Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. With more than two decades of on-the-ground experience and a large team of lawyers, tax experts and auditors, in addition to researchers and business analysts, we are your partner for growth in Asia.
Modern-day Laos has its roots in the ancient Lao kingdom of Lan Xang, established in the 14th century. For 300 years Lan Xang had influence reaching into present-day Cambodia and Thailand, as well as over all of what is now Laos. After centuries of gradual decline, Laos came under the domination of Siam (Thailand) from the late 18th century until the late 19th century when it became part of French Indochina.
The Franco-Siamese Treaty of 1907 defined the current Lao border with Thailand. In 1975, the communist Pathet Lao took control of the government ending a six-century-old monarchy and instituting a strict socialist regime closely aligned to Vietnam. A gradual, limited return to private enterprise and the liberalization of foreign investment laws began in 1988. Laos became a member of ASEAN in 1997 and the WTO in 2013
Laos is one of the few remaining communist states in the world and implemented economic reforms in 2005 to liberalize its domestic markets. The economy is heavily dependent on capital intensive natural resource exports and the labor force still relies on agriculture, dominated by rice cultivation in lowland areas, which accounts for about 25 percent of GDP and 73 percent of total employment. The country has benefited from high-profile foreign direct investment in hydropower, copper and gold mining, logging, and construction, although some projects have drawn criticism for their environmental impact.
Laos is in the process of implementing a value-added tax system. Simplified investment procedures and expanded bank credits for small farmers and small entrepreneurs will improve Laos’ economic prospects. The government appears committed to raising the country’s profile among investors, and the World Bank has declared that Laos’ goal of graduating from the UN Development Program’s list of least-developed countries by 2020 is achievable. The country is also preparing to enter the ASEAN Economic Community in 2015. Laos is still considered one of the most difficult places in the world to start a business, especially for foreign investors. According to the World Bank, the minimum time required to start a business in Laos is 92 days.
The Laotian government has agreed to set up 41 special economic zones, 25 of which will be launched over the next 10 years. Of these, six are currently under development. In Savannakhet Province, the Savan-Xeno SEZ will accommodate a commercial center, service areas, and processing plants. The zone is about two kilometers away from the Second Friendship Bridge with Thailand and will offer investors many incentives, including a 10-year tax holiday starting from the initial profit year.
In general all foreigners will need to obtain a visa in order to enter Laos. Thirty-day tourist visas can be obtained on arrival at all airports and most border crossings. However, certain nationalities may need to obtain their visa from a Lao consulate or embassy. In addition, nationals of the following countries are exempted from visa requirements for social, business, or professional visits for certain periods:
Visas are required for nationals of these countries if they intend to stay longer than the above-specified period.
If a foreigner wishes to work in Laos, they must obtain a business visa (B2 Visa), as well as a work permit and residence card. Foreign employees can only make up 10 percent of a company’s unskilled labor and 20 percent of its skilled labor. A B2 Visa can be issued to the following persons:
Obtaining the B2 Visa can be a long process, and involves the following steps:
According to Article 8 of the Investment Promotion Law, there are three types of investment vehicles that foreign investors can choose from, these are as follows:
There are three types of businesses available to foreign investors in Laos. Investors will have to obtain their business license from one of three government agencies depending on the type of business they wish to engage in. The categories are as follows:
You can find extensive collection of Laos’ tax treaties from our Knowledge Sharing Platform.