BusinessInvestmentsLao Economy

New Investment Law Offers Incentives

Source: Vientiane Times

A newly-amended Investment Promotion Law has recently been promulgated, offering a variety of incentives to attract investment in both promoted sectors and hardship areas.

Businesses investing and operating in hardship communities (known as Area I),where infrastructure has not yet been developed, will enjoy favourable profit tax exemptions over 10 years according to the amended law, which was passed by the National Assembly in November last year.

President Bounnhang Vorachit later issued a presidential decree promulgating the law.

Those investing in promoted sectors whose businesses are located in hardship areas will now enjoy an additional five-year exemption of profit taxes bringing the total up to a 15-year exemption of profit tax.

Promoted sectors include clean and organic agriculture, crop seed production, livestock breeding, environmentally-friendly agri-product processing, handicrafts, education, human resource development, labour training, educational equipment production, modern hospitals, pharmaceutical factories, medical equipment manufacturing, and herbal treatment and production.

The law also offers incentives to promote investment into areas where infrastructure and facilities are developed and are favourable (known as Area II). Investment in these areas will enjoy profit tax exemption for four years while investment in the promoted sectors will enjoy an additional three years bringing the total incentive to seven years of exemption from profit taxes.

An official from the Ministry of Planning and Investment involved in the drafting of the amended law told Vientiane Times yesterday that, overall, the law provides more incentives compared to previous laws and should attract more investment.

“Particularly greater incentives are given to businesses investing and operating in hardship areas in order to bring more investment into rural communities to minimise the development gaps between towns and rural areas,” the official said.

However, investment in special and specific economic zones is regulated and managed in line with particular regulations including incentive policies. Investment in the form of concession projects is regulated in accordance with the relevant laws or concession agreements.

In addition to the profit tax incentive, the government also offers tariff, value-added tax and land lease or concession fee incentives.

Businesses investing in hardship areas will also enjoy fee exemptions on land leases or concessions for 10 years. Businesses investing in promoted sectors whose operations are located in hardship areas will again enjoy an additional five-year exemption, bringing the total to a 15-year fee exemption for land leases or concessions.

Businesses operating in Area II will enjoy exemptions on land leases and concessions for five years. Those investing in the promoted sectors whose businesses are located in hardship areas will enjoy an additional three-year exemption, bringing the total to an eight-year fee exemption for land leases and concessions.

Additionally, businesses importing vehicles and machinery as well as equipment that cannot be sourced in Laos for use in the businesses’ operations and are used directly in the production process, can enjoy import tariff and value-added tax exemptions under the amended law.

However, the import of vehicles for administration use as well as the import of oil, gas and lubricants shall be regulated and managed by the relevant laws and regulations.

Businesses importing raw materials, equipment an d spare parts for the production of goods to be exported will also enjoy import tariff exemptions. In this regard, export tariffs and value-added tax will also be exempted from the finished products to be exported.

Those businesses using non-natural resource raw materials sourced locally to produce finished and partially-finished goods for export will also enjoy value-added tax exemptions, according to the amended law.