areas that offer incentives for businesses operating in the promoted sectors within these areas, as follows:

Zone	Description	Promoted business sectors	Corporate income tax exemption period (Maximum)
Zone 1	Zones with socioeconomic infrastructure unfavorable to investment	(d), (e), (f), (g), (h), and (i)	10 years
		(a), (b), and (c)	15 years (10 years plus an additional 5 years)
Zone 2	Zones with socioeconomic infrastructure favorable to investment	(d), (e), (f), (g), (h), and (i)	4 years
		(a), (b), and (c)	7 years (4 years plus an additional 3 years)

New Tax Incentives

The Investment Promotion Law 2024 offers additional tax incentives as shown below:

Profit tax	A continuous profit tax exemption for investments made in the educational sector throughout the duration of the investment.
Income tax	A reduced personal income tax rate of 5% for experts who work in promoted sectors.
Customs duty	Importations of raw materials, equipment, and components meant for producing products for local markets that serve as substitutes for imported goods are exempt from customs duty.
	Exportations of local agricultural products, processed industrial products, and handicraft products, are exempt from customs duty, except for certain items that may be updated periodically in specific regulations.

Land Concessions

The Investment Promotion Law 2024 amended the list of promoted business sectors that are eligible to receive an exemption from rental and concession fees, as shown below:

Zone	Description	Promoted business sectors	Rental and concession fee exemption period (Maximum)
Zone 1	Zones with socioeconomic infrastructure unfavorable to investment	(e), (f), (g), (h), and (i)	10 years
		(a), (b), (c), and (d)	15 years (10 years plus an additional 5 years)
Zone 2	Zones with socioeconomic infrastructure favorable to investment	(e), (f), (g), (h), and (i)	4 years
		(a), (b), (c), and (d)	7 years (4 years plus an additional 3 years)

The Investment Promotion Law 2024 also stipulates that before investors can transfer the state land-use or concession rights granted under land lease/concession agreements, they are required to develop their projects to at least 50% completion—an increase from the previous threshold of 45%.

Registered and Imported Capital

The Investment Promotion Law 2024 updates the minimum required registered capital and imported capital for investments in general and concession businesses, as follows:

Business type	Minimum required registered capital	Minimum required imported capital for Foreign Investors
General business	According to the Enterprise Law and relevant laws	30% within 90 days after obtaining business operation permission 70% within 12 months after obtaining business operation permission
Concession business	30% of the total investment value if less than US$50 million 20% of the total investment value if from US$50 million to US$100 million 5% of the total investment value if from more than US$100 million to US$500 million 2% of the total investment value if more than US$500 million	3% of registered capital for projects valued at less than US$50 million 2% of registered capital for projects valued from US$50 million to US$100 million 1.5% of registered capital for projects valued from more than US$100 million to US$500 million 1% of registered capital for projects valued at more than US$500 million

Other Legislations

Apart from the Investment Promotion Law 2024, there are a number of specific legislations that govern investment in the Lao PDR. They are as follows (not an exhaustive list):

• Decree on Special Economic Zones No. 188/GOL dated 7 June 2018
• Decree on Public-Private Partnerships No. 624/GOL dated 21 December 2020
• Instruction on Granting Investment Promotion Incentives on Corporate Income Tax and Rental Fees or State Land Concession Fees No. 0760/MOPI dated 14 May 2021

The above legislation will remain in effect barring any inconsistency with the provisions of the Investment Promotion Law 2024.

This article is intended to provide a brief overview of the Amended Investment Promotion Law 2024 of the Lao PDR for general purposes only and therefore, the contents herein must not be construed as legal advice or as a substitute for legal advice for any specific matter or situation.

Please also check our general guide for investing in the Lao PDR for a general understanding of investment in the Lao PDR. For more information on the regulatory changes relating to the above matter, or any other queries about the legal and regulatory environment, please feel free to contact us at the VDB Loi Laos office.