[:en]The Lao People’s Democratic Republic’s (“Lao PDR”) amended Law on Investment Promotion (the “Law”) recently came into force on 19 April 2017. The Law sets out some new and amended articles regarding promoted business sectors and investment incentives, forms and types of investment, and investment management mechanisms that aim to better facilitate company incorporation and improve investment throughout the country.
The Ministry of Industry and Commerce (“MOIC”) recently released a Notification (No. 2633/MOIC dated 7 November 2017) (the “Notification”) regarding the abolishment of the minimum registered capital requirement for foreign investors in general business companies. This follows the enactment of the amended Law, which omitted the minimum capital requirement for general business companies.
While no implementing guidelines have been released, we understand that foreign-owned general business companies will no longer be required to meet the current standard minimum registered capital requirement of one billion kip. Instead, companies will be required to meet a certain minimum registered capital threshold nominated by the MOIC having regard to consideration of the individual proposed Lao-registered entity.
Current industry-specific minimum registered capital requirements that are set out in specific laws and regulations are not affected by the Notification.
We have yet to see how the above will be implemented by authorities and will provide further detail as it becomes available.
Investment incentives under the Law (the “Incentives”) with respect to exemptions on profit tax (3-15 years) and rent/concession fee exemptions (5-15 years) will be offered to investors based on whether they invest in a promoted business sector and the economic status of the zone in which they invest as determined by the government of Lao PDR from time-to-time. Besides the Incentives, investors also enjoy import tariff and value-added tax exemptions in cases in which they:
Existing companies that meet the eligibility requirements and are not already receiving the Incentives under the Law may apply for them. While the deadline for the application to receive the Incentives lapsed on 17 August 2017, we have been informed that the One-Stop Service Office (the “OSSO”) of the Ministry of Planning and Investment will still receive and consider such applications on a case-by-case basis.
Companies wishing to claim the Incentives must fulfil the following requirements and conduct commercial operations in accordance with at least one of the listed activities set out below:
While a detailed list of commercial activities which, if conducted, will deem a company eligible to receive promotional incentives has yet to be released by the government, companies conducting the following activities will be eligible to claim the Incentives:
Investors can choose any of the following investment forms as set forth under the Law, subject to any additional requirements:
Restrictions for foreign investors (minimum registered capital, minimum shareholding requirements, corporate governance, etc.) to any of the above forms of investment are specified under respective relevant laws and regulations and will depend on the commercial activities a company intends to undertake.
The Law provides that businesses can invest in two types of activities:
General investment activities
General investment activities are divided into two categories in the Law: ‘activities in the negative list’ and ‘activities outside the negative list.’
The authorities under the Ministry of Planning and Investment manage the activities in the negative list, while the authorities under the MOIC administer the activities outside the negative list. For activities outside the negative list which fall in the promoted business sectors discussed above, investors can apply for the Incentives with the OSSO after the successful registration of their Lao entity.
The registered capital for general investment activities is based on the business activities of the relevant company, with at least 30% of the total registered capital needing to be paid up-front within 90 days of the date of issue of the investment licence. The remaining balance must be paid within 1 year or a period otherwise set out in specific regulations enacted by the authorities governing the proposed activities of the relevant company. The capital contribution can be made in cash and in-kind and requires a certification of the capital importation from the Bank of Lao PDR for all capital brought in from outside of Lao PDR.
The investment term for general business activities is unlimited unless otherwise stated in the relevant industry-specific regulations.
Concession investment activities
Concession investments comprise of the following main activities:
For concession investment activities, the minimum registered capital must be at least 30% of the total capital. The minimum paid up registered capital is based on the investment value in which 1% to 3% of the registered capital must be paid within 90 days of the date of issue of a company’s investment licence with the remaining balance paid within 2 years. The registered capital shall be made up of assets the value of which shall not be less than the registered capital during the entire period of business operation.
The investment term for a concession project varies depending on the type, scale, value, conditions and feasibility studies of the project with a maximum possible term of 50 years. The government, the National Assembly or the Provincial People’s Assembly may allow investors to apply for an extension of their concession investment term on a case-by-case basis.
If you would like more information about the Investment Promotion Law or investing in Lao PDR please contact the Arion Legal team at firstname.lastname@example.org to find out how we can help.
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