How to open a company in Laos as a foreigner

Laos is a Southeast Asian country that offers a wide range of opportunities for foreign investors looking to set up business here. It is one of the fastest growing economies in Southeast Asia, with a GDP growth rate of 7% over the past two decades.

Benefits of Starting a Business in Laos

• Laos derives much of its income from natural resources such as copper, gold, and silver. The abundance of natural resources and the government’s active promotion of foreign direct investment in this area have made the country a desirable destination for businesses looking to establish a company in the energy and mining industries.
• Laos’ strategic location and proximity to other important Asian countries has given it a foothold in a market of over 1.5 billion people. The country is close to Vietnam, Thailand, China, and Cambodia, making it easy for companies to access important neighboring markets. Infrastructure investment will pass through Laos on its way from Kunming, China to Southeast Asian countries, increasing opportunities for expatriates looking to participate in the Lao economy.
• Labor is inexpensive in Laos. This means that investors can expect significant reductions in labor costs compared to neighboring countries and most other ASEAN countries.
• The Lao government has established 10 special economic zones that provide investors with a number of financial incentives. Some of the benefits include tax breaks granted to international investors who would otherwise be required to pay taxes of 20% or 1% of turnover, whichever is higher. Another incentive is a 20% reduction in tax rates.
• Another benefit is that Laos has tax deductions on imports if specially listed goods fall within a special quota, thanks to the European Union and Japan granting the country these trading rights. For investors, this means that goods from Laos can enter world markets that are tax-free or have significantly lower tariffs.
• Laos — a relatively unexplored market for multinational corporations, which is a big advantage for foreign companies to do business in Laos. There is little competition from large multinational corporations.

Tax Laws

Personal Tax

In Laos, all business owners and independent contractors are responsible for personal income tax on their business income earned in the country. Both Lao and foreign nationals who receive income in Laos in the form of wages, benefits in kind and other remuneration are subject to personal income tax.

Expatriates working in Laos and receiving wages here continue to pay personal income tax regardless of the period of their employment and stay in Laos.

The annual income tax rates applicable to both Lao and foreign nationals are:

• Income from 0 to 3,600,000 Lao kip is subject to withholding tax of 0% of the annual income;
• Income from 3,600,001 to 8,000,000 Lao kip is subject to withholding tax of 5% of the annual income. income;
• Income from 8,000,001 to 15,000,000 Lao kip is taxed at 10% of annual income;
• Income from 15,000,001 to 25,000,000 Lao kip is taxed at 15% of annual income;
• Income from 25,000,001 to 40,000,000 Lao kip is taxed at 20% of annual income;
• Income from 40,000,001 Lao kip and above is taxed at 24% of annual income.

Income Tax (NP)

In Laos, a 24% corporate income tax rate applies to local enterprises and foreign legal entities, except those listed on the securities market and those that enjoy a 5% discount on normal rates for four years from the listing date. During this period, the normal provisions specified in this law shall apply.

The recommended rate of 26% shall apply to legal entities manufacturing, importing and distributing tobacco products, of which 2% shall be allocated to the Tobacco Control Fund (this is provided for in Article 46 of the Law on Tobacco Control in the Region).

Requirements for Starting a Business in Laos

Visa. Check if you are eligible to apply for a work/business visa to start a business in Laos.

Company Name Registration. Companies must apply for company name registration and an Enterprise Registration Certificate (ERC). You must submit your application to the Enterprise Registration Office (ERC).

Directors/Officers. You must appoint directors/officers to set up a business in Laos. The required number of directors for LLC, branch and representative office is 1, while PLC requires at least 3 directors.

Authorized Capital.The authorized capital in Laos varies depending on the type of business structure you want to register. LLC and PLC require only US$1 in authorized capital, while a branch office requires nothing. However, if you plan to set up a representative office of your business in Laos, you will need a minimum authorized capital of US$50,000.

Shareholders. If you plan to open an LLC, branch office, or representative office in Laos, then you will need to appoint at least 1 shareholder before setting up your business in Laos. However, in the case of a PLC, you will need at least 7 shareholders.

Tax Registration Certificate. Companies planning to expand their business in Laos will need a tax registration certificate before starting operations. However, if you are planning to open a representative office in Laos, you do not need one.

Types of Companies in Laos

Representative Office

Representative offices usually act as entities to gather market information or conduct research before investors engage in larger investments and income-generating entities. Essentially, this structure is limited in the types of activities they can engage in worldwide and is prohibited from conducting business or earning income.

Limited Liability Company

This type of organization is usually preferred by investors, especially foreign investors, but a limited liability company must have at least 2 shareholders and 1 director. As the name suggests, the shareholders' liability is limited to the capital they have invested. However, there are many restrictions for foreign companies that reduce their share capital quickly enough with a partner, so they choose the limited liability company structure, since their liability is clearly limited.

Single Limited Liability Company

Single Limited Liability Companies follow the same rules as Limited Liability Companies, but the main difference is that the share capital structure includes only 1 shareholder. In addition, if a regular Limited Liability Company has 1 shareholder in its business, then it must change its legal structure to a Single Limited Liability Company.

Public Limited Liability Company

A minimum capital investment of US$125,000 is required to establish a Public Limited Liability Company. In addition, to establish a public limited company, at least 7 shareholders, 3 company directors and 1 legal representative are required.

Whole Foreign Owned Company

Many businesses that typically export goods from Laos establish this type of business structure. It provides 100% ownership to a foreigner.

Branch

Companies such as banking institutions, financial services, resorts, airlines usually open branches, but the parent company makes decisions about the branch’s operations.

Company Registration Process

Step 1: Research the minimum authorized capital, foreign equity participation, and operating license requirements that may apply to your sector.

Lao law limits foreign equity participation and sets minimum authorized capital for certain economic activities in which foreign investors participate.

Step 2: Prepare the necessary documents.

To support your proposal to establish a company, you must prepare the following documents for submission to the Ministry of Industry and Trade (MOIC):

• Articles of Association
• Memorandum of Association
• Summary of Directors and Legal Representatives
• Board of Directors Resolution authorizing the establishment of the proposed company and appointing the Managing Director and representative(s) of the investor of the prospective enterprise

Step 3:Application for a Certificate of Incorporation of the Company.

According to the Companies Act (2015), the firm must submit the company documents, online application form and the required fee to the Office of the Registrar of Companies as soon as they are ready.

The application form requests information about the company, its management, representative office, central place of business, shareholders, shareholding arrangements and members.

Step 4: Obtaining an Operating License.

All types of commercial activities in the Lao PDR The Republic must be registered as a legal entity.

The Registrar of Businesses initiates a letter of recommendation recommending the business to cooperate with relevant sectors to obtain a business license.

Step 5: Tax Registration.

Newly established companies in Laos will no longer need to submit separate applications to register with the country's tax authorities and to obtain a 12-digit Tax Identification Number (TIN).

This action is in response to the recent decision to remove the need to provide a TIN as a requirement for business registration. Businesses will receive a TIN instantly upon issuance of the Business Registration Certificate, greatly simplifying the ERC procedure.

Individual buyers simply need to register for an ERC through the One-Stop Investment Service, which will be integrated with the Tax Revenue Information System under the updated regulations (TaxRIS).

Step 6: Opening a bank account and issuing a Capital Import Certificate.

The company must apply for a Capital Import Certificate to the Bank of Lao (BOL) within 30 days of issuing the ERC.

Within 90 days of issuing the ERC, the company must import 30% of its registered capital and the remaining amount — within 12 months from the date of issue of the ERC.

The company must open an account with a bank in the Lao People's Democratic Republic before the Capital Import Certificate can be issued.