This law aims to define the principles, procedures, and measures of income tax. The definition has a purpose to control and collect income tax in order to be transparency, fair and contributed in developing and strengthening socio-economics, and linked all around the nation and internationals. The purpose encourages individuals in paying their income taxes efficiently and effectively.
Income tax is an obligation which requires to pay and is collected from individuals, legal entities or organization that have income such as an enterprise income tax and an individual income tax.
Enterprise Income Tax is collected from the net profit of an enterprise and the income of a micro-enterprise which is operating domestically or internationally. The Enterprise income tax is divided into two categories: profit tax and enterprise income tax.
Profit Tax is basic taxable income rules: for business owners who meet accounting standards for financing, the report is taxable profit, which calculates the difference between annual business income minus the annual expenditure which is allowed to be taxable. Accounting profit plus items that are not allowed to be taxable as defined in Article 18 of this Law. For business owners with incorrect or incomplete accounts and those without a business establishment in the Lao PDR is compulsory profit, which is the annual business income multiplied by the compulsory gross profit ratio and is calculated as follows:
(1) Seven percent for agricultural and craft productions.
(2) Ten percent for industrial productions and other processing industries.
(3) Fifteen percent for commerce and services.
Micro-enterprise income tax is a tax collected on the conduct of a micro-enterprise, which is subject to income tax at the rate set in the Article 29 of this Law. For individuals with annual income from 50.000.001 Kip to 400,000,000 Kip, perform the tax rate as follows:
(1) The rate of 1% (one percent) for agricultural, industrial and other production.
(2) 2% (two percent) rate for trades.
(3) 3% (three percent) rate for services.
Individual income tax is a tax collected by individuals and organizations that are operating in non-profit organisations in Lao PDR or abroad as defined in Article 34 and Article 46 of this law. There are two types of individual income taxes: individual income tax for a resident and individual income tax for a non-resident.
Individual income taxes for residents are permanent residents, living, earning a living or doing business in the Lao PDR.
Individual income tax for non-residents who come to earning income or do business in Lao PDR but do not live and do not have permanent residency.