31.5 C
Vientiane
Wednesday, June 25, 2025
spot_img

Laos Proposes Tax Relief for Small Businesses Under Revised Income Tax Law

This Week

On 24 June, Laos proposed amending the Income Tax Law to exempt unprofitable small businesses from taxes, aiming to ease their burden and improve tax efficiency, Finance Minister Santiphab Phomvihane said.

Under the new system, micro-enterprises would be allowed to deduct operational expenses before calculating their tax obligations, shifting away from the current income-based model.

Although this shift is expected to reduce income tax revenue from micro-enterprises by 65 to 75 percent, the Ministry of Finance believes the shortfall can be partly offset by collecting Value Added Tax (VAT).

Santiphab also highlighted that the amendments would encourage proper accounting practices and improve financial transparency.

He explained that by keeping accurate financial records, small businesses enhance their chances of obtaining loans from commercial banks and financial institutions. Access to such financing, he noted, is crucial for supporting business expansion and creating new jobs.

The new profit-based tax system forms part of a broader overhaul of the income tax law. The revised legislation also seeks to increase tax revenue from multinational companies and bring Laos into closer alignment with international tax standards.

One significant change requires multinational corporations that meet criteria set by the Organisation for Economic Co-operation and Development (OECD) to pay a minimum profit tax rate of 15 percent.

To further encourage investment, the amended law offers reduced profit tax rates for companies listed on the stock exchange.

These firms will benefit from a 10 percent tax rate for the first 10 years after registration, an improvement from the previous system where listed companies paid 13 percent tax for four years before reverting to the standard 20 percent rate.

The revisions also broaden taxable income categories to include carbon credit sales, income from agricultural products, authorised forest product sales, and other new income sources.

Once enacted, the revised Income Tax Law is expected to become a vital legal tool for managing national revenue, ensuring that income from all eligible sources contributes fairly to the state budget.

Latest article