[:en]In case you missed it, Singapore’s reputation as an attractive holding company location for investments into Lao PDR recently went up a notch: after being signed way back in February 2014, the long-awaited tax treaty/double taxation agreement between Lao PDR and Singapore (the “DTA”) became effective on 1 January 2017.

For the uninitiated: what exactly is a tax treaty or double taxation agreement?

Tax treaties aim to prevent double taxation of income earned in one country by a (tax) resident of another country. They also make clear (which country has) the taxing rights on several types of income arising from the cross-border economic activities between two countries.

Amongst other provisions, tax treaties often provide for lower withholding tax rates on cross-border payments of dividends, interest and royalties, and are often an essential tool to encourage and facilitate trade and investment between the partnering countries.

Below we have taken a look at some – but not all – of the key provisions in the DTA.

Dividends, Interest and Royalties

Many countries levy taxes – often via withholding – on dividend, interestand royalty payments under their domestic tax laws; the DTA does not prevent this – it actually states that dividends, interest and royalties may be taxed in both countries. What it does, however, is limit the amount of tax which may be imposed in the source country to:

• Dividends – 5% (recipient must be a company directly holding at least 10% of the shares; the rate is 8% in all other cases.)
• Interest – 5%
• Royalties – 5%

The above compares to Lao PDR’s domestic (withholding) tax rates of:

• Dividends – 10%
• Interest – 10%
• Royalties – 5%

Permanent Establishment & Business Profits

The current Lao tax Law, the Revised Tax Law No. 70/NA, dated 15 December 2015, does not contain any definition of ‘permanent establishment’. Combined with the broad profit tax provisions within the Lao tax law, this often proves difficult for taxpayers trying to determine if any profit tax obligations exist in Laos.

The DTA assists in this regard by helping to clarify the taxation rights of business profits through determination of permanent establishment. This is important because, in very simple terms, the profits of an enterprise may only be taxed in its home country unless it carries on business in the other country through a permanent establishment, in which case that other country may tax any profits that are attributable to that permanent establishment.

While quite subjective, permanent establishments are generally defined as ‘a fixed place of business through which a business is (wholly or partly) carried on’ – and this DTA is no exception. A permanent establishment, therefore, includes – but is not limited to – a place of management, a branch, an office, a factory, a workshop, etc.

However, the DTA explicitly stipulates that the following will constitute a permanent establishment (paragraph 3, Article 5 of the DTA):

1. a building site, a construction, installation or assembly project, or supervisory activities connected therewith, but only where such site, project or activities lasts for more than 12 months;
2. the furnishing of services, including consultancy services, by an enterprise [of Singapore or Lao PDR] through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the other [country] for a period or periods aggregating more than 300 days within any 12-month period.

Example One
A Singaporean engineering company supervises the overall construction of a hydropower project in Lao PDR; the expected construction period is five years. The Singaporean engineering company will be considered to have a permanent establishment in Lao PDR (and thus its ‘business profits’ may be taxed in Lao PDR).

Example Two
A Singaporean consulting firm outsourced the services of its geology experts to a mineral exploration project in Lao PDR for seven months from January 2017 to July 2017. The Singapore consulting firm will not be considered to have a permanent establishment in Lao PDR (and thus its ‘business profits’ may not be taxed in Lao PDR).

Dependent Personal Services (Employment)

Without going into much detail, the DTA has the potential to provide tax relief where employees are required to exercise their duties outside their resident country. Generally speaking, an individual’s employment income shall be taxable only in their resident country unless the employment is exercised in the other country (the source country) – in which case, the income derived from that employment may be taxed in the source country.

However, subject to a couple of other conditions, the employee may avoid taxation in that other/source country where the individual is present in the country for less than a total of 183 days (six months) in any 12-month period.

Capital Gains (on Share Sales)

Perhaps the most significant provision of the DTA, in terms of a holding structure, is Article 13(4):

Gains from the [sale] of any property other than that referred to in paragraphs 1, 2 and 3 [of Article 13] shall be taxable only in the [country] of which the [seller] is a [tax] resident.

With reference to the above, paragraphs 1, 2 and 3 relate to gains on the sale of immovable property, movable property forming part of the business property of a permanent establishment or fixed base, and ‘international transportation vehicles’ (e.g. ships and aircraft).

Therefore, Article 13(4) provides that (capital) gains on share sales may only be taxed in the country where the seller/transferor is a (tax) resident. In other words, if a Singaporean entity sells shares in a Lao company, the (capital) gain may only be taxed in Singapore, thus avoiding the 10% ‘capital gains tax’ Lao PDR levies on such transactions. The kicker: Singapore does not tax capital gains.

Other Notable DTAs

Lao PDR has signed around 13 tax treaties with other countries, but not all of them are in force and effective; the below table summarises the key tax rates from some of the more notable ones which are currently in force:

1 ‘Effective’ rate; takes into account the ‘profit deeming’ provisions of the tax regulations.
2 Recipient must be a financial institution (insurance companies included); the rate is 15% in all other cases.
3 Applicable where the source country is Lao PDR; the rate is 10% if the source country is China.
4 Recipient must be a company directly holding at least 10% of the shares; the rate is 10% in all other cases.
6 Recipient must be a company directly holding at least 10% of the shares; the rate is 15% in all other cases.

Final Thoughts

We have only ‘scratched the surface’ of this DTA; there are many more aspects that we have not covered and tax treaties are complex pieces of international tax law that interact with domestic tax laws.

Furthermore, the circumstances of tax residents and any cross-border activity needs to be carefully considered in its own right before applying provisions of the DTA: two seemingly very similar transactions may not have the same outcome under a tax treaty.

Please don’t hesitate to contact Arion Legal at enquiries@arionlegal.com should you require assistance with interpreting tax treaties and how they apply to you, or should you require any legal and tax assistance in general.

Author: Daniel Harrison, Tax Consultant

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[:en]Arion Legal recently contributed to the exclusive chapter on arbitration in Lao PDR in Respondek & Fan’s biennial Asia Arbitration Guide (AAG). The AAG is a free publication which covers a review of 21 jurisdictions across Asia on arbitration law, practice and institutions and is a quintessential guide for all cross-border investors seeking to understand alternative dispute resolution in the region.

The choice of arbitration as a dispute resolution mechanism has risen in popularity as a time and cost-effective option to resolve commercial disputes. By including an arbitration clause in contractual arrangements, contracting parties may agree in advance on the seat and rules of arbitration, the size of the arbitration panel and even the rules to appoint an arbitrator in the event of a contractual dispute. This is particularly attractive to investors who are unfamiliar with the judicial processes of the local jurisdiction and wish to preserve the confidentiality of proceedings and final award.

In recent years, Lao PDR has established the Centre of Economic Dispute Resolution (CEDR) and Office of Economic Dispute Resolution (OEDR) as mediation or arbitration centres for commercial disputes in Lao PDR. The CEDR and OEDR are gradually gaining the attention of local investors as an alternative dispute resolution mechanism to the Lao PDR court system but the vast majority of matters referred have been for mediation rather than arbitration.

In our experience, major investors in Lao PDR prefer to designate international arbitration as the dispute resolution mechanism in a seat with well-established arbitration rules such as the Singapore International Arbitration Centre. Pursuant to the Law on Economic Dispute Resolution, foreign arbitration awards are recognised and enforced with the same status as local judgments subject to certification by the Peoples’ Court if the following conditions are satisfied: (1) the parties subject to the arbitration are nationals of member countries to the New York Convention on the Enforcement of Arbitral Awards; (2) the arbitration award does not violate the Lao PDR Constitution and laws and regulations relating to national security, social peace and environment; (3) the party obliged to repay any debt under the arbitration award has property, activities, shares, money or other assets in Lao PDR; and (4) the arbitration proceedings did not violate any procedural laws and regulations.

At the time of writing, however, there has been no public record of any foreign arbitration award which has successfully obtained certification from the Lao PDR Peoples’ Court.

For the full chapter of Lao PDR in the Asia Arbitration Guide 2017 see pages 164-174 here.

Should you have any questions relating to our article or would like further advice on dispute resolution in Lao PDR, please contact the Arion Legal team at enquiries@arionlegal.com.

Author: Florence Lo, Senior Legal Advisor

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[:en]The Labour Law (2013) came into effect on 28 October 2014, repealing and replacing the previous Labour Law (2006) and introducing a number of significant changes relating to the basic rules of employment in Lao PDR. As the Labour Law is now well into its third year in force, we consider one of its more significant yet often overlooked legal requirements for employers in Lao PDR – internal regulations or “work rules” of the workplace for employees.

While the Labour Law is silent on the topic, we understand that employers with five or more employees are, in practice, required to adopt a set of internal regulations for the workplace. Nevertheless, it is good practice for an employer to devise a set of internal regulations to establish and clarify specific regulations, benefits or entitlements for its employees which may not already be covered under Lao PDR law. Like an employment contract, internal regulations may provide for better labour conditions, benefits and entitlements beyond the minimum labour standards provided for under the Labour Law.

In the event of inconsistency between an employer’s internal regulations and the Labour Law, provisions of the Labour Law will prevail to the extent that the internal regulations improve the labour conditions provided for under the Labour Law. Examples of improved employment conditions, benefits and entitlements which may be stated in an employer’s internal regulations include bonus or salary incentive schemes, private insurance entitlements and retirement packages.

In order for an employer to adopt a set of internal regulations for its workplace, the internal regulations must, depending on the circumstances of the workplace, first be approved by either the trade union, a majority of the employer’s labour force or its appointed employee representative. Following this, an employer’s internal regulations must be submitted to the Labour Administration Authority (LAA). The internal regulations must be made accessible and available to all employees in the Lao language and also be translated into any other working language of that workplace. For foreign organisations such as international NGOs, aid organisations, embassies and consulates (whose labour matters are managed by the Ministry of Foreign Affairs (MOFA)), we understand that, as a matter of practice, these organisations are required to register their internal regulations with the MOFA.

Legal requirements aside, one of the benefits of utilising internal regulations, particularly for workplaces with many employees, is that it is easier for an employer to revise its internal regulations (in accordance with the above-mentioned process) than it is to amend existing employment agreements – the idea being that an employer may move towards using simplified employment contracts coupled with the flexibility of more detailed internal regulations. It is necessary to note, however, that only provisions in the internal regulations that provide for better labour conditions, benefits and entitlements than those provided for in a signed employment contract will be enforceable.

Although cases of inspection and fines for non-compliance with the Labour Law were rare in the past, we understand that there will be a stronger trend of enforcement by the LAA and the MOFA to require employers to have internal regulations in the workplace, particularly in the wake of the recently implemented Decision on the Operation of the Labour Inspection Committee effective from 5 December 2016. This Decision outlines the function, rights, duties and powers of the Labour Inspection Committee and prescribes sanctions for non-compliance with respect to the Labour Law. Of particular note, the Decision prescribes that, following a warning, an employer in non-compliance with the internal regulations requirement is liable to pay a fine of LAK 1,000,000 per instance of non-compliance (for employers with less than 100 employees) and, following multiple instances of non-compliance, the Labour Inspection Committee may take the matter to the relevant Court for further sanctions.

Should you have any questions or would like your internal regulations reviewed to ensure that they are in compliance with the Labour Law, please contact the Arion Legal team at enquiries@arionlegal.com.

Author: Steve Goddard Country Manager

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[:en]Arion Legal is pleased to congratulate our Legal Advisor, Chintala (Mam), on her milestone graduation!

Mam  completed her studies late last year in the Certificate of Judge, Prosecutor and Lawyer program. Mam will be admitted to the Lao Bar Association in due course.

We are very proud of Mam, who undertook a substantial 32 courses as well as practical work at both the civil and criminal courts in 2016 to obtain the qualification.

Arion Legal has maintained its position as a highly regarded firm offering international quality services in Lao PDR for almost a decade. With a passionate, driven and highly capable team, 2017 marks the start of new and exciting opportunities for the firm as we expand our presence in the region.[:]

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Prime Minister Thongloun Sisoulith told the National Assembly (NA) that the government will employ a number of measures to spur economic growth amid the current economic and financial constraints.

The prime minister on Monday responded to questions raised by Assembly members about stimulus measures and policies the government will take to boost the economy.

The government pledged to ensure a stable and steady macro economy through the harmonised implementation of financial and currency policies and measures to ensure annual economic growth of at least 7 percent.

The prime minister committed to closely follow up the implementation of tax and customs policies and regulations as well as amending them appropriately in order to promote investment and business operations.

Laos is suffering from chronic debt, budget and trade deficits, violation of financial discipline, and revenue leaks, which are the main reasons for the current economic and budget difficulties, Mr. Thongloun told the lawmakers.

He said the government will strive to relax budget tensions, while exploring more financial sources to balance the budget deficit as well as gradually disburse debt.

The government will continue to regulate interest rates on deposits and loans at commercial banks so they are conducive to greater productivity and business operations. The government will identify measures to expand and manage loans to encourage greater investment in micro, small and medium enterprises.

The government will reform state-owned commercial banks that are still making losses so that they become more commercially viable.

The government will attach great importance to harmonising financial and currency policies to create a strong government domestic bond market as a source of capital, he told the session. Mr. Thongloun also announced that revenue collecting mechanisms would be reformed systematically to ensure the effective and transparent collection of revenue. The government will closely follow up and improve mechanisms to ensure the effective implementation of budgets and financial plans. At the same, frugality would be enforced to counter extravagance through an Order which the government will soon issue.

The government will push sectors and localities to explore and make full use of all untapped potentials then draw up plans to maximise these potentials in a bid to alleviate poverty, especially in rural communities.

Additionally, the government will evaluate and draw lessons from the implementation of the Three Builds devolution directive, to increase its effectiveness.

The prime minister also committed to improve ease of doing business and the investment climate by removing barriers that caused difficulties for business operators.

We will amend some laws and regulations, which will contribute significantly to creating confidence among investors in a timely fashion, he told the lawmakers.

Mr. Thongloun promised to rejuvenate the Board of Investment Promotion to ensure effective performance of the one-door service to accelerate the investment approval process.

The government will inspect and re-improve mechanisms that don’t coincide with laws, and push various sectors to strengthen their coordinated action to facilitate investment and business operations, he said.

The government will improve mechanisms for the transparent and faster consideration and approval of issues proposed by investors in line with the laws and regulations.

Mr. Thongloun pledged to more strongly promote the services and production areas in which Laos has potential, such as green agricultural production, organic agriculture, the processing industry, historical and cultural tourism as well as ecotourism, along with transit and logistics services among others. The government vowed to push for the effective implementation and operation of those investment projects already approved, especially mega projects that have a significant impact on the economy, while minimising environmental and social impacts.

The government will strive to improve state-owned enterprises for effective commercial operation so that these enterprises contribute significantly to the national economy.

Currently, the government is carrying out studies with a view to improving Electricite Du Laos, Lao Airlines, and two state-owned banks. In addition, improvements are being carried out in other state enterprises that are making a loss, lack transparency and operate inefficiently, Mr. Thongloun said. The state will no longer subsidise or carry burdens, he told the parliament.

I believe if we can improve and strengthen state enterprises, they will become an important driver of our economy.

The prime minister committed to streamline mechanisms towards greater transparency, speed, and effective and efficient governance.

Source: Vientiane Times

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The government has announced its intention to increase deposits in commercial banks to 84 percent of Gross Domestic Product (GDP) by 2020, up from the 57 percent expected in 2016, in a bid to meet growing development needs.

Governor of the Bank of the Lao PDR, Mr. Somphao Phaysith, this week presented the next four-year currency plan to the ongoing ordinary session of the National Assembly (NA) following the government’s proposal to revise the four-year national socio-economic development plan (2017-2020). To achieve this target, it would be necessary to increase deposits to 23,067 billion Kip annually, he told the session, which is currently debating the proposal to revise the 2017-2020 socio-economic development plan, the budget plan and the currency plan.

Every effort will be exerted to increase the total credit in commercial banks to 74 percent of GDP by the end of 2020, an increase on the 50 percent expected by the end of 2016. To attain this target, an annual increase of 16,817 billion Kip must be secured.

The central bank governor pledged to endeavour to increase credit quality while limiting non-performing loans to not more than 3 percent of total credit.

“We will work to guarantee the security of the banking system. We will strive to resolve weaknesses in the financial situation and the administration and management of some state and private banks,” he told NA members.

The move is aimed at boosting economic growth, with the government asking the Assembly to lower the average annual growth rate from the previously approved 7.5 to 7.2 percent over the next four years. Next year, a target will be set to ensure that deposits in commercial banks reach 57 percent of GDP, an increase of 13,189 billion Kip compared to the year before, while bank credit is expected to reach 54 percent of GDP. The central bank will endeavour to ensure that the inflation rate is less than the economic growth rate. Under the proposed plan, the economic growth rate for next year would be set at 7 percent. The Kip exchange rate would be allowed to fluctuate between plus or minus 5 percent against major foreign currencies.

Mr. Somphao said the central bank would strive to ensure that foreign reserves could cover the cost of imports for more than five months, and would control money supply growth (M2) so that it did not exceed 24 percent compared to the previous year.

As of July 2016, commercial banks have recorded deposits totalling more than 59,616 billion Kip, representing 54.84 percent of GDP. This was an increase of 5,692 billion Kip compared to the same period last year.

Credit in the banking system climbed to more than 60,262 billion Kip, equivalent to 55.43 percent of GDP. The credit held by all 42 commercial banks accounted for 49.55 percent of GDP.

In addition, 158 non-bank financial institutions have released credit amounting to more than 884 billion Kip. Over the first 10 months of the 2015-16 fiscal year, Laos maintained an average inflation rate of 1.26 percent. The Kip was weaker by 0.30 percent against the US dollar compared to the previous fiscal year. By the end of July 2016, money supply growth increased by 9.63 percent compared to the same period last year. Foreign reserves were sufficient to pay for at least five months of imports.

Source: Vientiane Times

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Business leaders in Thailand and the CLMV countries are urging their governments to use local currencies for trading along borders instead of the US dollar to facilitate business and cut costs.

Businesses from Thailand, Cambodia, Laos, Vietnam and Myanmar will propose the plan to their governments today at the seventh Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (Acmecs) summit in Vietnam.

Sanan Angubolkul, president of the Thailand-Vietnam Business Council, said using local currencies would benefit business operators and eventually boost trade value along border areas.

The move would reduce risks incurred by volatile exchange rates against the US dollar and shorten the trade process, he said.

Mr Sanan said businesses in these five countries do not have to wait for all parties to be ready to create new initiatives, including using local currencies in trade. Countries can also partner with those that are ready to adapt to using other currencies, he said.

“The move would benefit business in the region immediately if they begin a bilateral agreement to initiate new cooperation, including using local currencies in trade,” said Mr Sanan.

He said bilateral trade between Thailand and Vietnam increased 37% over the past three years after the two countries agreed to cooperate under the scheme.

Trade between the pair is expected to rise to US$20 billion by 2020, up from $13 billion now, said Mr Sanan.

Other issues expected to be raised during the meeting in Vietnam include food security, cooperation on farming, human resource development, tourism, environment protection and transport links.

The Thai government plans to establish its first Thai Board of Investment office in Vietnam next year, which is expected to expand trade and investment value between Thailand and Vietnam in both directions, he said.

With government trade facilitation and business cooperation between the two countries, Mr Sanan expects the popularity of Thai products to rise in Vietnam, where consumers already enjoy Thai goods.

The proposal to use local currencies and other cooperative measures that are expected to be created via bilateral agreement is part of the effort to facilitate trade and investment via the Southern Economic Corridor for transport and goods that are routed through Thailand, Cambodia and Vietnam.

Mr Sanan’s council planned a business matching event during the Acmecs summit between Thai and Vietnamese investors, which is expected to help create new investment and additional trade value in the region, he said.

Source: Bangkok Post

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Prime Minister Thongloun Sisoulith said yesterday the government will maintain the moratorium on new mining concessions because it needs more time to inspect a number of operations.

The prime minister was speaking at a three-day conference taking place at the National Convention Centre for mining sector officials from around the country and private investors in the industry.

The conference on the management of investment in the mining sector began on Tuesday and ends today.

The prime minister’s statement comes after the government earlier said it was preparing to lift the moratorium in a bid to boost revenue. But Mr. Thongloun said the government needs more time to investigate the activities of some concession holders and mining operators.

Some companies hold concessions but are not actively extracting mineral ores while other companies are operating illegally by falling short of the required environmental standards or failing to comply with other government regulations.

“Obviously, the mining sector has generated significant revenue and has contributed to the steady growth of the economy for many years. On the other hand, there have been negative impacts on local communities. In these cases we should consider imposing a suspension on a company’s activities or stop them altogether,” Mr. Thongloun said.

A halt to new mining projects would enable the government sectors in charge of the inspection and management of mining projects to monitor all ineffective mining companies in Laos, he added.

“We have to continue our negotiations with substandard mining operators to make sure the government earns a fair income from mining projects as well as reconsidering the benefits and negative impacts of various projects,” he said.

At the same time, the prime minister admitted that a lack of local experts in the mining industry had forced Laos to be in a defensive situation.

Mr. Thongloun called for the relevant government bodies to conduct surveys on potential mining sites across the country together with foreign experts prior to concessions being approved.

“In addition, we should consider the preservation of mineral resources for the next generation, otherwise we will have nothing left,” he said.

Over the past five years, the mining sector has generated more than 13.34 trillion Kip for government coffers. However, the government admitted that this figure would have been higher if some mining companies had fully complied with the regulations.

Source: Vientiane Times

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Mike McDonald and Mark Stewart, the Directors and founders of Arion Legal are delighted to announce the appointment of Steve Goddard as our new Country Manager with effect from 17 October 2016. He takes over from Kate Baillie who is moving to Myanmar in the New Year. Kate will continue to consult to the firm until her departure.

Steve recently joined the Arion Legal team from Cambodia where, based in Phnom Penh, he was a Legal Advisor with a leading regional law firm, specialising in foreign direct investment under the Cambodian, Myanmar and Lao PDR legal frameworks and heading up, among others, its Corporate and Commercial Practice Group, while overseeing operations in Myanmar.

Steve is a qualified Australian Lawyer and has particular expertise in corporate law and restructuring projects including mergers and acquisitions, contractual arrangements, regulatory compliance and industry-specific licensing matters.

Prior to working in Southeast Asia, Steve studied and worked in Kunming, Yunnan Province, PRC, where he gained a proficiency in speaking Mandarin. Given the strategic co-operation agreement between Arion Legal and Yunnan Baqian Law Group (the largest law firm in Yunnan Province, PRC) to provide transnational legal services within Lao PDR and the Mekong Region, Steve is well-positioned to work with our Yunnan Baqian Law Group colleagues in assisting China-based investors to establish a legal presence and expand their businesses in Lao PDR.

We look forward to having Steve on board as Country Manager and to his participation in shaping the firm’s future and driving forward its continued development. For all future enquiries Steve can be contacted via our Vientiane office or directly by e-mail at stevegoddard@arionlegal.com.

We would also like to thank Kate Baillie for her substantial contribution to the firm as Country Manager. Kate has played a pivotal role in the establishment of the Arion Legal brand within Lao PDR, the delivery of exceptional professional service to our clients, the significant expansion of our client base and assistance with the development of our collaboration with Yunnan Baqian Law Group. We wish her all the best with her future endeavours in Myanmar.

Arion Legal in Lao PDR has expanded considerably over the last couple of years and now has a permanent professional staff complement of two Australian qualified lawyers (expanding to three in December), three Lao lawyers and an Australian CPA who heads up our tax advisory practice. The Yunnan Baqian Law Group also operates from our offices, ensuring on-going and close collaboration between the two firms. Added to this is the support and experience of the firm’s directors, specialist lawyers and consultants, collectively providing a full suite of services and expertise across the commercial spectrum.

We believe that Arion Legal is now exceptionally well-positioned and resourced to be able to provide practical, results-orientated and cost effective legal and tax services to our broad and diverse client base and we look forward to continuing to assist foreign and local investors in the development and expansion of their businesses in Lao PDR.

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The Customs Department of the Ministry of Finance will begin collecting Valued Added Tax (VAT) payments next month with the department readying equipment and human resources.

“At the beginning we will be collecting VAT at the first Thai-Lao Friendship Bridge between Nong Khai Province and Vientiane followed by the other international border crossings,” Acting Director-General of the Customs Department, Mr. Bounpaseuth Sikounlabout told local media during a press conference on Friday.

Ministry of Finance had issued a Provision on the Levy of 10 percent Value Added Tax of Passengers’ Personal Effects No. 2834/MoF, dated 30 August 2016.

In order to extend the implementation of the provision, the Customs Department has also issued an Instruction on the Management of the Levy of 10 percent Value Added Tax of Passengers’ Effects No. 09523/CD, dated 16 September 2016, which stipulates rules, procedures and measures on the implementation of the provision.

The provision stipulates that Lao citizens or expat passengers living in Laos upon entry through border checkpoints including international airports shall pay 10 percent VAT on their (new or used) personal effects. The levy of VAT is exempted for infrequent passengers who travel less than twice a month on items costing less than US$50.

Frequent passengers to Laos are not exempted from VAT and will be charged accordingly.

Passengers entering Laos shall fill in a Customs Declaration Form for Personal Effects and submit it to customs officials upon their entry into the country. In cases where the personal effects are new, the passenger shall attach a purchase receipt to ease and hasten the calculation of VAT.

In cases where passengers do not have all receipts or eligible documents, or have no documents, the customs officials will have the right to evaluate items according to present circumstances to calculate VAT.

The department is currently improving facilities to ensure transparency and swift service, especially IT and software systems plus setting up more lanes.

“In cooperation with BCEL we are developing a system for the tax payments so that people can declare the value of their goods and pay the tax using their smartphone,” Mr Bounpaseuth said.

While the government isn’t expecting large sums from the VAT collections it will help to improve revenue collection in the country and assist Laos adjust to international integration.

Source: Vientiane Times

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