A new taxation law outlining equal tax rates for domestic and foreign businesses is now undergoing reviews and is expected to be implemented by the end of next year.
More than 100 people from tax offices in Vientiane and the provinces, businesses and some international organisations attended a seminar in the capital yesterday to contribute their ideas to the draft law.
The seminar was presided over by Vice Minister of Finance Dr Viengthong Siphandone and Director General of the Tax Department Ms Manivone Insixiengmay.
The current tax law has been in place for more than six years. Dr Viengthong said “The tax system needs to be improved in line with the growth of the Lao economy and to match government policy.”
Dr Viengthong said there are seven key changes in the draft law, including the replacement of turnover tax with a 10 percent value added tax, and adjustments to the consumption tax rate for some goods. Additionally, under the proposed law businesses with annual revenue of less than 400 million kip will be exempt from value added tax and will instead pay taxes through the contract tax system, under which rates are based on business catalogues.
Other changes in the draft law include a 28 percent profit tax rate for both Lao and foreign businesses, replacing the former rates of 35 percent for domestic companies and 20 percent for foreign ones, cancellation of the lowest level tax rate and improved management structures at all tax offices.
Income tax rates for Lao and foreign businesses will also change, with foreigners paying a flat 10 percent and Lao people subject to a multi-tier system based on income levels and starting from 1,000,000 kip.
The adjustments aim to promote greater production of goods and services in Laos, facilitate regional and global integration, provide for equality between Lao and foreign businesses and also domestically produced and imported goods, facilitate tax collection and improve the overall organisation of the taxation system.
“The improved tax law will encourage business and economic growth in the country and also complies with regional and global standards under the Asean Free Trade Area, World Trade Organisation and other trade agreements,” said Dr Viengthong.
Similar seminars have already been conducted three times to provide opportunities for relevant parties to provide comments and contribute to the draft law.
Ms Manivone said that after the consultation process the draft law will be presented to the government meeting in June.
“It might take some time for the law to come into effect. I estimate that the draft law could be approved and implemented by the end of 2012 at the latest,” she said.
“However, on March 1 this year, the National Assembly adopted legislation No. 01 regarding the urgent need for tax rate adjustments. The legislation covers some proposed issues mentioned in the draft law.”
“That legislation will come into effect at the start of the next fiscal year (October 1, 2011),” added Ms Manivone.
The nation's first tax law was passed in 1995, before being amended in 2005. A review of the taxation system was carried out in 2009, the findings of which resulted in the current draft law.