TAX SYSTEM OF LAO PDR Personal Income Tax Who is Liable

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					                       TAX SYSTEM OF LAO PDR
I. Personal Income Tax
      1. Who is Liable?
         Pursuant to the article 55 of the Tax Law No.04/NA, date 19 May 2005:
                Scope of Income Tax and Income Tax Obligations:

                  Organizations, individuals or legal entities whether Lao, [resident]
       aliens, foreigners, including apatrids[,] generating income in the Lao PDR in
       accordance with the provisions of the Article 56 of the Tax Law No.04/NA, date
       19 May 2005 must pay income tax to the state budget.

                   A resident of the Lao PDR who works abroad for less than 180 days
       and who earns income has the duty to declare and pay income tax in the Lao PDR
       if that person is exempt from having to pay income tax abroad.

                  Lao employee working in embassies, consular offices or international
       organizations abroad must declare and pay income tax in accordance with the
       regulations of the Lao PDR.

                 Foreign persons working in Lao PDR who receive their salaries abroad
       must pay income tax in Laos if they reside in Laos for more than one hundred
       eighty days in [any] tax year, unless there is a separate agreement between the
       government of the Lao PDR and the relevant party.

          According the article 14 of Foreign Investment No.11/NA, 22 October 2004:

                 Foreign employees working in a foreign investment enterprise must
       pay personal income tax at the rate of ten percent (10%) of their total income to
       the Lao Government, except employees of a company with which the Lao
       Government has signed a double taxation agreement.

       2. Income subject to tax:

          1. Income from salaries , general labor wages, bonus, position and title
             honoraria, annual allowance, allowance related to broad of directors
             meetings of a company and other benefits received in cash or in kind;

          2. Income from movable property such as: distribution of dividends or other
             benefits to the partners or shareholder of a company, profit from the sale of
             shares, interest income from loans, guarantee fees received according to a
             contract or other binding obligations except when there is a separate
             agreement between the government of the Lao PDR and relevant party;

              Income from dividends or other benefits which are subject to tax,
               including profits which have been used in any form whether directly or
               indirectly, except profits which have been maintained in the reserve or
               which have been [re] invested in the company capital; annual allowances,
       allowances relating to broad of directors meeting, benefits received from
       the increase or decrease of the company’s capital, merger, the transfer of
       shares, value added arising from the winding up or liquidation of a

   3. Income from immovable property such as: lease of land, house, or other
      property or other benefits in kind;

   4. Income from patents, copy rights, trademarks or other intellectual

3. Capital gains
   There is no separate capital gains tax in Laos. Capital gains are taxed in the
   same manner as other operating profit for corporate and withholding from
   income tax for individual.

4. Taxation of employer – Provided stock option
   Income from provided stock option will be the other benefits of employee and
   it will be taxed as same as income from salary, wage and fringe benefits.

5. Deduction
         Persons who receive salary 1,500,000 Kip and below must pay
         monthly tax [shall] prior to calculation, deduct the monthly exemption
         amount in the amount of 300,000 Kip from the salary subject to tax.
         Persons who receive a salary of more than 1,500,000 Kip must paid in
         accordance with the progressive rates stipulated in Table 2 of Article
         60 of the Tax Law No.04/NA, 19 May 2005(see table No.1,2);

            Before calculation the from salary shall deduct the allowance
            according to the Ministry of Finance’s provision No. 2137/MOF, date
            28 September 2005, Article 30:
            - 6% of basic salary for government officers;
            - 4,5% of total monthly income of employee from all kind of
               enterprises for social security pursuant notification of Ministry of
               Labor and Social Security No.1374/MOLS, date 28 May 2001.
            - Spouse and Children.
6. Rates:
            (1) Income from salary is subject to a progressive rate as provided in
                the table below:
                     Table No.1 is for persons who have an income of not more than
                  one million five hundred thousand Kip:

Levels    Taxable Salary at each level        Basic of       Tax        Salary Tax
                                              Calculation    Rates      at each
   1           300,000 Kip and below            300,000         0%             0
   2       300,000 [Kip] to 1,500,000 Kip      1,200,000        5%          60,000

                     Table No.2 is for persons who have an income of more than
                  one million and five hundred thousand Kip:

Levels   Taxable Salary at each level          Basic of       Rates    Salary Tax at
                                               Calculation             each Level
  1      From 1 [Kip] to 1500,000 Kip           1,500,000       5%         75,000
  2      1,500,000 [Kip] to 4,000,000 [Kip]     2,500,000      10%        250,000
  3      4,000,001 [Kip] to 8,000,000 Kip       4,000,000      15%        600,000
  4      8,000,001 [Kip] to 15,000,000[Kip]     7,000,000      20%       1,400,000
  5      15,000,000 Kip and up……….                …….          25%          ……

              (2) Income from patents, copyright, trademarks and other intellectual
                  property of individuals or legal entities 5%
              (3) Income from dividends, profits from the sale of share, interest from
                  loan, security fees of individuals or legal entities 10%
              (4) Income from non-commercial operation of the Lao Front for
                  National Construction, mass organizations and social organizations
              (5) Income from the lease of houses, land or other assets. 15%

  7. Tax Filling and Payment Procedures

              -   Self- Assessment for Large and medium size business monthly
                  before 15;
              -   Official assessment for small business.

  8. Tax Treaty
     Thailand, Vietnam, China, Korea Republic, Kuwait.
II. Corporate Income Tax
    1. Profit Subject to Tax
       Profit from business operation [refer to] the profit which arises from conducting
       agricultural and forestry production business, industry and handicrafts [business],
       including exploitation of natural resource, import-export trade, wholesale, retail
       and general services such as: logging, mining, transportation, postal[service],
       telecommunications, construction, repair, land development for sale of the right to
       use, contracting for or operating markets, bidding and construction of various
       projects sponsored by state funds, aid funds or foreign loans, banking activities,
       activities of financial institutions, insurance, hotel activities, tourism, food and
       beverage operations, casino activities, lottery activities, artistic activities, sports,
       agency or brokerage activities.

   2. Asset Depreciation
      Fixed Asset Depreciation: article 37, 2
      A depreciation deduction [refer to] a deduction of the reduction in value of fixed
      assets which have depleted over their period of use or whose technical [capacity]
      has changed in order to accrue funds to purchase a new asset in the future to
      replace the old one.
      The calculation of the depreciation deduction base on the period of use shall be
      performed in accordance with the rates provided in the table below:

   3. Royalties and Technical Assistance fee
      These kinds of income will be taxed according income tax for both personal and
4. Management Assistant

5. Permanent Establishment
      The Law on Enterprise No.11/NA, date 9 November 2005 article 3:

       Tax Law article 3, the tax law applies to individuals, legal entities [and]
   organizations including foreign persons which carry out business or make a living
   on a permanent or temporary basis in the Lao PDR as well as those which reside
   or have a place of business located in Laos [but] carry out activities in foreign
   country which generate income.

       The term of Permanent Establishment is also defined on the Tax Treaties.

6. Representative Office
       The Foreign Investment promotion Law No. 11/NA, 22 October 2004
   A foreign legal entity establish under the law of another country may establish a
   representative office in the Lao People’s Democratic Republic to collect
   information, study the feasibility of investment and coordinate matters for the
   purpose of applying for investment.
       Representative offices or agents which operate for commercial purposes do
   not come under this law.
       After a foreign legal entity had issued the approval paper from Ministry of
   Planning and Investment, and business certificate, Tax Department or local Tax
   authorities will issue the temporally tax certificate and that foreign representative
           office will liable to pay tax withheld from resident employee’s salary,

   III. Value Added Tax

       1. Tax Rate
          Article 19 of the Value Added Tax Law No.04/NA date 26 December 2006;
          1. A 10% rate is applied to imported [goods and services] and domestically
              produced and consumed goods and services liable to value-added tax;
          2. A 0% rate is applied to goods and services for export.

       2/3. Export /Import of Service

       According to the article 10, Decree on the Implementation of the Law on Value
       Added Tax:

       Place of Supply of Services
           In general, the place of supply of service is the place where the receiver of the
       service established or has his usual residence within the Lao PDR.
           However, the supply of the following services applies special rules according to
each case:
       1. The supply of services include design, construction, maintenance and repair work,
           services to prepare and co-ordinate construction work, such as: the services of
           architects and of firms providing on-site supervision, services of estate agents and
           expert and any other work directly relative to an immovable good, as well as the
           provision of hotel or similar accommodation are regarded as the place of supply of
   2. The hiring of any movable good, including means of transport(car, boat, ship, air
      plan, etc) take place where the movable good actually mainly used by the
   3. Transportation of the passengers and goods takes place where it is actually carried
      out, proportionate to the distances covered;
   4. The supply of the following services takes place where the services are physically
      carried out;
   4.1 services and ancillary services relating to cultural, artistic, sporting, scientific,
       educational, entertainment or similar activities, including the supply of services
       of the organizers of such activities;
   4.2 restaurant and catering services;
   4.3 any services not mentioned elsewhere in this paragraph provided to foreign
       travelers, whether charged to the traveler directly or to a Travel Agent or similar
       organization, including but not limited to services usually provided by hotels, the
       work of tourist guides, the rental of any tangible, movable goods and the
       provision of Spa and other health and beauty treatments;
   4.4 ancillary transport activities such as loading, unloading, handing and similar
       activities; valuation of and work on movable tangible property;
   4.5 logging, extraction and transportation by or for the account of the concession
       holder of the natural resources;
   5. Post and telecommunication services to any organizations, legal entities and
      individuals established outside the Lao PDR are deemed to take place where the
      provider of these services is established;
   5.1 A package tour sold for a single global price by a seller who is established and/or
       registered for VAT in the Lao PDR is deemed to take place in the Lao PDR to the
       extent that any or all constituent elements of the package tour takes place or is
       deem to take place in the Lao PDR, the package tour is deemed to take place

IV. Custom
    Tax Department not collects revenue from custom duties and it is administrative by
    the Custom Department for importation while the domestic revenue is collected by
    Tax Department.
           According to the General Agreement on Tariff and Trade GATT, the Lao
    custom and duties collect from importation will use Custom Valuation method.

V. Local Tax
   We have not specific local tax which separated some revenue for local authorities, all
   revenue from Taxes will directly to national treasury.

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