TAX LAW

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Lao People's Democratic Republic

Peace Independence Democracy Unity Prosperity

TAX LAW

PART I

GENERAL PROVISIONS

Article 1 :

Tasks of the Tax Law

The present law is proposed to determine the tax system aimed at

facilitating all economic sectors, social and public organizations, Lao

citizens, immigrants, foreigners, non-citizenship persons who have businesses

or earn their living in the Lao PDR, to contribute to the implementation of

the national tasks, and promote business activities in every economic sector

and accelerate the circulation/distribution of goods, stabilize the currencies

and market prices, rationalize fairly the incomes between various strata of the

society, ensure acquiring incomes to the state budget and the developing the

national economy continuously.

Article 2 :

Tax

Tax is a duty of every person who deals in business activities or earns

their living in the Lao PDR. to contribute to the defence and development of

the country.

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Article 3 :

Tax system

The tax system of the Lao P.D.R consists of direct and indirect tax.

The indirect tax :

- Turnover tax

- Excise tax

The direct tax:

- Profit tax

- Income tax

- Minimum tax

- Fees/charges

Article 4 :

Utilization of the Tax Law

The Tax Law shall, be applied to individuals or entities who consume

goods or services, and have a business, or liberal professions and generating

incomes within the Lao PDR territory.

PART II - TURNOVER TAX

CHAPTER I

Turnover Tax Regulations

Article 5 :

Turnover tax

The turnover tax is an indirect tax to be paid by consumers of goods

and services through business conductors as stated in the Article 7 of the

present law.

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Article 6 :

Territory of turnover tax

The turnover tax is collected from imports, sales of goods and general

services which take place in the Lao PDR.

Article 7 :

Work-activities subject to turnover tax payments

The work activities subject to turnover tax payment are as follows:

Import of goods to the Lao PDR;

The first-time sale of import goods or domestic products by

importers or domestic manufacturers is the first-time transfer of the property

to other people by importers or domestic producers who will, in return,

receive compensation in money or other types of benefits, and such deal shall

be made in a manner of wholesale of retail sales, in cash or by credit, on

commission or commodity exchange.

The general service is an economic activity which deals with

supplies of labor power to other people but not import, production or sales

of goods, and shall be compensated in a manner of service changes. The

general service includes : transport, post, communications, construction,

repair, market management by subcontract, land development and leasing

activities, hotel and tourist businesses, drinking bars, concerts, sport and

other entertainment activities, medical service, agent/commission or dealers'

activities and so on.

Article 8 :

Persons who shall pay turnover tax

Individuals or entities providing activities as stated in the Article No.

7 of the present law, shall pay turnover tax despite of that, their activities

would be either on continual or interval, commercial or non-commercial

basis .

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Article 9 :

Activities exempted from turnover tax

The activities which shall be exempted from turnover tax include:

- Import of crop seeds, animal breeds and insecticides;

- Import of materials, instruments and chemical components for

research purposes;

- Import of gold for the notes issuing institution;

- Import of bank notes or coins;

- Import or activity relating to tax or post stamps;

- Import planes and instruments for international air transportation;

- Import of goods or accessories for components of international air

transportation;

- Import of goods for selling to diplomats and international

organizations in the Lao PDR according to permissions of Ministry

of Foreign Affairs;

- Import of goods with tax exemption or temporary import;

- Import and sales of animal treating medicines;

- Sales of self-produced agricultural products by peasants;

- Forestation activities, industrial trees and fruits planting;

- Sales of agricultural and handicraft products by Government

employees or cooperative members on a family basis or limit;

- Export of goods and services;

- Sales of allowed text books, newspapers and magazines;

- International transportation and relevant services;

(International transportation-transportation of passengers or cargos

from abroad or to abroad by land, air and sea/river);

- Transportation by manpower, animals and boats without engines;

- Provision of leasing immovable properties, such as land, houses and

others by persons who do not have business activities;

- Export services;

- Independent job-occupation by one's own labor;

- Educational activities: child schools, primary schools, secondary

and high schools, universities and professional technical schools;

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- Activities for public benefits held by Government authorities and

International Organizations;

- Banking and insurance activities.

CHAPTER II

Time and basis for calculation and collection of turnover tax

Article 10 : Time and basis for turnover tax calculation

The tax calculation time and principles have been determined as

follows.

The tax on import goods shall be calculated during declarations

and payments for customs duty. The calculation shall be based on the

declared amount of import goods plus customs duty excise tax (if exist) and

other fees;

The declared amount shall include cost of goods, insurance and freight

to the destined import border.

In case of the first-time sales of goods imported or

manufactured inside the country, the tax shall be calculated during its selling

or delivery by importers or domestic manufacturers. The calculation shall be

based on the actual sales amounts without turnover tax;

The tax on services shall be calculated after full or partial

completion of the work. The calculation shall be based on the actual service

charges without turnover tax.

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Article 11 : Self-utilization and temporary import

Goods imported or produced inside the country, any of constructed or

services used by businessmen themselves, shall be imposed to turnover tax

according to the general principles except those stated in Article 9 of the

present law. The calculation shall be based on the actual prices of goods or

services applied therein and at that time.

Import goods exempted from import duties shall be levied on turnover

tax during its selling. The calculation shall be based on the actual sales

prices.

CHAPTER III

Rates of Turnover Tax

Article 12 :

Rates of turnover tax

The rates of turnover tax shall be as follows:

The rate of 3% for

Import or sales of:

- Agricultural products : rice, bran, rice flour, manioc and maize

flour;

- Foodstuff;

- Raw materials, semi-products, chemical products for

agricultural, industrial and handicraft production;

- Fertilizer, animal foods;

- Machines, tools and instruments for cultivation, cattle-

breeding and production (industrial, agricultural and craft);

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- Machines or vehicles for land development, transport, mining

including petroleum and gas, construction of infrastructure

(bridges-roads, railway, irrigation, dams, ports and airports)

and spare parts;

- Ore: iron, tin, zinc, red copper and others;

- Glue-stone, lignite, coal, gas and others;

- Water supply;

- Medicaments, medical instruments and education materials;

- Ambulance, fire-fighting vehicles and other special service

cars;

- Bicycle and tricycle;

- Cotton thread, silk thread and other yam;

- Art and craft products

- Toys and other play-games for children;

- Instruments for sport and physical training.

Services:

Agricultural services with machines;

Analysis of agricultural, forest and construction soils, and

ores;

Municipal sanitation;

Slaughter-house and general animal killings;

Hairdressing salon (barber's shop);

Medical treatment for human and animal;

Concert, art play, opera, sport (football, volleyball, basketball,

boxing, tennis and physical training;

Massage (treatment) activity;

Golden and silver hand-made products making;

Diamond, jewel and glass processing;

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The rate of 5% for:

Import or sales of:

- Electric power, electrical tools and instruments;

- any type of fuel;

- Wooden coal and fire-wood;

- General construction materials and instruments including

gravel and sand;

- Wood and rattan products;

- Tea and coffee products;

- Pure water, lump-ice, ice-cream;

- Soft-drinks and other non-alcoholic drinks;

- General office supplies: typewriter, duplicating machine,

photocopier, calculator, computer and others including

instruments;

- Communications instruments;

- House furniture: sofa, table, chair, shelf, bed, mattress, pillow

and others;

- Electrical products: fridge, electric cooker, electrical iron,

water-cooler, rice-cooker, kettle, fen, radio, vacuum cleaner,

washing machine, meat and fruits scraping machine and

others;

- Fabrics, clothes, hat, shoes, belt and umbrella;

- Suitcase, travel bags, handbag and other similar products;

- Watch, glasses;

- General sewing machines;

- Motorcycle, took-took and jumbo, passenger truck, transport

truck, bus, mini-bus, fuel-tank truck;

- Any car instruments, spare parts and batteries;

- Fishing tools and instruments;

- Ship and motor-boat for domestic transportation including

spare parts and accessories;

- Sport motor-boat;

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- Plane for domestic transportation including tools and spare

parts;

- Product for body cleansing;

- Perfume and cosmetics;

- Precious metal and glass: silver, gold, diamond, jewel and

other similar products;

- Air-pressured gun;

- Unrecorded cassette;

- Recorded cassette with Lao songs;

- Musical instruments and accessories;

- Other items excluded in the 3 , 10 and 15 percent rates;

2 -

Services :

- Soil and sand loading services, development of land for

cultivation, cattle-breading and construction purpose;

- Post, telecommunications and transport services;

- Construction, installation and general repairs;

- Bridge-road, irrigation, dam, port and airport services;

- Tailoring and dresser's salons, capitonage, photos, shoes

sewing shops;

- Printing or publication activity;

- Wood-sawing mills, wood and rattan manufacturing plants;

- Tobacco-leaves drying mills;

- Development of land for sales (utilization rights) and

construction of houses for sale;

- Market management service by subcontract;

- Such activities as advertising, study, planning, analysis of

data-information, accounting, and laws consultancy,

engineering and architectural consultancy;

- Other services excluded in the 3, 10 and 15 percent rates;

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The rate of 10% for:

Import or sales of:

- TV, radio, tape-recorder, sound-recording equipments,

amplifier, camera, movie-camera, video. player and video

camera, recording discs, photo-making equipment, cinema-

film, unrecorded film, film for camera, video cassette, tape

cassette of foreign songs, long-sight scope, other similar

products, accessories and spare parts;

- Sport gun;

- Cooling and heating equipment;

- Passenger car, pick-up, jeep;

- Plane, ship, motor-boat for tourism;

- Decorating products made of silver, gold, diamond, jewel,

glass, pearl and other precious metals:

Services:

- Hotel, resort, tourism and drinking bars;

- Broker and dealer activities;

- Film and video shows, video photographing, video and tape

recording, video or video cassette renting;

- Golf activity;

- Horse and car racing activity;

d )

The rate of 15% for :

Import or sales of:

- Alcohol and any other drinks containing alcohol;

- Cigarettes including packed and unpacked, and cigars;

- Any hunting guns;

- Billiard and snooker tables, football table and other games;

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- Salute and other similar products;

- Play cards and other similar plays;

Services :

- Entertainment activity : night club, discotheque, karaoke;

- Snooker, billiard and balling activity;

- Lottery activity.

CHAPTER IV

Declaration and taxation system of turnover tax

Article 13 : Persons who shall declare and pay turnover tax

Persons who should pay turnover tax as determined in Article No. 8

of the present law, shall declare and pay turnover tax according to the

following cases :

Any import of goods: importers shall produce the declaration

document to customs offices at the import customs checkpoints for tax

payments. The tax shall be fully paid before removing the goods out of the

customs checkpoint area;

For the first-time sales of goods imported or produced inside

the country and services, the importers, producers and servers shall submit

declaration sheets on their business incomes to the tax authority concerned

before the 15-day of the next month in order to pay turnover tax for the

current month.

The tax-payers using the forfeit system (contract system), shall pay tax

duties according to the terms and conditions of the contract.

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CHAPTER V

Deduction of the turnover tax paid initially

Article 14 : Persons who shall have a right to obtain the deduction of

initial turnover tax paid

Importers, producers or servers who operate sales or services inside

the country and have paid the initial tax (at customs checkpoints) as

determined in Article No. 9 of the present law, shall have the right to get the

deduction of initially paid turnover tax from a monthly tax amount due to

payment. If amount of the initial tax paid exceeds the monthly tax volume,

the difference shall be transferred to the next month deduction until its

completion .

Those who are able to obtain the initial tax deduction, shall have the

tax registration with the tax authority and hold a legal accounting system as

well as providing a full set of tax payment certificates, such as import

documents on tax declaration (D10), tax-payment receipts and invoices

stating a certain turnover tax amount.

Article 15 : Limits of initial turnover tax deduction

The initial turnover tax deduction shall be implemented within the

following limits:

Importers : The deduction of the initial turnover tax shall be

made from import goods proposed for further sales or further transforming;

Producers : The initial turnover tax shall be deducted from

purchases of raw materials, production instruments, trucks and other

production materials;

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Servers : The deduction shall be made from purchases of

transport vehicles, spare parts or other service materials.

The initial turnover tax deduction shall not be allowed for the

following, except the above items 1, 2 and 3:

- Service charge

- Purchase of transport vehicles including accessories and spare

parts which are not used directly by the companies.

- Purchase of consumer goods for personal utilization by the

company management staff or workers.

Article 16 : Re-export

Re-exporter, export producers and servers who have paid the initial

turnover tax as determined in Article No. 13 of the present law, shall have

the right to obtain the deduction during the next import of goods, raw

materials and other products.

The deduction shall be operated in conformity with the conditions

stated in Article No. 15 of the present law, and with presentation of the re-

export documents.

Article 17 : Reimbursement of the initial turnover tax paid

In the event when the sales or service operations have been liquidated for

some reasons, the initial turnover tax paid shall be deducted from the amount

subject to tax payment in the amount of the liquidation, or in the next month

until it has been fully deducted.

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PART III - EXCISE TAX

CHAPTER I

Limit of Excise Tax, Goods due to Tax Payment or Exemption

Article 18 : Excise tax

The excise tax is an indirect tax collected from some consumers goods.

Article 19 :

Limit of excise tax

The excise tax shall be collected from some products imported or

manufactured by domestic producers for sales inside the country.

Article 20 :

Goods due to excise tax payment

Some products that be imported or supplied for sales by local

factories, such as fuel, alcohol or the alcoholic drinks, soft drinks and others,

packed and unpacked cigarettes, cigars, perfumes and cosmetic, shall be

imposed at the rates determined in Article 23 of the present law.

Article 21 : Tax-exempted goods

In order to promote export and health activities and to implement the

international principles, the following goods shall be exempted from the

excise tax.

- Some products as determined in Article No. 20 of the present law

that shall be export according to the confirmation of the

concerned authority of the Lao PDR;

- kerosene;

- Alcohol (90) for medical purposes;

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- Some products sold to the Embassies and International

Organization in the Lao PDR according to the confirmation of

Ministry of Foreign Affairs,

CHAPTER II

Calculation basis, Rates, Declaration and Payment of excise tax

Article 22 : Basis for calculation of excise tax

The excise tax calculation shall be based on the import cost for import

goods or factory cost for domestic products.

The import cost includes the import amount declared plus import duty

and other fees (if exist).

The factory cost includes the production cost plus other fees (if exist).

Article 23 : Rates of excise tax

The rates of excise tax shall be as follows:

Fuel:

- Gasoline (super)

23 percent

- Gasoline (Normal)

20 percent

- Diesel

10 percent

- Aviation gasoline

10 percent

- Lubricant, hydraulic oil, grease, brake oil

2 percent

Alcohol or other alcoholic drinks:

- Alcohol or alcoholic drinks (above 15 degree) .... 40 percent

- Beer, wine and other drinks (below 15 degree) .... 30 percent

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Bottled soft drinks and other vitamin drinks ............ .20 percent

Packed and unpacked cigarettes, cigars ................. 30 percent

Perfume and cosmetic .......................................... 10 percent

Play-cards and other similar items........................... 50 percent

Article 24 :

Declaration and payment of utilization tax

Imports, or producers of some products as stated in Article No. 20 of

the present law, shall declare and pay excise tax as follows:

- For import: the importers shall produce the customs declaring

documents to the customs offices at the import customs checkpoints in

order to pay tax. The tax shall be fully paid before removing the goods out of

the customs checkpoint.

- For domestic production: the domestic manufacturers shall produce

the tax declaring sheets to the concerned tax authority monthly before the

l5-day of the next month for payment of excise tax for current month.

PART IV - PROFIT AND INCOME TAX

CHAPTER I

Tax limits, taxable profits and incomes, and

persons who shall pay the tax

Article 25 :

Profit and income tax

The profit and income tax is a direct tax paid by businessmen or

independent jobbers, or those who obtain incomes from salary or wages,

movable or immovable property, intellectual property right and other

licenses.

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Article 26 : Limit of profit and income tax

The profit and income tax shall be collected from annual profits or

incomes of those persons who have profits or income in the Lao PDR

including that stated in Article No. 29 of the present law. The profits or

incomes gainers can be an individual or entity who have a permanent

residence in the Lao PDR or abroad.

Article 27 : Profit tax

The profits which shall be imposed, are as follows:

The business profit is a type of profits gained from such

business activities as agriculture-forestry, industry and handicrafts including

natural resources mining, import-export operations, wholesale and retail

sales, and general services, such as transport, post, telecommunications,

construction, repairs, development of land for leasing purposes, auctions on

market management and construction of projects funded by the Government

budget, foreign aids or loans on bilateral or multilateral basis, banking and

insurance operations, hotel and tourist activities, drinking bars, lottery,

concerts, sport, agent or dealer business;

The profit made from the independent type of jobs or

professions, such as doctors, advocates, law and accounting consultants,

engineering and sculpturing consultants.

Article 28 : Income tax

The taxable incomes shall be as follows:

The income made from salaries, such as labor charges, bonus,

careers allowances, and other material benefits obtained according to the

contracts by any of the Government or private parties;

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The income made from movable capital informs of share dividends or

other benefits shared between shareholders, lending interest rates, warranty

fees obtained according to the contracts' or other obligations unless

otherwise agreed between the Government of Lao PDR and concerned

parties,

The profits shared or other taxable benefits shall include such profits

as may be applied to any forms of utilization including direct spending, unless

it shall be saved to the accumulation funds or included to the companies'

capital assets, bonuses, meeting per diems, benefits arisen by increase or

reduction of capital assets of companies, concentration of' enterprises,

transfer of shares, values added from the companies bankruptcy or debt

liquidation;

The income made from rents of the immovable property, such as

rentals or other benefits gained according to the contract, or renting

obligations on the land, houses or other property;

The income from the copyright. or other rights, such as

intellectual property, know-how, trade-mark, compositions and novels.

Article 29 : Persons who shall pay the profit and income tax

Lao Individuals or entities, immigrants or foreigners including non-

citizenship persons who, have the profitable activities in the Lao PDR as

determined in the Article No. 27-28 of the present law, shall pay the profit

or income tax to the state budget.

If the Government officials appointed to reside or work with

International Organizations abroad have been exempted from paying the

income tax there, they shall declare and pay that duty in the Lao PDR.

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If foreign workers who come to work and stay in the Lao PDR more

than 180 days within the fiscal year and receive salaries abroad, shall pay the

income tax in the Lao PDR unless otherwise agreed with the Lao

Government.

CHAPTER II

Tax-Exempted Incomes, Tax Exemption or

Payment of Profit Tax at a Discount Rate

Article 30 : Tax-exempted incomes

The tax-exemption incomes shall include :

Income made from agricultural production by peasants

themselves;

Income obtained from concert performance, sport and others;

Salary of foreign consultants or experts who provide a project

assistance in the Lao PDR, and such exemption should be stated

in the agreement between the Lao Government and concerned

parties;

Salary of the Diplomatic and International Organizations official

to the Lao PDR;

Allowances permitted within the limits of the Labor Law;

Deducted funds for pensions or other welfare matters, family

allowances;

Single allowance, pension, per diems;

Lending interests; bond or shares interests;

Social security funds;

10- Lottery prizes;

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11- Bonus or premium given by the Government to those people

who have achievements in preventing the violation of the laws;

12- Scientific premiums

Article 31 : Tax exemption or payment of profit tax at a discount rate

Persons who have been permitted by the Government to invest projects

or other priority zones in the Lao PDR, shall be exemption, or depending on

each case, shall pay the profit tax at the discount rates within the duration

determined by the concerned committees.

In order to obtain such privileges the above mentioned persons shall

hold an accounting system conformed to the principles set by the Accounting

Law.

CHAPTER III

Place of the Profit and Income Tax Payment

Article 32 : Place of the profit and income tax payment

-Businessmen and independent workers shall declare and pay the profit

tax in the tax office where they have been registered.

Those who obtain incomes by providing their immovable property for

leasing (land, houses and other property) shall declare and pay profit tax to

the tax office which controls that property.

The companies branches or representatives operating in the local

provinces, shall pay profit tax in those places directly.

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CHAPTER IV

Basis for the Calculation of the Profit and Income Tax

Article 33 : Basis for the profit tax calculation

The calculation of the taxable profit made from business operations or

professional services shall be based on the net annual profit of the

accounting year completed.

The end-year net profit is a difference between gross incomes and

expenditures in the fiscal-accounting years.

Article 34 : Expenses that can be deducted from the annual profit

The expenses that can ve deducted from the annual profit, include the

following:

General expenses :

- Electric power, water, telephone, advertisement, and repair

charges;

- Travel and guest's reception expenses which shall not exceed

0.20 percent of the annual business income, or not more than

6,000,000 Kip for each item per year;

- Salaries and wages, welfare and social-security spending;

- Services, lending interest rates, transport charges;

- Rents of premises;

- Insurance of company assets or property;

- Non-deductible turnover tax and other fees;

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- Gifts, allowances, presents and prizes which shall not exceed

0.15 percent of the annual business income, and not more

than 4,000,000 Kip per year.

Amortization

The amortization shall be made from the capital assets depreciated

from time-to-time of its utilization, or technical changes in order to reserve

funds for renewals of the capital assets in the future.

The amortization shall be calculated according to the following rates:

Company capital assets (immovable)

Duration of Amortization

utilization

rate (%)

- Expenses for the establishment

2 years

- Industrial premises

20 years

- Trade premises and dwelling houses:

+ permanent basis

20 years

+ temporary basis (or medium-term basis)

10 years

- Machines and equipments for industrial,

agricultural, craft and other activities

5 years

- Land transport facilities (vehicles)

5 years

- Instruments and tools sets

5 years

- Office instruments and other supplies

10 years

- Installation, improvement and decoration

10 years

- Vessels and passenger planes

20 years

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Article 35 :

Expenses non-deductible from the annual profit

The expenses which can not be deducted from the annual profit, shall

include:

-The expenditures considered as luxuries: expenses relating to golf-

play, dancing, sport and other entertainments;

-Profit tax and enterprise minimum tax;

-Income tax collected from salary and wages;

-Salary paid to share-holders or employers by themselves;

-Interest paid to the share-holders;

-Any type of penalties;

-Reimbursement of credits.

The amortization can be made with parallel or downwards methods

based on the cost of the capital assets. The calculated amount of

amortization shall be showed in the accounting book during close of the

accounting at end of the year. The annual or partial amortization funds that

have not been included or written in the book-keeping, shall not be

confirmed as expenditures deducted from the annual profit. In event of

selling a property, the annual or partial depreciation of the asset subject to

the sale, shall be deducted from its cost in order to assess the excess or

reduced value of that property,

Funds for reasonable emergent expenses and certain risks,

amortization fund, stock reserves and receivable debt amounts.

Unused reserves or used for other purpose shall be transferred to the

taxable annual profit.

The independent workers shall not be permitted to establish any type or

reserve funds deductible from the annual profit.

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Article 36 :

Transfer of the annual losses to another forth-coming

year.

Businessmen or independent workers who pay the profit tax based on

the ordinary or extended counting system audited and confirmed by the tax

officials, shall have the right to transfer the financial losses to another forth-

coming year for further deduction from the annual profit with a cooperation

of three years, and thereafter such transfer shall not be allowed.

Article 37 :

Basis for calculation of the income tax

The basis for calculation of the income tax by each type shall be as

follows :

Income from salary/wages:

- Salary amount plus other allowances received according to

the contract;

Income from movable capitals:

- Profit or other benefits shared to share-controllers or share-

holders according to the by-law of companies or decisions of

the share-controllers or share-holders meetings;

- Interests from providing credits, guarantee fees gained

according to the contract or other commitments;

Income from providing rent of the immovable property: renting

charges or other material benefits obtained according to the

contract or commitments;

Income from licenses or other intellectual property rights: gross

income obtained according to the contract or other

commitments.

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CHAPTER V

Rates of Profit and Income Tax

Article 38 :

Rates of annual profit and income tax

The rates of annual profit and income tax applied to individuals and

entities shall consist of general and discount rates:

The general rate:

- The net business profit of entities

35 percent

- The net profit obtained by individuals from business

operations, independent job, and providing land, houses and

other properties for rent, shall be imposed on the progressive

rate basis:

Table No. I

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The income from salary shall be imposed as follows :

Table No. II

- Dividends, lending interests, guarantee fees of individual

entities

10 percent

- Receipts from licences or other intellectual property rights

of individual or entities

05 percent

- Rents of land. houses, and other property, incomes from non-

business activities of public organizations or other social

associations

10 percent

The discount rate

The net profits made by entities from the business activities which

have been promoted by the Government, shall be imposed according to the

following positions of location:

- Urban area

20 percent

- Rural and low land areas

15 percent

- Mountains and remote areas

10 percent

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CHAPTER VI

Calculation of Profit and Income Tax

Article 39 : Calculation of profit and income tax

The profit and income tax shall be paid annually based on the total

profit or income obtained within the year. Before tax calculation, any profits

or incomes in foreign currencies shall be converted into Kip at the exchange

rates of the Bank of Lao PDR applied in each period

The profit and income tax shall be calculated as follows:

Entities: The tax shall be made from the net annual profit or

income at the fixed rate as stated in Article No. 38 of the present law, and

minus the amount of profit or income tax paid in advance within the year;

Individuals: Before calculating the tax for those persons who

have profits from the business, independent jobs, or obtain incomes from the

rent of land, house or other property, the annual discount sum of

360,000 Kip shall be deducted from the total annual taxable income.

If a tax-payer has various incomes as mentioned above, a summary of

the incomes shall be made first, and thereafter to make deduction of the

annual basic discount. The remaining shall be the net annual income subject

to be imposed according to the "Table 1" of Article No. 38 of the present

law.

A monthly basic discount amount of 30,000 Kip for the tax-payers who

have incomes from salaries, should be also deducted before tax calculation

which should be based on "Table II" of the above Article No. 38.

The basis discount amount is an essential sum for living which should

be deducted from taxation.

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The advance tax payment made within `the year, should be also

deducted from the real taxable profit or income.

CHAPTER VII

Systems of the Profit and Income Taxation,

Submission of the Profit and Income Tax Declaration

Article 40 : Taxation of profits made from business operations or

independent jobs.

Enterprises (entities), individuals who deal in business or independent

work, shall pay the profit tax according to holding the extended, ordinary or

primary accounting system.

Article 41 : Profit tax systematization

Those who pay the profit tax based on holding an extended

accounting system, shall be enterprises with an entity status and

independently working individuals who have the annual business income

more than 240,000,000 Kip.

Those who pay the profit tax based on holding an ordinary or

common accounting system, shall be any business individuals or independent

jobbers who have the annual business income from 24,000,001 Kip to

240,000,000 Kip.

Those who pay the profit tax according to holding a primary

accounting system, shall be individuals who have a small business, or

independent workers who have the annual business income less than

24,000,000 Kip.

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Such simple system of tax payment shall associate turnover tax and

profit tax into one payment.

The simple system of tax payment requires an agreement between the

tax authority and the tax-payer. The agreement shall be effective within one

year. In order to cancel the agreement, the tax payer shall inform the tax

authority sixty days before expiration of the contract. The tax authority may

cancel the agreement in any time when finding out that the tax-payer has

violated the limits of business operations stated in the contract.

Rates for the simple system of tax payment have been determined

as follows :

Estimated annual income

Less than 2,000,000 Kip

2,000,001 - 4,000,000

4,000,001 - 8,000,000

8,000,001 - 12,000,000

12,000,001 - 16,000,000

16,000,001 - 20,000,000

20,000,001 - 24,000,000

Rates for each type of activities

Production,

Trade

Services,

construction

restaurants

transport

Article 42 :

Selection of the tax payment systems

Those who pay or have conditions to pay the tax on a contract basis

(simple method of tax payment), may apply to the tax office where they have

been registered if they want to pay the tax according to the regime of holding

an ordinary accounting system, and their proposals shall be approved.

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In order to change the system of tax payment, those who implement

the tax payment based on a contract basis, shall apply to the tax office within

sixty days before expiration of the contract:

Article 43 :

Close of Accounting

The businessmen or independent jobbers who pay the profit tax based

on holding an extended or ordinary accounting system, shall close their

accounting on December 3 1 of each year except when the business has been

stopped, sold or transferred to another owner during the year.

Article 44 :

Liquidation sale or transfer of a business activity

In event of business stopping, sale or transfer of a business activity

(partially or fully) to another person, the businessmen or independent

workers shall close their accounting and submit it to the tax office concerned

for tax clearance within 10 days after the liquidation, sale or transfer of the

activity. Besides, if the activity has been sold or transferred to another

person, the full name and address of the new owner shall be also informed to

the tax office.

In event of the owner's death, the heir shall prepare the necessary

income data to the tax office concerned within ninety days after the death in

order to clear the unpaid tax duty of the previous owner. The responsibility

in the tax payment shall be within a limit of the property value received.

Article 45 : Income from salary

The salary tax shall be paid monthly by deducting from the salary

amount during its pay. The calculation of salary tax shall be made according

to the principles stated in Item No. 2, Article No. 39 of the present law.

If a tax-payer receives the salary from different sources or declares the

income under its volume, the tax shall be recalculated at end of the year.

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Article 46 :

Incomes from the rent of immovable property

The income tax on the rent of immovable property shall be paid every

time upon receipts. The tax calculation shall be operated according to the

principles stated in Item No.2, Article No. 39 of the present law.

If the tax-payers receive the rents in advance for some years, the tax

shall be calculated on the annual basis, and then multiplied with number of

the rented years.

Article 47 :

Incomes from movable capitals, licenses and other

intellectual property rights

The tax on dividends, lending interests, guarantee fees, incomes from

licenses and other intellectual property rights, shall be paid upon every

receipt by deducting the tax amount from the income during the pay.

If the lending interests and guarantee fees of an enterprise which

regularly pays profit tax, have been included into the annual income, it shall

not be re-imposed. In event if the income has been imposed earlier, it should

be deducted from the annual taxable profit. If the tax amount imposed

earlier is more than the annual tax value, the non-deducted sum shall be

transferred to a next year for further deduction.

Article 48 :

Submission of the profit and income tax declaration

Those who pay the profit tax according to the extended or ordinary

accounting system shall pay, the annual profit tax quarterly (each face shall

include three months) based on the profit of the previous year or the

estimated profit of the fiscal accounting year. The real annual tax amount

shall be recalculated in the last face of the tax payment during closing the

accounting at end of the year.

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Duration of the profit-tax declaration shall be as follows:

- First phase

: before April 10 of the year

- Second phase : before July 10 of the year

- Third phase

: before October 10 of the year

- Forth phase

: before March 10 of the next year

If the total amount of tax paid quarterly is more than the actual annual

tax volume, the difference shall be transferred to a next year for further

deduction.

The inventory report and other accounting documents shall be

submitted to the tax office concerned before March 1 of every year. The

report of meeting between the share-holders or board's members shall be

submitted to the tax office within 10 days after the meeting.

The company group which consists of a number of enterprises with a

joint capital, shall report the property, results of all activities and other

benefits to the tax office concerned within the duration stated above.

Those who pay the tax on the contract basis or based on holding the

primary accounting system, shall fulfill their tax duties according to the terms

and conditions of the contract.

Article 49 : Income from salary and wages

Organizations, enterprises, or individuals who pay salary or wages to

their staff, workers and other persons according to the contract, shall deduct

the income tax amount from the salary/wags monthly, and make a list of the

tax collected and send to the tax office concerned within 10 days after the

pay.

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Article 50 : Income from rent of the immovable property

Those who have income from rent of the immovable property, shall

submit the tax declaration to the tax office where registered within 10 days

after receipt of the rentals for the calculation and issue of tax invoice.

In the rate of rent declared or according to the contract was too low,

the tax officials may make re-verification or recalculation of the tax in

conformity with the general market average rate in that place.

In event of providing land, houses or other properties for the utilization

of another person without any rent, the user who makes benefits from those

facilities, shall be responsible for the income tax payment instead of the

owner of the property. The tax shall be calculated and paid according to a

suitable market rate applied to the same conditions of the property.

If the owner does not require rents for a definite period of time

because the renter has paid for development of the land, construction or

repair of the premises rented, the material benefits gained by the owner shall

be also imposed. The annual income tax shall be calculated by sharing the

total expenditure for the development, construction or rehabilitation with the

number of years excluded from the rents.

In the tax duty had not been paid in time, the tax-payer who had the

rentals, shall be made to pay the tax in accordance with Article No. 85 of the

present law.

Article 51 :

Income from movable capitals, licenses and other

intellectual property rights

Organizations, enterprises or individuals who pay dividends lending

interests, guarantee fees, charges of license and other property rights to the

recipients, shall deduct the tax amount and submit the list of tax collected to

the tax office concerned within 10 days after the payment in order to

calculate and issue the tax invoice.

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CHAPTER VIII

Minimum tax

Article 52 :

Minimum tax

The minimum tax is a minimum duty of the businessmen or

independent workers who pay the profit tax according to holding the

extended or ordinary accounting system as stated in Article No. 41 of the

present law.

Article 53 :

Minimum-tax payers

The businessmen and independent workers, such as individuals, entities,

Lao citizens, immigrants and foreigners who operate a business in Lao PDR

and hold the extended or common accounting system, shall pay the minimum

tax.

Article 54 : Minimum-tax exemption

Those who may be exempted from the minimum tax, shall include :

- Foreign investors who are in a period of the annual profit tax

exemption according to the conditions of the Law on the promotion and

management of foreign investment in the Lao PDE No. 07/SNA of April 19,

1998 and No. 01/94 of March 14, 1994;

- Local investors who are in a period of the annual profit tax

exemption based on Article, No. 70 of the Decree of the Council of Ministers

No. 47/SNA dated June 26, 1989, and the Law on the promotion of

domestic investment.

- Those who pay the profit tax on the contract basis as stated in

Article No. 41 of the present law.

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Article 55 :

Rate of the minimum tax

The rate of the minimum tax shall be at 0.5 percent of the annual

business income without the turnover tax, for the businessmen, or of the total

annual income, for the independent workers.

Article 56 :

Calculation and payment of the minimum tax

The minimum tax shall be paid annually based on the annual business

income or the total annual income of the preceding year at the rate stated in

Article No. 55 of the present law.

The minimum-tax payers shall submit the tax declaration sheets to the

tax office where registered before March 01 of every year for the

calculation and issue of tax invoices.

Article 57 :

Deduction of the minimum tax

The annual profit paid in advance quarterly within the preceding year

shall be deducted from the minimum tax due to payment.

The minimum tax paid shall be deducted from the actual annual

taxable profit. If the minimum tax paid is more than the annual profit tax

amount, the minimum tax paid or the difference shall be reimbursed.

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PART V

Other Fees or Royalties

Article 58 : Collection of fees and service charges

The Government work-sections shall collect fees from the issue of tax

registrations, business permissions, approvals, certificates and other official

documents, and from using the transport roads, the country's entry or exit

travel, issue of entry-exit visa, stay in the Lao PDR, utilization of satellite

system of tele-antenna, TV utilization, installation of advertising posters or

boards and name-plates of stores as well as of other services in the Lao

PDR.

Article 59 : Determination of the rates of fees or service changes

The rates of fees and service charges applied in each work-section shall

be determined by the President's Provision in conformity with the

real

social-economic situation of the country in each period.

Article 60 : Transfer of the fees and services charges

All incomes made from the fees and service charges shall be transferred

to the state budget.

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PART VI

GENERAL PRINCIPLES ON THE TAX AND VARIOUS FEES

Article 61 : Accounting holding

Those who pay the profit tax on holding the extended or common

accounting as stated in Item No. 1 and 2, Article 41 of the present law, shall

hold a full legal accounting which conforms to the principles set by the Law

on enterprise accounting of the Lao PDR. The enterprise accounting shall be

made in details and clearly without omission, spacing, errors, deletion,

overwriting and so on.

Before utilization the accounting books shall be registered with

numbering, sealed and signed by the competent tax authority. All book-

keeping documents already used shall be kept within 10 years and ready to

be presented to the audit of tax officials at any time.

Article 62 :

Issuance of payment receipts for the sales goods or

services

Those who deal in such business as production, trade and services, or

have an independent job-occupation any pay the profit tax on the system of

accounting holding as stated in Article 41 of the present law as well as

providing the sales of goods and services, shall issue the bills of payment

receipt to the buyers or clients served.

The bill of payment receipt shall consist of the following contents:

- Name and location of the shop selling goods, commodities or

providing services;

- Name and address of the buyer of clients receiving serves;

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- List of items sold or services provided;

- Price of goods without turnover tax or services charges divided on

each separate rate;

- Amount of the calculated turnover tax divided on each separate

rate;

- Total price of goods or services including the turnover tax.

The bills of payment receipt should be checked, certified and sealed by

the related tax officials before its utilization. The bills used should be kept

within 10 years and able to be presented to the tax authority at any time

during their audit.

Article 63 :

Adjustment of tax calculation

During the calculation of tax if the figures made are in a package of

ten, it shall be adjusted to a package of hundred as duly.

Article 64 :

Method of the tax and fees payment

The tax fees calculated shall be fully and promptly transferred to the

state budget. The payment of tax or fees shall be made in Kip with one

installment either in cash or by cheque, transfer or bonds. The fees collected

by the Lao consulates abroad and the charges for flying through the sky of

the Lao PDR shall be paid in foreign currencies, but before its transfer to the

state budget it shall be exchanged into Kip with the Bank of Lao PDR at the

current exchange rates applied in each period.

Article 65 :

Reimbursement of tax

In case when the calculation of tax payment is made wrong, such as

double calculation of tax payment, absence of compliance with the actual tax

rates, overpayment of tax, or if the tax due to reimbursement can not be

made, it shall be transferred and deducted from the next tax duties subject to

payment.

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PART VII

ORGANIZATION AND PERFORMANCE

OF THE TAX AUTHORITY

CHAPTER I

Organization of the Tax Authority and Criteria of the Tax Staff

Article 66 : Tax authority

The tax authority is a organization belonging to the Ministry of Finance

and has the following structure of organization.

- Tax Department and its Divisions

- Tax offices in various provinces, prefecture and special zones;

- District tax offices.

The functions of the organization at each level shall be determined in

details in the resolution of the Minister of Finance.

Article 67 : Division of functions on calculation and collection of tax

The tax calculation and collection functions shall be offered to the

following two work-units:

1 -

The local tax offices at various levels shall be responsible for the

calculation and issuance of tax invoices, and then report daily to tax

accounting offices on an official routine;

The tax accounting office has a function to monitor and

accelerate the deposit of tax amount calculated to the tax account fully and in

due time.

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Article 68 : Appointment and functions of the chief of the tax

accounting office

The chief of tax accounting office shall be appointed by the Minister of

Finance based on the proposal of the Director of Tax Department.

The head of tax accounting office shall have the following functions:

1- Monitor and accelerate the deposit of the calculated tax or fees

to the tax account fully and in due time;

Close the tax account at 16:00 and compare the amount

calculated with the real receipts in order to know the actually remaining

amount of tax or fees due to be paid in each day in details;

Transfer the income collected to the state budget entirely in each

day.

Article 69 :

Criteria of the tax staff

The tax staff shall be healthy, and have a good personal quality,

honesty, good skills and abilities in tax field, good knowledge of the laws,

and follow the by-law set. Any of the tax control-team members shall be

appointed: and make personal promise officially.

Article 70 : Official secrets

Any tax staff implementing the tax functions or assigned to take part

in proceeding any case shall close all official secrets strictly.

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CHAPTER II

Role, Rights and Duty of the Tax Authority

Article 71 :

Role of the tax authority

The tax authority has the role in organization, management and control

of the income sources in the whole country in order to collect tax to the state

budget.

Article 72 :

Rights to receiving assistance

Any state organization, administrative authorities at each level, armed

troops and other persons shall provide assistance or facilities to the tax

authority if they request for such supports during implementation of their

duties.

Article 73 :

Rights to contact for getting various data-information

With a purpose of control, the tax authority has the right to require

various data-information from any concerned organizations, enterprises or

individuals. The data collection can be made by letter or by sending a person

for the collection directly.

All above organizations, enterprises, or individuals shall supply any

data required by the tax authority.

Article 74 :

Rights to claim for declaration of accounting documents.

various information, and to make checking on other

places.

The tax officials have the following rights:

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- Claim the tax-payers to declare all enterprise accounting

documents, request for explanations or presentation of evidences on data and

information which are considered as necessary for the calculation, deduction,

exemption, cancellation or reduction of tax.

The claim can be made in written form or orally, and the tax-payers

shall give response to the tax authority within 10 days after receipt the

notice.

- Check the business units in order to secure the implementation of

activities in compliance with the sections of work approved in the business

license and the tax registration;

- Check goods in the stocks, and check all documents relating to the

transport or removals of the goods from one spot to another spot, such as:

sales certificates, invoices, shipping documents and import declaration

documents in order to verify the legality of goods.

Article 75 :

Rights to audit the enterprise accounting

The tax authority has the right to audit the annual accounting of

enterprises within its responsibility in order to assure that the fulfillment of

tax duties by those enterprises shall be operated correctly, entirely and within

the duration.

The audit shall be made at least once a year, but if it is considered as

necessary, the audit can be made earlier.

Three methods of audit are available :

- Audit the accounting based on the documents available in the tax

office;

- Audit the accounting directly in the enterprise offices;

- Emergent audit of the accounting.

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Regarding the audit, the tax agency shall inform the tax-payers early in

written form within 10 days in order to let them prepare all necessary

accounting documents and able to select an accounting consultant to assist

in the explanations during the audit.

Article 76 : Audit and its record

The audit team shall consist of at least three tax officials in the tax

uniform with marks and ID cards issued by the Finance Minister.

After completion of the audit the tax auditors shall make a record

which shall include the following:

- Name and surname, rank, post and work place of the tax auditors;

- Name and surname, age, citizenship, occupation and address of the

tax-payer;

- Day, time and place of the audit;

- The real situation met during the audit.

The audit memo or record shall be made in presence of the tax-payer.

The tax-payer shall read and understand the audit report clearly before its

signing, of printing his thumb on the report together with the tax auditors. If

the tax-payer denies to sign or print his thumb on the audit memo the tax

auditors shall make a remark in the audit report.

The audit memo shall be made in two original copies, one for the tax-

payer and another one shall be kept by the tax authority for filling or to

proceed according to the Tax Law.

Article 77 : Duration of auditing the annual enterprise accounting

The tax authority has the right to audit the annual accounting of

enterprises within three year after receipt of the accounting documents.

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Article 78 : Duration permitted to claim for the tax repayment

In event if the tax has not been fully calculated or it has been mistaken

the tax officials shall have the right to make a claim on the tax repayment

with a duration of three years after the tax calculation or payment.

Article 79 : Duties of the tax staff

During the implementation the tax staff shall be in the tax uniform, fix

the tax mark and have a good attitude, follow the order, the tax regulations

and other laws strictly, keep the documents and official secrets, provide

guidelines to any persons, businessmen and staff of other organizations

regarding fulfillment of the Tax Law

Article 80 : Consideration of the claims or disputes on tax calculation

: The tax officials have a duty to consider the claim of any tax-payer on

the calculation and shall give an answer to them within 30 days after receipt

of the claim. During the consideration if it found that the claim is evidenced

the tax authority shall adjust the incorrect tax amount or make the

adjustment by applying the reimbursement method as stated in Article No.65

of the present law.

Article 81 : Cancellation of the tax unable to collection

In each year the head of the tax accounting office in coordination with

the chief of the tax office shall have a duty to summarize the tax invoices

unable to be collected by such reason as the tax-payers have escaped, and

then make a report to the Director of Tax Department, by through the local

administrative authority, in order to submit to the Minister of Finance as

stated in Article No. 43 of the Law on state budget.

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CHAPTER III

Rights of Tax-payers

Article 82 :

Right to submit a claim

Tax-payers who considered that they have overpaid the tax as

compared with the real tax amount due to payment, shall have the right to

submit a claim on tax calculation to the tax office concerned within one year

after the tax payment, otherwise, the claim shall not be considered.

If the person who claimed on the tax

satisfactory response from the tax officials,

appeal to the next upper tax administration.

PART VIII

calculation does not receive a

he/she shall have the right, to

POLICY FOR SUCCESSORS AND MEASURE ON VIOLATORS

CHAPTER I

Policy Concerning the Work-successors

Article 83 : Policy concerning. the work-successors

Government officials and other individuals who contributed to the

inspection, monitoring, searching, provision of various information enable to

find the tax avoidance and claim back the hidden tax amount as well as

penalize the violators, shall be praised and awarded as duly.

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Article 84 : Policy regarding the tax-payers

The tax-payers who correctly and entirely implement the tax duties as

well as within the duration set, shall be praised and facilitated in their

business performance.

CHAPTER II

Measures on Violators

Article 85 : Calculation of the forced tax payment

The calculation of the forced tax payment is the calculation that the

tax authority considered as correct and reasonable for the tax payment based

on the information available.

The forced tax payment shall be applied to businessmen, independent

jobbers and other income gainers who:

- Do not hold an accounting or avoid the audit of tax authority;

- Do not declare for the tax payment or do not submit the annual

accounting documents as determined by the law.

- Do not give response or give false response to the tax authority who

requires for the presentation of evidences, explanations, various

data or information regarding the tax calculation.

Article 86 :

Measures on tax-payers

The tax-payers who violate the rules declaration and payment of tax as

stated in the present law, shall be applied with the measures according each

case as follows:

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In case of delay in submission of tax declaration or tax payments

according to the tax contract, a penalty of 5% of the amount of tax due to

payment in each month or each installment of delay shall be made. In the

calculation of the fine a part of month or installment of delay shall be

calculated as a full month or a full installment.

In any case the amount of fine shall nor exceed the amount of tax due

to payment.

If the accounting is not correct, or the declaration of tax

payment is not entire, and sales of goods or services are made without

issuing any bills of payment receipt. or the bills and other accounting

documents have been falsified, the tax-payers concerned shall be applied with

all three following measures:

- Repay the tax entirely;

- Pay additional tax of 30 percent of the tax amount subject to

repayment;

- Shall be penalized of 100,000 Kip according to the rules of the Law

on enterprise accounting.

If the second violation had been made, besides the entire repayment

of tax the violators shall:

- Pay an additional tax of 60 percent of the tax amount. due to

repayment;

- Pay a penalty of 100,000 Kip according to the rules of the Law on

enterprise accounting;

- Therewith their activities shall be liquidated and publicized through

the mass media.

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The tax-payers who do not hold an accounting system, or do not

let the tax authority to audit, and do not declare tax payments or submit the

annual accounting documents as determined by the present law, or do not

provide response timely to the tax authority which has requested for

presentation of evidences, explanations, information on the tax calculation,

shall be applied with all three following measures:

- Shall pay the tax based on a forced basis as stated in Article No. 85

of the present law;

- Shall pay an additional tax of 50 percent of the tax amount

calculated for the payment;

- Shall pay a penalty of 150,000 Kip according to the rules of the

Law on enterprise accounting.

If the second violation has been taken, besides the forced tax payment

the violators shall:

- Pay an additional tax of 10 percent of the tax amount calculated for

the payment;

- Pay a penalty of 150,000 Kip according to the rules of the Law on

enterprise accounting.

- Therewith their activities shall be liquidated and publicized through

the mass media.

In event of the delay in tax payment after receipt of the tax

invoice the tax-payers shall:

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- Be penalized of 5% of the tax amount delayed in payment, for the

first time of delay, or of 10% for the second time of delay and 15% for the

third time of delay. Each claim made by the tax officials shall state a duration

of 10 days within which the tax-payers shall make the payment.

- If the tax-payers do not make the payment after receipt of the claim

in the third time, the tax authority shall temporary close their activities and

withdraw the enterprise license including the tax registration for one month.

While closing the activities the tax authority shall form a committee to

confiscate the properties of the tax-payers temporary with an agreement of

the court The committee shall consist of:

- Officials from the tax accounting office;

- Trade officials;

- Police officials;

- Officials from other parties concerned.

After one month if the tax-payers have not paid the tax, their

activities shall be closed, and the enterprise license as well as the tax

registration shall be withdrawn permanently, and therewith they shall be

brought to the court for proceeding the case according to the regulations and

the laws.

If the tax payers insult and use rough words, challenge and threaten,

hinder or have other attitudes contradicting the criminal law, they shall be

proceeded according to the laws.

During the close of the activities, confiscation of the properties or

consideration of the case at the court, if the tax-payers have paid the tax and

remained penalty entirely, the tax authority may cancel the close of

activities, the confiscation of properties or withdraw the application for legal

proceeding at the court against the tax-payers, and then the case shall be

closed.

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Article 87 : Measures on the tax Staff

The tax staff who made a violation, shall be punished according to the

severity of each case as follows:

Any tax official who reveals an official secret, shall be

disciplinary condemned, or shall be proceeded based on the laws;

In case of turning the occasion to account of one's position,

misuse the authority, leave the duties, imprudence in implementing the

duties, falsification of receipts or other documents, non-transfer of the

collected money to the state budget, admit bribes or other actions damaging

the reputation of the state or persons, the tax staff shall be disciplinary

condemned or shall be proceeded according to the laws.

PART IX

FlNAL PROVISIONS

Article 88 :

Improvement and amendment of the tax rates

In case of the necessity and urgency, the President of the country shall

issue a state provision to improve and amend the tax rates stated in the

present law. The state provision shall be submitted to the forthcoming

plenary sessions of the National Assembly for adaptation as a law.

Article 89 : Implementation

The government of Lao PDR shall implement the present law.

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Article 90 :

Entry into force

Any definitions and regulations contradicting the present law shall be

canceled.

The present law shall come into force 90 days from the date of its

promulgation by the President Decree.

Vientiane, October 14, 1995

President of the National Assembly

Samane Viyaket