The deadline for existing companies to opt-in for the investment incentives available under the new Investment Promotion Law (No. 14/NA, 17 November 2016 (the “Investment Promotion Law”) is fast approaching. Existing companies that intend to opt-in should ensure that their application has been submitted to the One-Stop Service Office (“OSSO”) of the Ministry of Planning and Investment by Thursday, 17 August 2017.
Are existing companies eligible to “opt In”?
YES. The Investment Promotion Law provides significant incentives to newly established companies in the Lao PDR (the “Incentives”). However existing companies may “opt-in” to the new incentive structure, by applying to the OSSO for an Investment Promotion Incentive Certificate (the “Incentive Certificate”). The Incentive Certificate will set out the investment incentives to which the company is entitled. However, not all existing companies are eligible for the Incentives.
Who is eligible?
All sole limited and limited companies may elect to opt in by obtaining an Incentive Certificate, if they satisfy one of the following:
- Have a total investment value (not yet defined) of at least 1.2 Billion Kip;
- Utilize 30 or more Lao national technical staff; OR
- Hire more than 50 Lao nationals (for contracts of at least 1 year)
Investors that do not meet the requirements for Incentives should be aware that certain administrative aspects of the new Investment Promotion Law, such as those pertaining to changes in corporate documentation, will apply to them regardless.
What are some of the benefits?
- Profit Tax Exemption: From three to fifteen years, based on the business sector and the zone in which the company is registered;
- VAT Exemption: Applies to importation of materials or equipment unable to be supplied or produced in the Lao PDR to form vehicles, machinery, or fixed property; the importation of materials or equipment, including parts, used for manufacturing; and domestic raw materials (excluding natural resources) used to manufacture finished or semi-finished products for export; and
- Rent/Concession Fee Exemption: Applies for five to fifteen years based on the business sector and the zone in which the company is registered.
The Profit Tax Exemption runs from the date of “first business revenue”, while the Rent/Concession Fee Exemption runs from the date of the underlying land lease or concession agreement. The VAT Exemption applies to all investors, for the duration of their investment.
Companies that do not opt in retain their existing incentives, while companies that opt-in will lose any incentives to which the company is entitled under the previous Law on Investment Promotion (№ 02/NA, 8 July 2009). investors should carefully consider the extent to which they are eligible for incentives before deciding to opt in.
What do you need to do?
For companies which think that they may be eligible for Incentives under the Investment Promotion Law the deadline for opting in is 17 August 2017.
If you are not sure if your company is eligible or what Incentives you may qualify for, or if you would like further information on how to opt in for the Incentives, please feel free to contact us.
Managing Director, DFDL Lao PDR; Head of Regional Mining Division
Senior Legal Adviser