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All people who enter Laos bringing with them goods valued at over US$50 will have to pay 10 percent of the goods value to the government as Value-Added-Tax (VAT), with the decision already in force.

This is in line with an order by the Deputy Prime Minister and Minister of Finance Mr Somdy Duangdy dated August 30, 2016, which comes into force from the date of its issuance.

Through this decision, the minister has tasked the customs sector to implement the levy on all Lao and foreign passengers entering the country via border crossing points and international airports, while all citizens are required to declare their luggage to customs officials.

The decision clarifies that the exemption up to US$50 valued goods will be realised for those who make not more than two cross-border trips per month, bringing non-commercial purpose items or goods for daily household consumption.

An official from the Taxation Department explained that if a traveller had a TV set valued at US$150 with him entering the country, he would have to pay US$10 (ten percent of the US$100 in excess of the US$50 exemption) as VAT. However, this policy will not be offered for frequent cross-border travellers and they will have to pay ten percent of the total value of their goods with no exemptions, according to the decision. This decision also clarified that the levy on imported goods items is calculated based on their price in the country where they were purchased, with any VAT tax paid in that country excluded from their value.

The decision noted that customs officials are given the right to assess the value of goods if their owner does not have all receipts in place, if the value is unclear or if there are no documents at all. According to the decision, the duty is given to the Customs Department to prioritise border customs checkpoints in regards to the implementation of the decision, as well as issue technical instructions in detail on the procedures, methods, design declaration forms, and the tax hand-over mechanisms.

The department is also given the duty to disseminate the decision and instruction to civil servants, customs officials, individuals, legal entities or organisations, as well as manage, inspect and report to the minister about the decision’s implementation. The decision has been issued pursuant the Law on Customs promulgated since 2011 and the amendment of some articles in the law in 2014, the Law on Value-Added Tax 2014, the Prime Minister’s Decree No.80 dated February 28, 2007 on the Ministry of Finance’s organisation and activities, and the agreement of the government’s economic team at its meeting held last month on this matter.

Source: Vientiane Times

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[:en]The Lao Securities Commission Office is advising people considering making deposits with financial institutions to make a careful assessment before going ahead. Various financing companies in Laos are encouraging people to deposit with them by offering a higher rate of interest than that provided by banks but despite the glowing promises of financial gain made by such companies, their long-term viability is uncertain, the securities office warned.

People who deposit money with those companies run the risk of losing their savings if these businesses go bust, a commission official said.

The commission said it will not be responsible for any such problem, even if the financing company in question has legally registered its business operations in Laos.

Only five companies registered on the Lao Securities Exchange (LSX) are able to encourage deposits from people legally and confidently, he said.

These are the EDL Generation Public Company, the Banque Pour Le Commerce Exterieur Lao Public, the Lao World Public Company, the Petroleum Trading Lao Public Company and the Souvanny Home Center Public Company, the commission announced.

By contrast, Maxkey Lao Worldwide Limited is one example case of an entity which the government requested to cease its business operations in Laos after the company contravened laws and regulations governing banks and capital markets.

The company began operating in Laos in 2013, encouraging people to deposit money and promising 3 percent interest per month for savings deposits, 3.5 percent for fixed deposits for one year, and 4 percent for fixed deposits over two years.

People who held a savings account could draw out money at any time but depositors with fixed accounts were to be fined 27 percent of the capital amount if they withdrew money before the end of the stated term.

Many people have lost their money after the company left with large amounts of money owing to customers.

In another example, the PS Agriculture and Industry Promotion Import-Export Company of Laos is one such company that is encouraging people to pay into a fund run by the company for the purpose of agricultural and industrial business expansion.

Those who pay into the fund are promised a monthly interest rate of 4 percent.

A bonus of 24 percent will be paid to those who maintain their deposit for a year, bringing the total projected return to 72 percent.

Many people are still depositing with the company despite the fact it is operating outside the laws governing banks and capital markets.

The government is now seeking measures to work with the company to wind down its operations after banning further trade.

Source: Vientiane Times[:]

[:en]By Eileen Ang for Asian Legal Business

Lao People’s Democratic Republic remains one of the most underdeveloped countries in Southeast Asia. But according to the Asian Development Bank (ADB), the Lao economy is poised for growth, with its gross domestic product (GDP) rising by 6.8 percent this year and 7.0 percent in 2017, thanks to strong performances in several sectors including construction, services and electricity exports. The Lao legal market is also in the developmental stage, being relatively small compared to neighbouring countries such as Thailand, Vietnam and Myanmar. The number of legal professionals in Laos is also small. As Vientiane Law managing partner Aristotle David pointed out, “There are only about 188 lawyers in the whole of the country that are members of the Lao Bar Association, and most are not practicing law.” In addition, “the majority of Lao law graduates go straight into the government without giving any thought of practicing as a lawyer in the private sector,” said Kate Baillie, country manager of Arion Legal Laos.

OPPORTUNITIES

ZICO Law-affiliated Vientiane Law and Australia-headquartered Arion Legal are among the key law firms that operate in Laos. Baillie notes, however, that the legal industry is opening up. “As the Lao economy continues to expand, largely off the back of resource development and a burgeoning middle class, we have noticed an increase in the number of foreign and local law firms being established to meet local market needs.” Despite the limitations of the Lao market, most of the legal work focuses on natural resource development and infrastructure projects, according to Baillie. She also observes that as the country gears up for more visitors in connection with the ASEAN Plus 3 (APT) forum, transactions related to industries such as tourism, airline and hotel and mall development as well as the special economic zones, are on the rise.In addition, to meet the increasing demands of various businesses in Laos, “there is significant growth in the services industry, including financial services, accounting and insurance, IT, recruitment and human resources development,” shared Baillie.

MARKET GAPS

David says that while “international law firms [are] beginning to set a foothold in the country” as they anticipate growth in Laos and the rest of Southeast Asia, “the availability of local legal talent is very difficult in terms of securing an English-speaking lawyer, particularly [one] with legal experience.” Moreover, Baillie points out that because of problems with the Lao education system, firms have to make considerable investments in training local lawyers to meet international standards. However, after they get the training they need, “it can be difficult to hold onto such lawyers due to the highly competitive labour market for skilled Lao lawyers,” she said. As such, foreign attorneys and global law firms that have foreign language capabilities and legal experience in international matters such as foreign direct investment and project financing are filling this gap in the market. Many of the newer firms tap “fly-in fly-out foreign lawyers”, observes Baillie, while the more established firms “maintain permanent, on-the-ground teams of foreign and local lawyers,” giving them a competitive edge. However, foreign attorneys based in Laos are also in short supply, as “it can be difficult to find lawyers who are willing and able to relocate and stay in Laos for an extended period,” added Baillie. Another complication is how the “huge vagaries” of the Lao legal system and its inconsistent interpretation and implementation “can prove very frustrating for lawyers who are used to operating in more transparent and straightforward jurisdictions, which can lead to low retention rates of foreign lawyers,” she continued. In addition, some foreign firms are hampered by their inadequate grasp of how “Lao cultural and political forces shape the legal and business sectors,” said Baillie. She recounts how some firms have tried to enter the Lao legal market “by applying the same marketing strategy and firm structure that they use in their offices in Thailand, Vietnam or Cambodia.” But after six to 12 months, they fall apart because they fail to understand “the importance of forging and maintaining positive interpersonal relationships within the relatively small business community and government offices” and train their employees accordingly.

HOPES AND CHANGES

According to David, the Lao government is taking steps to remedy the aforementioned market gap, beginning with the recently approved amendments to the Law on Lawyers – the main legislation that governs legal practice in the country. He adds that the amendments include a provision aimed at regulating the registration of foreign lawyers as well as another requiring that Lao lawyers be able to speak a foreign language such as English. The latter is designed to help Lao lawyers develop their ability “to handle legal matters by foreign investors and to be competitive with other countries.” “There is a need to improve legal education by having courses which address international legal trends and issues and training legal interns on critical legal analysis and writing,” suggested David.  Baillie also cited how Lao legislators are currently revising the Investment Promotion Law “to improve market access for foreign investors” by lifting some barriers such as high capital requirements as well as the possible “introduction of transparent bidding and tender processes for large-scale concession projects.” Nothing is certain, however, until the National Assembly approves these changes as expected in December.

Source: http://www.legalbusinessonline.com/news/laos-market-report-gentle-awakening/73049[:]

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The Taxation Department of the Ministry of Finance is aiming to introduce new land and road tax rates to boost government revenue for next fiscal year.

According to the Taxation Department’s report for the first seven months of the 2015-2016 fiscal year they were yet to determine what the percentage increase would be for the numerous categories of land and road tax.

At present tax is collected for land and vehicles at many different rates depending on the type of land as well as vehicle.

However, all rates are set to go up to increase the country’s coffers for use in social, economic and infrastructure development.

The move comes after the Taxation Department showed overall revenue collection across the country decreased by 5.1 percent during the first seven months of 2015-2016 compared to the same period in 2014-2015.

The department is also working to increase efficiency in collecting revenue including the continued improvement of the land tax collection system.

The department is implementing technological improvements such as its Easy Tax System which allows firms and individuals to pay tax electronically through the banking system.

Authorities believed state revenue from land taxes through the electronic system would increase by 25-30 percent every year. Despite collections being down the Taxation Department is forecasting revenue across the country to reach its goal of 4,394 billion kip for the last five months of this fiscal year.

According to its recent report for the first seven months of the 2015-2016 fiscal year, tax collected in Vientiane reached 2,343 billion kip while the other provinces attained 2,051 billion kip.

The department was also predicting an improved tax base from 470 large business units amounting to around 500 billion kip.

The Tax Department will continue to collect 9.6 billion kip in tax from 2,658 stored vehicles as well as 140 kip per litre from fuel amounting to 15.1 billion kip for the final five months of the fiscal year.

Source: Vientiane Times

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[:en] Kate Baillie speaking at the Symposium about investment risk prevention and economic and trade dispute resolution in Lao PDR.

Kate Baillie, Country Manager of Arion Legal, was honoured to be asked to attend and speak at the Symposium on China – South Asia, Southeast Asia Commercial Legal Cooperation , which was part of the 11th China-South Asia Business Forum, held in Kunming, PR China from 11-14 June 2016. (more…)

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The Lao Government ‘slipped through’ a revised tax law recently (Amended Tax Law No. 70/NA, dated 15 December 2015), with the law set to take effect next week on 24 May 2016. But fear not: much of the revised law is similar to the law it replaces, the Tax Law (2011), with a few new inclusions, revisions and corrections.

That said, one glaring adjustment is the insertion of a new article on profit tax withholding for foreign entities deriving income from Laos. Under the soon-to-be-replaced Tax Law (2011), Lao payers had to refer to the old Tax Guidelines (2005) to obtain the rates required for calculating the profit tax withholding.

Below are some of the key changes the revised law will impose.

Profit Tax (Withholding)

As mentioned above, an entirely new article on profit tax withholding has been added (Article 33), which no doubt helps to clarify which withholding rates should apply to certain payments. Article 33 stipulates the ‘profit deeming’ ratio for each business activity, and expands the list of business activity categories beyond the current four – the new list of activities includes 12 separate profit deeming ratios, with services heavily segregated.

The result of this is that profit tax withholding on services provided by foreign entities may actually reduce under the revised tax law, depending on the service type – by up to 75% in some cases.

Income Tax

The key change under the income tax provisions appears to be non-salary income tax rates, with the noteworthy introduction of a new 2% tax rate on certain taxable income.

Under the Tax Law (2011), dividends and share-sale profits were included in the same line item under the income tax provisions and taxed at 10%. However, the revised tax law includes dividends and share-sale profits as separate line items and introduces two-tiered tax rates for the latter: a 10% tax rate will apply to the net profit of share sales that can be properly substantiated, whereas a 2% tax rate will apply to the gross amount of share sales where the net profit cannot be properly substantiated.

Likewise, the revised tax law introduces two-tiered tax rates for income from the sale/transfer of land and/or buildings (real property transactions): a 5% tax rate will apply to the net profit of real property transactions that can be properly substantiated, whereas a 2% tax rate will apply to the gross amount of real property transactions where the net profit cannot be properly substantiated.

Excise Tax

The key change under excise tax provisions appears to be the ‘tweaking’ of tax rates. The list of taxable items is too extensive to go into in this article, however, notably, we expect the cost of fuel, motor vehicles and motorcycles to change on the back of excise tax rate adjustments (fuel to increase, motorcycles to increase – motor vehicles will be mixed, depending on the motor vehicle type, as the classifications have also been revised).

For any motorcycle enthusiasts out there: the excise tax rate on 500cc+ models will be 80%, and that’s excluding any import duties and VAT applicable at the time of import (that new Harley-Davidson just got a little further out of reach, for now).

We are still working through our analysis of this revised tax law and will keep you updated on our progress.

The Amended Tax Law (2015) will come into force on 24 May 2016, 15 days after publication on the Official Gazette, in accordance with the Law on Making Legislation (2013).

Author: Daniel Harrison  CPA, Senior Tax Advisor

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The Taxation Department  reported recently that  tax payments across  the country had decreased  5.1 percent during the first  seven months of the 2015-16  fiscal year, in comparison to the  previous year. (more…)

[:en]Kasikornbank (Laos) aims to triple lending growth and open a new branch this year to cash in on strong economic prospects in neighbouring Laos.

The bank, a 90%-owned subsidiary of Kasikornbank (KBank), expects 2016 loans outstanding to grow by more than 250% to 1.5 billion baht, said Pattanapong Tansomboon, first senior vice-president.

“KBank will mainly focus on increased lending this year since the Laotian economy is continuing to expand,” he said. “Customers are seeking loans for business expansion and working capital, especially those firms involved in border trade. KBank aims to achieve 1.2 billion baht in deposits, 1.5 billion baht in total loans — up 250% — and 9 billion baht in trade transactions this year.”

Kasikornbank (Laos), a locally incorporated institution in Vientiane that has operated for one year, had 760 million baht in deposits and 8 billion baht in international trade transactions in 2015.

Large Thai banks are keen to expand into other countries in Asean, especially Cambodia, Laos, Myanmar and Vietnam, to serve local customers who are seeking a foothold in these countries where growth is higher than the global economy.

KBank, Thailand’s fourth-largest lender by assets, also has outposts in Jakarta, Phnom Penh, Hanoi, Ho Chi Minh City and Yangon.  Kasikornbank (Laos) plans to open a second branch soon on Lan Xang Avenue in Vientiane’s Chanthabouly district.

Moreover, the bank will reinforce its support for business customers through consulting advisory, business matching and lending services, especially for companies involved in international trade.

Trade growth between the two countries has been significant, with Thailand becoming Laos’ main trade partner. In 2015, trade between the two nations grew by 10.1% to 193.2 billion baht, of which 90% was border trade.

Source:  Bangkok Post

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The enormous drop in revenue generated from mining coupled with improper budget planning has been the main cause of the budget tensions Laos has faced over the past few years, Deputy Prime Minister Somdy Douangdy told parliament recently.

Mr Somdy, who is also Minister of Finance, addressed the National Assembly (NA)’s inaugural session recently, highlighting the main causes of the financial difficulties.

He said revenue generated from mining dropped two thirds from 1,600 billion kip earned annually during the early years of the five-year national socio-economic development plan (2011-2015) to just 518 billion kip in the 2014-2015 fiscal year. The drop in revenue was linked to the decrease of mineral prices on global markets.

Laos has encountered budget tensions since the 2012-2013 fiscal year triggered by several factors including the fall in revenue earned from mining.

Another factor was the fact that the budget plans drawn up were not based on actual budget capacity as proper analysis of essential financial information was not conducted, Mr Somdy said.

“Data used to draw up the budget plan was not fully accurate and scientific, which does not coincide with the national socio-economic development plan of each period,” he said.

Meanwhile, measures to generate income to compensate for revenue lost to implementing the Asean Free Trade Area was carried out slowly due to the slow promulgation of some legislation such as the draft presidential decree on natural resource leasing fees and the presidential decree on vehicle tax, he explained.

Although several new hydropower dams have become operational, Laos has to repay loans borrowed to build the dams, so the electricity sector has not generated sufficient revenue to the national budget.

Addressing parliament, Prime Minister Thongloun admitted that the state budget was far short of actual state investment, leading to larger budget deficits in recent years.

To overcome the budget tensions, he stressed that there is a need to improve state plans for revenue collection and expenditure given that in the past the budget plans were not realistic because they were based on forecast figures.

The PM stressed the need to take proper management of state investment projects, especially those prior private investment projects to ensure reasonable investment costs, citing experiences in the past years where the investment costs for many prior private projects were unreasonably high.

He promised that his administration will take action to address budget loopholes, especially tax loopholes to prevent money leakages. The PM stated that tax exemptions should be considered carefully as to which products should be exempt and which should not, noting that some people imported more than was allowed by the government under the exemption policy.

The PM said the government will exert every effort to improve state budgets and address loopholes that have arisen during the socio-economic development process.

Source: Vientiane Times  (4 May 2016)

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Arion Legal was heavily involved in assisting Havilah in negotiating and completing the deal for the development of the Portia gold mine in South Australia. The deal was recognised for its unique and innovative commercial and funding model which has allowed Havilah to proceed with the development and operation of the Portia gold mine in a tough economic climate for mining projects.

Media Release: 22 April 2016:
Havilah has been awarded the inaugural Ocean Partners Commercial Achievement Award recognising the success of its innovative funding model for the Portia Gold Mine.

Havilah Resources Limited (“Havilah” or “Company”) is pleased to announce that it received the inaugural Ocean Partners Commercial Achievement Award for the innovative funding model that enabled its Portia Gold Project to come to fruition. This award is an initiative of the South Australian Chamber of Mines and Energy (SACOME) and was announced at SACOME’s Annual Resources Industry Dinner. Further details can be found in SACOME’s media release available on the following link:
http://www.sacome.org.au/images/Final_Awards_Winners_announced.pdf

Commenting on the award, Havilah’s Managing Director, Dr Chris Giles said:
“SACOME is to be congratulated for this initiative. Things are tough in our industry and it is good that unique and special achievements are recognised.
“I would also like to acknowledge Minister Koutsantonis’ unwavering support and encouragement of mining in our State. He has taken some courageous initiatives and is continuously seeking ways to improve the regulatory framework for mining and we applaud that.
“Havilah’s small dedicated management team and legal counsel, Mark Stewart of Arion Legal, are thanked for their hard work in implementing the mining agreement and funding arrangements.

“Particular thanks is also due to Steve Radford, the owner and Managing Director of our mining partner, Consolidated Mining and Civil, who was prepared to back our venture. His execution of the mining operations has been outstanding. He has spared no effort in helping to make the project a success and we sincerely thank him and his team” said Dr Giles.

Steve Radford, Owner and Managing Director of Consolidated Mining and Civil (left) with Chris Giles Managing Director of Havilah Resources holding the Ocean Partners Commercial Achievement Award.