Decision No. 1005/MOIC on Wholesale and Retail Businesses issued on 25 May 2015 and its additional instructions (No. 0515/MOIC.DTD, 17 June 2015) have just come into force which now allow foreign individuals and legal entities to operate wholesale and retail businesses in the Lao PDR.
This Decision marks a major reform and significant liberalization of the wholesale and retail sector which has hitherto been strictly reserved for Lao citizens.
These regulations stipulate several conditions and require a minimum capital threshold for foreign investors as follows:
- The operation of wholesale and retail businesses must be in accordance with the Decision on Shopping Centers and Supermarkets. Note this Decision has not yet been promulgated;
- The location of the business premises is subject to regulatory approval. It is not clear whether this applies to both wholesale and retail or only retail outlets;
- The registered capital of the enterprise must be at least LAK 4 billion (around USD 490,130), however local equity participation requirements also apply;
- A 100% foreign shareholding requires registered capital of at least LAK 20 billion (around USD 2,453,200) or higher;
- A joint venture with local and foreign shareholders wherein the foreign shareholding is no more than 70% requires registered capital of less than LAK 20 billion, but at least LAK 10 billion (around USD 1,325,320);
- A joint venture with local and foreign shareholders wherein the foreign shareholding is no more than 50% requires registered capital of less than LAK 10 billion but at least LAK 4 billion; and
- A joint venture where the foreign shareholder holds a minority of shares must have a registered capital of at least LAK 4 billion.
Further, the Decision provides that enterprises wholly owned by foreign investors or as a joint venture with Lao investors who registered wholesale and retail businesses prior to the promulgation of this Decision may continue their business operations. However their operations must be restructured so that they are consistent with the new requirements within the following timeframes:
- 3 years within which to inject registered capital of LAK 20 billion;
- 2 years within which to inject registered capital of less than LAK 20 billion, but not below LAK 10 billion;
- 1 year within which to inject registered capital of less than LAK 10 billion, but not below LAK 4 billion.
Managing Director, Lao PDR
* The information contained in this legal update is provided for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.