Lao Government to Raise Value-Added Tax Rate to 10 Percent

Patuxay Monument

The Lao government has announced plans to raise the value-added tax (VAT) rate from 7 percent to 10 percent as part of efforts to enhance state budget revenue and support economic and social development in the country.

However, the decree issued on March 19 lacks specific details regarding the implementation date of the proposed increase, pending approval from various sectors of the Lao government.

“The decree is currently awaiting a record letter from the Lao National Assembly. Following this, the Department of Taxation will also seek a letter of record from the Ministry of Justice,” a government source says. “The decree will come into effect 15 days after these approvals are obtained.”

Under the revised plan, the VAT rate of 10 percent will be applicable to a range of transactions, including imports, goods, general services, mineral imports, and supply, as well as electricity usage.

The adjustment would restore the VAT rate to its original level, which was in place from 2010 to 2021. The reduction in VAT rate, initiated from 1 January, 2022, was part of the Lao government’s efforts to stimulate economic recovery following the COVID-19 pandemic.

With the expected increase in VAT, local residents are currently concerned about the potential rise in the prices of goods and services. This worry is compounded by the increasing inflation rate, raising concerns about affordability.

“The cost of everything is increasing, including essential goods, water, and VAT, while salaries remain unchanged,” one social media user wrote, expressing concern about whether their family will be able to afford housing amidst these financial challenges.

Regarding salary adjustments, it’s reported that many companies in Vientiane are yet to raise their minimum wages, despite the government’s approved increase in 2023. Only 10 percent of companies in the capital city have complied with the mandated wage guidelines.