22 Apr, 2024

Lao Government to Raise Value-Added Tax Rate to 10%

The Lao government has announced plans to raise the value-added tax (VAT) rate from 7 percent to 10 percent as part of efforts to enhance state budget revenue and support economic and social development in the country.However, the decree issued on March 19 lacks specific details regarding the implementation date of the proposed increase, pending approval from various sectors of the Lao government.“The decree is currently awaiting a record letter from the Lao National Assembly. Following this, the Department of Taxation will also seek a letter of record from the Ministry of Justice,” a government source says. “The decree will come into effect 15 days after these approvals are obtained.”Under the revised plan, the VAT rate of 10 percent will be applicable to a range of transactions, including imports, goods, general services, mineral imports, and supply, as well as electricity usage.The adjustment would restore the VAT rate to its original level, which was in place from 2010 to 2021. The reduction in VAT rate, initiated from 1 January, 2022, was part of the Lao government’s efforts to stimulate economic recovery following the COVID-19 pandemic.With the expected increase in VAT, local residents are currently concerned about the potential rise in the prices of goods and services. This worry is compounded by the increasing inflation rate, raising concerns about affordability.“The cost of everything is increasing, including essential goods, water, and VAT, while salaries remain unchanged,” one social media user wrote, expressing concern about whether their family will be able to afford housing amidst these financial challenges.Regarding salary adjustments, it’s reported that many companies in Vientiane are yet to raise their minimum wages, despite the government’s approved increase in 2023. Only 10 percent of companies in the capital city have complied with the mandated wage guidelines.

17 Apr, 2024

Navigating Lao E-Commerce: Understanding the Latest Tax Regulations

In February 2024, the Ministry of Finance of Laos issued regulation number 0558/MOF which sets out the latest guidance regarding tax obligations for e-commerce and digital platform providers.Under the latest guidance, non-resident suppliers of digital goods and services, e-commerce providers, and digital platform providers must register and pay for VAT through the DTax System. The new rules will apply to transactions from August 1, 2024, and also apply to foreign e-commerce providers who are not residents or registered enterprises in Laos but earn income from the country.E-invoices can be paid in USD, EUR, and CNY currencies.  Imposing tax on the provision of digital servicesDigital service providers will be charged a 10 percent VAT rate. This includes the following transactions:Online games and online advertising services;Mobile applications;Software programs;Digital music, photos, videos, and games; andElectronic database management such as websites, and web hosting, among others.If the digital goods and services are provided through a digital platform, then that digital platform is responsible for collecting VAT on these goods and services. Further, the new regime covers services made to both B2B sales and B2C sales located in Laos.Categorizing digital platform operationsA taxpayer will be recognized as an electronic digital platform operator if they undertake in one of the following activities:Those that directly or indirectly dictate the terms and conditions for digital goods and services;Those who are directly or indirectly involved in the payment processing activities for digital services;Those who are directly or indirectly involved in activities related to the delivery of digital services; andThose that provide support services to customers of digital services.VAT filingVAT filings must be submitted via an online LTD portal and are done three times per year.1st filing – reporting period between January to April and to be filed by May 31;2nd filing – reporting period between May to August and to be filed by September 30; and3rd filing – reporting period between September to December and to be filed by January 31 of the following year.As previously mentioned, VAT payments can be made in USD, EUR, and CNY, or other currencies approved by the Laos tax department.Penalties for non-complianceThe Laos tax department can apply the following fines and penalties:A penalty of US$800 for late VAT filing per quarter;Interest payment of 0.1 percent per day for outstanding VAT payments;30 percent of the VAT payable for the first demand of payment, 60 percent of the VAT payable for the second demand of payment, and 100 percent of the VAT payable for the third demand of payment by the Laos tax department.The Laos tax authorities can also propose to suspend or terminate the digital service provider for non-compliance.