Business rules and regulations for investment in Vietnam, Cambodia, Myanmar, and Lao PRD

เอกสารประกอบการสัมมนาระเบียบการลงทุน
ในประเทศเวียดนาม กัมพูชา เมียนมา และลาว
วันที่ 20 มิถุนายน 2561
ณ สํานักงานอีวาย ชั้น 34

SEMINAR
“Business rules and regulations for investment
in Vietnam, Cambodia, Myanmar and Lao PRD”
Wednesday 20 June 2018 (09.00-15.30)
EY Thailand office, 34th floor, Room 3403
09.00 – 09.30 hrs. Registration
09:30 – 10.30 hrs. Business related rules and regulations in Vietnam
by Ms. Huong Nguyen
Director of Ernst & Young (Vietnam) Ltd.
 Foreign investment highlights
 Tax/regulation updates
 Tax incentives for foreign investment
Q&A/Panel discussion

10:45 – 11.45 hrs. Business related rules and regulations in Cambodia
By Mr. Brendan James Lalor
Director of Ernst & Young (Cambodia) Ltd.


11.45 – 13.00 hrs. Lunch Break

13:15 – 14.15 hrs. Business related rules and regulations in Myanmar
By Ms. Thu Zar Win
Manager of EY UTW Advisory Ltd.

14:30 – 15.30 hrs. Business related rules and regulations in Lao PDR
By Mr. Quoc Bao Luu
Manager of Ernst & Young Lao Co., Ltd


Vietnam
Investment incentives & key updates
2018
20 June 2018
Page 2 Vietnam Investment incentives & key updates 2018
Agenda
► Foreign investment highlights
► Tax updates
► Available tax incentives
► Generalized System of Preferences in Vietnam
► Q&A

Vietnam Investment incentives & key updates 2018
Foreign Investment
Highlights
Common types of entity
Direct Investment
100% foreign owned/wholly foreign
owned
Joint venture
Business Cooperation Contract
(BCC); Build- Transfer- Operate
(BTO); Build – Operate- Transfer
(BOT); Build- Transfer (BT)
Purchase shares or to contribute
capital for management of investment
activities
Indirect Investment
Purchase equity, shares, bonds and
other valuable papers without
management
Through investment funds
Through other intermediary
financial institutions
(See definitions on BCC, BTO, BOT, BT, etc… in the Law on Investment)

Foreign ownership restrictions
Conditional business
activities under the local Law
on Investment
 Applicable for both
Vietnamese and foreign
investors
 For national security, social
morality and public health
protection purposes
Foreign
Ownership
Limitation in terms of foreign
stake applicable to certain
business sectors
 Vietnam’s WTO
Commitment on Services
 ASEAN Framework
Agreement on Services
(AFAS)
 Other FTAs
The State shall
grant land use
rights to land
users
3
2
1
Foreign-invested
enterprises, may be
allocated land or
leased land, have
land use rights
recognized by the
State, or acquire land
use rights
Foreign enterprises
are not entitled to
land ownership
except for housing
ownership with
certain limitations
(i.e. 30%
apartments of the
building)
Land ownership restrictions

Form of investment
► Full control of business activities in Vietnam
► Easier to exit in the future (i.e. sell off part or all
stakes in local entity), without concerning about
local partner
► Needs to find a suitable local partner” to
minimize any complication/conflict in terms of
handling this local partner
► Often recommended only in restricted business
activities or due to commercial reasons
Others
The Law on assisting SMEs come into effect in 1/1/2018:
Simplified
accounting
procedures and
systems
Lower
standard
CIT rate

Tax Updates
General tax system
► A newly set up enterprise in Vietnam could be subject to the following taxes:
Type Tax rate Calculation Remarks
Filling
requirements
Corporate
income tax
(CIT)
► Standard
rate: 20%
► Incentive
rate could
be applied
► Taxable income x
Tax rate
► Taxable income =
Revenue –
Deductible expenses
+ Other income –
eligible losses
carried forward
► Exemption and reduction
period may be applied
subject to conditions
► Conditions for deductible
expenses
► Losses can be carried
forward wholly and
consecutively within 5 years
► Quarterly
payment
► Year-end
finalization
Value added
tax (VAT)
10%; 5%; 0% or
exempt,
depending on
type of
transactions
VAT payable = Output
VAT - Input VAT
► Conditions applied for
creditable input VAT
► Output rate for exports is 0%
► VAT refund: project under
construction period or export
sale
Monthly or
quarterly filing

General tax system (cont.)
Type Tax rate Calculation Remarks
Filling
requirements
Personal
income
tax (PIT)
► Non-resident:
20% on Vietnam-
sourced income
► Resident:
Progressive
rates from 5% to
35% on
worldwide-
sourced income
► 50% reduction
may apply
Taxable income
= Total income –
(Compulsory
insurance
(SHUI) +
Deductions +
Exempt income)
► Personal deduction:
VND9mil/month; Dependent
deduction:
VND3.6mil/person/mth
► Some deductible expenses are
subject to cap amount: uniform
fee, voluntary insurance,
business trip allowance, etc.
► Monthly/Quar
terly filing
► Year-end
finalization
Foreign
contractor
tax (FCT)
► Include CIT and
VAT
► Tax rate varies
depend on
service type and
foreign
contractor’s
declaration
method
3 methods:
► Deemed
method
► Direct
method
► Hybrid
method
► Withholding mechanism
► PE concern and DTA application
► Common income subject to FCT:
Royalty and license fees, Supply
of goods with delivery terms
through the border-gate of VN,
M&E leasing, Loan interests,
etc.
Monthly/Quarterly
filing depending on
declaration method
Vietnam – Thailand DTA
Description Domestic tax rate DTA
Interest 5% CIT, VAT
exempted
► CIT not exceed 10% if it is received by any financial
institution
► CIT not exceed 15% in other cases
Royalties 10% CIT ► CIT not exceed 15% of the gross a mount of the royalties
► Technology transfer Not subject to VAT
► The use of
trademark
5% VAT
Transfer of capital 20% CIT on gains ► No exemption available
Dividends Exempt ► Not exceed 15% of the gross amount of the dividends
Service fees 5% CIT, 5% VAT ► Taxable only if a PE is constituted
► PE constitution is unclear under local laws and interpreted
strictly in practice

DTA Application Procedure
Tax exemption/
deduction
Statutory deadline for submission
of DTA notification dossier
DTA notification dossier is rejected if
time of application request past 3
years after the income arises
DTA exemption or
reduction is not
automatic. Taxpayers
must self-assess tax
exemption/reduction
eligibility under relevant
DTA and submit a DTA
notification dossier to
local tax office
No written confirmation/
approval by local tax
office for the submitted
DTA notification dossier.
Final decision is made
once local tax office tax
audits Vietnamese party
BEPS update
► Three-tiered TP Documentation: prepared before the submission date of the
annual tax return
► Master file
► Local file
► Country by country report – CbCR
► Disclosure Forms submitted together with CIT final returns
► Form 01 - Information on related parties and related party transactions
► Form 02 - List of required information and documents in the Local File
► Form 03 - List of required information and documents in the Global Master File
► Form 04 – Country-by-Country Report
► Interest expense is capped at 20% of EBITDA

Rules for deduction of intra-group expenses
Service provided must be directly beneficial to the business operation
Service from related parties is only determined to “have been provided” if
under similar circumstance independent companies pay for such service
Fee is paid on arm’s length basis and the allocation keys should be used
consistently within the Group
Proper supporting documents must be available
1
2
3
4
Cases that intra-group expenses are non-
deductible
Payment made
to related
parties is for
activities not
related to the
enterprise’
business
activities
01
Value of the
payment made to
related parties is
not in proportion
to the company’s
asset scale,
number of
employees,
business
activities
02
The beneficiary
related parties
do not have
rights or
obligation to the
good/service
provided to the
enterprise
03
Payment made
to the related
party who is
resident of a
country or
territory which
does not
impose income
tax
04

Tax incentives
Investment incentives
Type of incentives
CIT
incentives
PIT
incentives
VAT
incentives
Import
duty Land
rental

Incentive rates & exemption/reduction
Standard CIT
rate 20%
CIT
Exemption
and
reduction
(of 50% CIT
payable)
period
Incentive rates
► 10% applied within 15 years from first year having revenue from
incentive activities, may be extended to 30 years for some
particular cases subject to conditions and Prime Minister’s
approval.
► 17% applied within 10 years commencing from first year
generating revenue
► Exemption period: 2 years or 4 years commencing from the first
year having taxable revenue, in case no taxable revenue
generated until the fourth year from the first year having revenue
then the exemption period will start from such fourth year
► Reduction period: 4 years or 9 years subsequent to the
exemption period
CIT incentive conditions
Incentive locations
High-tech parks
Economic Zones
Areas having specially difficult socio-
economic conditions (per list under Decree
118/2015/ND-CP)
Areas having difficult socio-economic
conditions (per list under Decree
118/2015/ND-CP)
Industrial parks located in disadvantaged
areas
► 10% CIT rate for 15 years
► 4 years CIT exemption
and subsequent 9 years of
10% CIT reduction
► 17% CIT rate for 10 years
► 2 years CIT exemption and
subsequent 4 years of 50%
CIT reduction
2 years CIT exemption and
subsequent 4 years CIT
reduction

Incentive conditions
Incentive sectors
Education
Healthcare
Investment
incentive
sectors
Infrastructure
development,
Energy
High-tech
Software
development
Agriculture,
Environment
protection
Culture,
Sports
► High-tech (subject to strict
conditions), software
development, infrastructure
development, energy (power):
10% CIT rate for 15 years; 4
years CIT exemption and
subsequent 9 years of 50% CIT
reduction
► Education, health, environment,
culture and sports investment
project: 10% CIT incentive rate
for whole life of project
Big investment
Incentives:
► 10% CIT for 15 years,
4 years CIT exemption
and 9 years CIT reduction
► An additional 15 years for
10% CIT rate may apply
Investment capital up to VND6,000bil
Or VND12,000bil
No. of employees up to 3,000
OR
Annual revenue of VND10,000bil
Project for manufacturing
of products not subject to
special sales tax
Using high technology
As stipulated by law

Supporting industries
Manufacturing investment projects:
- The products support high technology sector; or
- The products support the garment, textile, footwear, IT,
automobile assembly, mechanical sectors are not produced
domestically as at 1 January 2015, or if produced
domestically, they meet the quality standards of the EU or
equivalent
Application documents prepared and submitted to
competent authority
Post-audit procedures carried out by competent authority
Incentive applied:
10% CIT for 15
years, 4 years CIT
exemption and 9
years CIT reduction
Other tax incentives
PIT & VAT
VAT
► Import of goods for the purpose of
performing contracts of processing
export goods and manufacturing of
export goods: not subject to VAT
► 0% on exported processing services and
exported goods (including on spot
exports)
► Input VAT refund for input VAT incurred
during construction period (no revenue
generated amounting to VND300 million
► Input VAT refund for input VAT of goods
imported then exported to overseas or
non-tariff zones amounting to VND300
million
PIT
► 50% PIT deduction for Vietnamese and
foreign individuals (both tax residents and
non-tax residents) who directly and actually
work in economic zone(s)
► With the above incentives not mentioned in
recent Government’s Decree 82/2018/ND-
CP on 22 May 2018 on the management of
industrial park and economic zone, further
guidance is expected.

Other tax incentives
Import duty & Land rental
Land rental
► Land and water surface rental fee
exemption of maximum 3 years during
construction period, and up to entire
lease term depending on the business
sector and geographical location of the
project
► Higher incentives (longer period of
exemption) may applied for projects
located in economic zones and hi-tech
parks
Import duty
► Preferential import duty rates under ATIGA
for imports from Thailand with valid C/O
► Import duty exemption for goods imported
for the purpose of performing processing
contracts; or for the purpose of
manufacturing/producing exported goods
► Import duty exemption for imported M&Es
to form fixed assets and imported materials
not yet able produced domestically if
investment project located in incentive
areas
Generalized System of
Preferences

GSP vs. FTAs
Exports from Vietnam are entitled to GSP
scheme in some countries:
• New Zealand
• EU
• Japan
• Canada
• Russia
Vietnam has concluded 12
FTAs, including:
• ASEAN – Australia/ New
Zealand
• Vietnam – Eurasian
Economic Union
• Vietnam Japan
• CPTPP
GSP
FTA4 FTAs under
negotiation,
including:
Vietnam – EU
and RCEP
(ASEAN+6)
GSP Overview
Conditions to
apply
Direct consignment conditions
Origin criteria (vary from country
to country, product to product)
Others: marking,
regional culmulation, etc.
Documentary evidence
(C/O Form A or
Exporter’s Statement of Origin)

Specific conditions for some countries
Canada
► Product coverage:
Applicable for selected
agricultural and industrial
products. Some products,
such as certain textiles
and apparel, footwear,
and chemical products
are excluded
► Origin criteria:
At least 40% of the ex-
work value of a product
must contain inputs
originating in one or more
GPT beneficiaries or from
Canada (global
cumulation)
Japan
(1) Agricultural and
Fishery Products
(HS chapters 1-24)
(2) Industrial Products
(HS chapters 25-97)
► Origin criteria for
non-wholly obtained
products:
(1) Value added rule
(2) CTC
► Rule of cumulative
origin for 5 countries:
Indonesia, Malaysia,
the Philippines,
Thailand, Vietnam
Russia
Applied to all products
from beneficiary countries
non-wholly obtained
products:
(1) Sufficient processing
(2) Value of foreign
content not
exceeding 50% of
FOB Price
► Full and global
cumulation
EU
Over 6,350 products
including agricultural and
fish products in HS
chapters 1–24, and
almost all processed and
semi-processed industrial
products, except for those
in chapter 93
non-wholly obtained
products:
(1) Value added rule
(2) CTC
(3) Specific operations
► ASEAN culmulation
is allowed
(*) Value added rule: compare the customs value of the non-originating materials with the ex-work or FOB price of the product
(*) Change of tariff classification (CTC): compare the HS code (normally 4-digit tariff classification) of the non-originating materials with the
HS code of the product
(*) Specific operations: certain processing must be done
Examples of some products

Questions
Place image
here with
reference to
guidelines
Huong Nguyen
Director, Tax & Advisory Services
Tel +84 438 315 100
Fax +84 438 315 090
Email: huong.nguyen@vn.ey.com
Background
► Bachelor of Economics, Hanoi
Foreign Trade University
► Member of Vietnam Tax Consultant
Association
► CPA, ongoing
Skills
► Tax advisory and tax planning
► Tax consulting
► Tax due diligence
► Tax compliance
► Tax audit
► Languages: English, Vietnamese
Professional experience
► Huong has been working as a professional tax advisor for thirteen years. Huong has provided
tax compliance and advisory services to multinational organizations in diversified industries
including power, financial services, real estate, manufacturing.
► Huong has also involved in advising clients on investment and tax structures during entry and
exit phases.
► She has also actively engaged in assisting clients with tax and regulatory compliance
requirements during their business operations in Vietnam and tax due diligence work.
► Huong has been engaged in various tax advisory and compliance for foreign invested
companies and banks during their business operations in Vietnam

Cambodia
2018
20 June 2018
Page 2
Agenda
► Overview of setting up business in Cambodia
► Land and foreign ownership restrictions
► The Cambodian tax regime
► Relevant tax compliance issues relating to investment in Cambodia
► Investment incentives
► Foreign exchange controls
► Double tax treaties
► Transfer Pricing
► Q&A
Cambodia Investment incentives & Key updates 2018

Overview of setting up business in Cambodia
Page 4
► Setting up business in Cambodia is governed by the Law on
Commercial Enterprise and the Law on Investment
► Foreign direct investment into Cambodia may take one of the
following forms:
► A subsidiary, which may be incorporated in the form of a Limited Liability
Company (LLC)
► Branch Office of Foreign Company (Branch)
► Joint Venture – Foreign ownership must not exceed 49%
► A commercial Representative Office (RO)
► All business forms above are required to be registered with the
relevant authorities in Cambodia as follows:
Ministry of
Commerce (MOC)
General Department
of Taxation (GDT)
Other related
ministries
Ministry of Labor and
Vocational Training (MLVT)

(Cont.)
► Foreign investors seeking an investment guarantee and incentive should
register with the Council for the Development of Cambodia (CDC) as a
Qualified Investment Project (QIP)
► The CDC is a one-stop service organization providing all necessary licenses
required from the relevant ministries for the entities listed in the Conditional
Registration Certificate (CRC) for investment on behalf of the investor
► Once a project fulfills all the requirements under the CRC, a Final Registration
Certificate (FRC) will be issued to the investor, and at this point the QIP will
commence
► The below flow chart illustrates the procedures involved for the QIP
registration:
CDC MOC GDT Other related ministries MLVT
Page 6
Land and foreign ownership restrictions

Land and foreign ownership restrictions
► There is no restriction on foreign ownership of a business, except where the business
owns land.
► While an LLC may be 100% foreign owned, only legal entities where 51% or more of
the shares are owned by Cambodians or Cambodian companies may own land in
Cambodia
► The foreigner may own the other 49% shares in the land owning company
► There are limitations on certain investments activities which apply to both Cambodian
and foreign entities. Restricted activities are include:
► Production/processing of psychotropic and narcotic substances
► Poisonous chemicals, agriculture pesticides/insecticides and other similar goods made from
chemical substances
► Processing and production of electricity from imported waste
► Forestry exploitation is prohibited by the forestry law and other investment activities which may
be prohibited by other laws.
Page 8
Foreign exchange controls

Foreign exchange controls
► Currently, there are no restrictions on foreign exchange operations
including:
► the purchase and sale of foreign exchange on the foreign exchange
markets
► all kinds of international settlements and
► capital flows in foreign or domestic currency, between Cambodia and the
rest of the world or between residents and non-residents.
► Please note that such operations should be undertaken through
authorized financial intermediaries, which are mainly banks which
have a banking license and have a permanently presence in
Cambodia.
Page 10
Cambodian tax Regime

Cambodian tax regime
► The Cambodian tax system is real regime (self-declaration).
Taxpayers under this regime are classified into 3 types:
► Small Taxpayer: Sole Proprietorships or partnerships that have
annual turnover from KHR 250 million to KHR 700 million (USD
62.5K to USD 175K)
► Medium Taxpayer: Enterprises that have annual turnover from
KHR 700 million to KHR 4,000 million (USD 175K to USD 1M)
► Large Taxpayers: Enterprises that have annual turnover over
KHR 4,000 million (USD 1M), or branch of a foreign company, or
QIP
► All foreign direct investment in Cambodia should be classified as
either medium or large taxpayers
Page 12
Relevant tax compliance issues relating to
investment in Cambodia

Applicable taxes
Medium and large taxpayers subject to the Real regime system of
taxation are liable for the following taxes:
► Annual tax compliance:
► Patent tax
► Tax on Income (TOI) / Minimum Tax (MT)
► Monthly tax compliance:
► Value Added Tax (VAT)
► Prepayment of Tax on Income (PTOI)
► Tax on Salary (TOS) & Tax on Fringe Benefit (TOFB)
► Withholding Tax (WHT)
► Other taxes depending on the industry or registered business
activities, as applicable
Page 14
Patent tax – overview
► Patent tax is an annual fixed business tax.
► Patent tax is applied upon initial business registration and annually
thereafter with the statutory deadline of 31 March of following year.
► Patent tax fees are as follows:
► Small Taxpayer : KHR 400,000 (approximately US$100)
► Medium Taxpayer: KHR 1,200,000 (approximately US$300)
► Large Taxpayer: KHR 3,000,000 or KHR 5,000,000*
(approximately US$750 or US$1,250)
* If the annual turnover of the large taxpayer exceeds KHR 10,000 million
(USD 2.5 million) then the patent tax will be KHR 5,000,000 (USD 1,250).

TOI / MT / PTOI – overview
► A registered taxpayer is subject to either TOI or MT, whichever is higher.
► TOI is the Cambodia’s CIT, which is calculated on the taxpayer’s taxable
income inclusive of capital gains and other passive income, such as interest,
royalties and rent
► TOI rate are as follows:
► 0% For QIP during tax exemption period
► 5% For insurance or reinsurance products covering property and other risk
insurances including sale of protection products sold under the life insurance
business (gross premium received)
► 20% For life insurance or reinsurance policies in the form of savings products and
any other products not related to the insurance or reinsurance of physical property
or risk insurance
► 20% Standard rate
► 30% For oil and gas and certain mineral exploration
Page 16
TOP / MT / PTOI – overview (Cont.)
► MT is a minimum, annual, tax which is separate from the TOI
► MT is based on 1% of annual turnover inclusive of all taxes, except VAT.
** Based on 2017 Law on Financial management, a company can be exempted from
MT if the company maintain its accounting records properly.
► PTOI is an advance tax payment system, where the PTOI is paid monthly and
may be used to offset against the taxpayers TOI / MT liability
► PTOI is imposed on a flat tax rate of 1% of monthly turnover inclusive of all
tax except PTOI and VAT
► Taxable losses may be carried forward for a period of 5 consecutive years
subject to certain conditions including that there is no change in the taxpayers
business activities nor should there be a change in ownership of the taxpayer

TOP / MT / PTOI – overview (Cont.)
General rule for deductible expenses:
► Any expenses incurred can be claimed as a deduction for the purpose of the
TOP calculation if the following conditions are met:
► The expense is actually incurred (i.e. regardless of paid or accrued)
► Is the result of economic activities (i.e. for generating taxable income) and
► The amount of the taxpayer’s liability is precisely determined (i.e. supported with
verifiable evidence)
Exception to general rule for deductible expenses:
► Charitable contributions (CC) - 5% of taxable profit excluding CC
► Interest deduction (50% of net non-interest profit plus the interest income) and capped
interest expenses
► Depreciation expense under the tax law
► Provisions for bad debts (allowable for financial institution only with conditions)
Page 18
VAT – overview
► VAT applies to the supply of goods and services other than land or money.
► VAT rates are determined as follows:
► 10% Standard rate
► 0% For goods exported and service rendered to a beneficiary based outside of
Cambodia
► Non-taxable supplies / VAT exemption*
► VAT is paid under the deduction method:
VAT payable/(credit) = Output VAT – Input VAT
* Non taxable supplies include mainly public postal service, hospital and medical
supplies, public transportation system, insurance services, primary financial services,
education, electricity and water supply, non-processing agricultural product and waste
cleaning or collection.

WHT - overview
Nature of payments from resident
taxpayers to residents:
Payment to
VAT register
Payment to
Non-VAT register
Interest payment to recipients other than
domestic banks and saving institutions
15% 15%
Interest paid on non-fixed term saving accounts
by domestic banks or saving institutions
4% 4%
Interest paid on fixed-term saving accounts by
domestic banks or saving institutions
6% 6%
Royalties 15% 15%
Rent paid for movable and immovable property 10% 10%
Payments for services, including management,
consulting and similar services
Exempted 15%
Page 20
WHT – overview (Cont.)
Nature of payments from resident taxpayers to non-residents: WHT Rate
Dividends distributed by a resident enterprise 14%
Income from services performed in Cambodia 14%
Compensation for management and technical services paid by a resident person 14%
Income from movable or immovable property, if such property is situated in Cambodia 14%
Royalties from the use, or right to use intangible property paid by a
resident/Permanent Establishment (PE) in Cambodia
14%
Gain from the sale of immovable property located in Cambodia or from the transfer of
any interest in immovable property situated in Cambodia
14%
Premiums from insurance of risks in Cambodia 14%
Income from business activities carried on by a non-resident through a PE in
Cambodia
14%
Gain from the sale of movable property which is part of the business property of a PE
in Cambodia
14%

TOS and TOFB - overview
► Personal Income Tax (PIT) is not implemented in Cambodia. Only TOS and
TOFB which is collected through withholding by the employer at the time of
salary payment and remitted to the tax authority.
► TOS: A resident employee is subject to TOS on Cambodian and foreign
sourced salary income at progressive rates from 0% to 20% while a non-
resident employee is subject to a flat rate of 20% on Cambodian source
salary income only.
► TOFB is imposed on a flat tax rate of 20% of total value of the benefit,
receives directly or indirectly any goods, services or other benefits in cash or
in kind other than salary, for the employment activity which provide by the
employer.
Page 22
Other Taxes - overview
► Specific Tax on Certain Merchandise and Services (STCMS) is charged on
the certain manufactured products and services as follows:
► Soft drink and non-alcoholic products – 10%
► Beer – 30% and Wine – 35%
► Cigarettes – 20%
► Entertainment and domestic and international air ticket – 10%
► Telephone service – 3%
► Accommodation Tax (AT) is calculated at the rate of 2% of accommodation
fee inclusive of other services and all taxes, except AT itself and VAT.
► Tax on Public Lighting (TPL) is collected at the rate of 3% on the selling price
of alcoholic drinks and cigarette, inclusive of all taxes except TPL itself and
VAT.

Other Taxes - overview (Cont.)
► Additional Profit Tax on Dividend Distribution (APTDD) is imposed on the
distribution of profits that have not been taxed at the rate of 20% to
shareholder. Generally, if the applicable TOP rate is 0% (i.e. QIPs), the
amount of APTDD should be calculated based on 20% of dividends.
► Tax on Immovable Property is collected annually at a rate of 0.1% on the
immovable property exceeding the value of KHR 100,000,000 (approximately
USD 25,000).
► Tax on Unused Land is imposed on a non-constructed land and the abandon
constructed land at the rate of 2% of market value of land.
Page 24
Other Taxes - overview (Cont.)
► Registration Tax is imposed on the following transactions:
► 4% of the value of immovable property for the transfer of ownership or
possession right of immovable property or capital injection in term of
immovable property
► 4% of the value of transportation mean or vehicle for The transfer of
ownership or possession right of all transportation means or vehicle
ownership.
► 0.1% of the value of share for the transfer of parts or whole of shares or
merger of a business
► 0.1% of the value of contract for supply of goods or service contracts
which use national budget.
► KHR 1,000,000 for 3 types of legal documents, such as letter on business
incorporation, letter on dissolution and letter on merger of business.

Payment and filing of tax procedure
► The previously mentioned monthly tax compliance comprises VAT,
PTOI, WHT, and TOS/TOFB
► These tax returns are required to be filed monthly, generally by the
20th of the following month, which is when the tax should also be paid.
► For annual tax compliance, the taxpayers are required to pay the tax
liability and submit returns annually within 3 months after the end of
each tax year.
► Payment of tax may be made electronically via an authorized bank,
while the submission of the tax returns should be made via hard
copies to the GDT or appropriate tax branch.
Page 26

Investment incentives – QIPs
► A QIP registered and approved by CDC is entitled to the
tax incentives described below:
► MT exemptions if the QIP maintains proper accounting record
► Use of special depreciation allowances OR the tax exemption period in
form of “trigger period + 3 years + priority period”
► Import duty exemption with respect to the importation of production
equipment, construction materials, raw materials, intermediate goods and
accessories that serve production and
► 100% export duty exemption
Page 28
Investment incentives – zone investor
► Investment located in a Special Economic Zone (SEZ) is granted the
following incentives:
► The same incentives on taxes and custom duty as other QIPs and
► VAT at the rate of 0% for every imports; however the zone investor shall
record the amount of tax exemption for its every import. The said record
shall be disregarded if the Production Outputs are re-exported. In case,
the Production Outputs are imported into the domestic market, the Zone
Investor shall refund the amount of VAT as recorded in comparison with
the quantity of export.

Double tax treaties
Page 30
Double tax treaties
► To date Cambodia has signed Double Tax Agreements (DTA’s) with the
following countries:
► Singapore and China in 2016
► Brunei and Thailand in 2017
► Vietnam in April 2018.
► The Singapore and Thailand DTA’s were ratified in late 2017 and are in force
as of 1 January 2018. While Cambodia’s DTA with China was recently ratified,
it will only come into force on 1 January 2019
► Broadly, the DTA’s cover salaries, business profits and passive income
► In order to enjoy the benefits of the DTA’s, taxpayers are first required to
request the approval from the GDT before claiming the treaty benefits

Double tax treaties
Nature
Standard
Rate
Rate Under DTA
Payment of Dividend 14% WHT 10% WHT
Payment of Interest 14% WHT 10% WHT
Payment of Royalty 14% WHT 10% WHT
Payment of Technical Service 14% WHT 10% WHT
Capital gain on movable property in other
contracting state
20% TOI
Taxed only in other
state
Capital gain derived from the alienation of ship or
aircraft operated international traffic or movable
property on ship or aircraft
20% TOI
Taxed only in the
state it is derived
Capital gain derived from the alienation of shares
deriving more than 50 percent of their value directly
or indirectly from immovable property situated in
other contracting state
20% TOI
Taxed only in other
state
Capital gain from any property other than the above
point
20% TOI
Taxed only in the
state it is derived
Page 32
Transfer Pricing

Transfer Pricing
► On 10 October 2017 the GDT released its Transfer Pricing (TP) rules with the
introduction of Prakas 986
► It confirms that all five OECD recognized transfer pricing methodologies are
accepted by the GDT. Cambodian taxpayers should, therefore, use one or
more of these methodologies when setting and testing the arm’s length nature
of their related party transactions.
► The five methodologies, which are divided into transactional and profit based
methods, include the following:
Transaction based methods Profit based methods
Comparable uncontrolled price method Transactional net margin method
Resale price method Transactional profit split method
Cost plus method
Page 34
Transfer Pricing
► GDT has confirmed that maintaining TP documentation from FY 2017
onwards is mandatory and in this respect the FY 2017 TOI requires taxpayers
to confirm whether they have prepared TP documentation for their related
party transactions that they entered into in FY 2017
► Taxpayers are expected to update their TP documentation annually by testing
the arm’s length nature of their related party transactions by reference to a
benchmarking study, based on the use of external or internal comparables.

Questions
Page 36
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here with
reference to
guidelines
Rob King
Tax Market Leader – Vietnam, Cambodia and Laos
Tel +84 8 38245252
Fax +84 8 38245250
Email: robert.m.king@vn.ey.com
Background
► Bachelor of Commerce/Laws
► Member of the Institute of Chartered
Accountants in Australia
► Legal Practitioner in WA
► Rob is a qualified chartered accountant and a member of the Institute of Chartered Accountants
in Australia. Rob also holds a legal practicing certificate in Western Australia. He has more than
20 years experience specialising in tax across a range of sectors including consumer products,
mining, energy and infrastructure.
► Rob’s technical expertise and strong industry insight drives his highly pragmatic approach to
client relationship management. As a full service advisor, he provides support ranging from
general corporate tax advice and compliance, to more in-depth planning and structuring for major
new investments, acquisitions, divestment and financing.
► Professional experience
► Rob joined Arthur Andersen’s tax practice in Sydney after graduating with a BCom/LLB from the
University of NSW in 1994.
► Rob joined Ernst & Young’s mining, energy and utilities group following the merger with Arthur
Andersen in 2002.
► Rob has worked in Sydney, London, Croatia, Slovenia, Perth and now Vietnam, Cambodia and
Laos. Working in a number of different markets and in a number of different roles has given Rob
a broad range of tax experience in both mature and maturing markets.
► In July 2015, Rob moved to Vietnam to lead the tax team in the region and bring his international
tax expertise and general experience to the local market.

Place image
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reference to
guidelines
Brendan Lalor
Director - Tax & Advisory Services Ernst & Young (Cambodia) Ltd.
Tel: +855 23 860 450/451
Cell: +855 89 777 374
Email: brendan.lalor@kh.ey.com
Background
► Master of International Tax
(Australia)
► Bachelor of Economics (Australia)
► Australian Taxation Office graduate
certificate in taxation
► Attended numerous workshops
provided by the OECD and IBFD on
transfer pricing and international
taxation
► Brendan Lalor is a Director in the Tax and Advisory Services Division of Ernst & Young
(Cambodia) Ltd
► Brendan has more than 15-year experience in transfer pricing, international and corporate tax.
► Brendan has worked for revenue authorities and consulting firms during his tax career and across
a number of jurisdictions so brings a wealth of experience to the role, which he leverages off to
provide value adding services to his clients.
► Brendan currently leads the tax team at EY Cambodia and provides tax advisory services to a
range multinational and domestic Cambodian clients covering a wide array of industries and
sectors.
► In the broader Asia Pacific region Brendan has also provided transfer pricing advice to a range of
clients in other jurisdictions including Vietnam and Australia.
► Brendan has also assisted numerous clients, which are or have faced transfer pricing or
corporate tax scrutiny from the tax authorities in Cambodia and Vietnam and so brings significant
experience in this regard.
Page 38
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Reangsey Darith Touch
Senior Manager - Tax & Advisory Services Ernst & Young (Cambodia) Ltd.
Tel: +855 23 217 824/825
Cell: +855 12 355 373
Email: reangsey.touch@kh.ey.com
Background
► Master of Professional Accounting,
the University of Auckland, New
Zealand
► Bachelor of Economics Sciences,
majoring in Finance and Banking,
Royal University of Law and
Economics, Cambodia
► Bachelor of Education, majoring in
B.Ed. TEFL, Royal University of
Phnom Penh, Cambodia.
► Reangsey is a Senior Manager in the Tax and Advisory Services Division of Ernst & Young
(Cambodia) Ltd.
► Reangsey is an experienced tax adviser more than 7 years experience on Cambodian tax
through working with the largest auditing and tax advisory firm in Cambodia.
► More than 7 years of professional working experience, Reangsey has advised a wide range of
both of local and international clients on tax structures, tax planning, tax due diligence , tax
compliance, licensing and taxation aspects in different industries such as power supply,
consumer products, airline, banking, and hotel.

Myanmar
2018
20 June 2018
Myanmar Investment incentives & key updates 2018
Agenda
► Tax updates
► Available tax incentives in Myanmar
► Q&A

Foreign investment highlights
Page 4 Myanmar Investment incentives & key updates 2018
Foreign ownership restrictions
Restricted
Investment Activities
(MIL Section 42 and
MIC Notification
15/2017)
1) Investment activities allowed to be carried out only by the Union
2) Investment activities that are not allowed to be carried out by foreign investors
3) Investment activities allowed only in the form of a joint venture with any citizen owned
entity or any Myanmar citizen
4) Investment activities to be carried out with the approval of the relevant ministries
Proposal need to be submitted to get MIC permit for the below business activities;
(a) investment businesses that are essential to the Union strategy
(b) large capital intensive investment projects
(c) projects which are likely to cause a large impact on the environment and the local
community
(d) investment businesses which use state-owned land and building
(e) investment businesses which are designated by the government to require the
submission of a proposal to the Commission
Submission of
Proposal
(MIL Section 36)

Land ownership restrictions
► No foreigner or foreign owned company shall acquire immovable property by way of
purchase, gift, pawn, exchange or transfer.
► No person shall grant a lease of immovable property, for a term exceeding one year:
(a) To a foreigner or foreigner owned company.
(b) No foreigner or foreigner owned company shall receive a lease of immovable
property, for a term exceeding one year.
Restrictions
(The Transfer of
immoveable
property restriction
Act (1987)
Section 4 & 5)
► An Investor who obtains permit or endorsement under MIL 2016 has the right to
obtain a long-term lease of land or building from the owner if it is private land or
building, or from the relevant government departments or government organization if
it is land managed by the government, or land or building owned by the Union in
accordance with the stipulations in order to do investment. Citizen investors may
invest in their own land or building in accordance with relevant laws.
► Under MIL 2016, Foreign Investors may lease land or building up to 50 years with the
option of consecutive 10 years and for further consecutive period of (10) years
extension with the approval of the Commission.
Rights to use Land
(MIL Section 50)
Common type of legal entity used by foreign
investors
Common types of
legal entity
► Limited liability company
► Branch office
► Representative office
Shareholder
Director
Minimum requirements
Minimum 2 shareholders (individual or corporate)
(decreased to 1 shareholder under New Myanmar
Companies Law)
Citizen or local required No restriction
Corporate shareholder Permitted
Corporate director Prohibited
Minimum requirement
2 (Under New Myanmar Companies Law, decreased to
1 director who must be resident in Myanmar (i.e.
present in Myanmar for a minimum of 183 days in a
relevant 12 month period))
Resident status
No restriction (Under New Myanmar Companies Law,
1 director who must be resident in Myanmar)
Legal representative Not required

Corporate and statutory requirements
Capital requirement
Constitutions/ by
laws
Execution of
documents
Memorandum and Articles of Association (replaced with a single company constitution
under New Myanmar Companies Law)
Language
requirement
Local language and English
► Any documents that are not in English, it needs to be notarized and endorsed by the
Myanmar Embassy of the investor’s country or residence.
► Translation to Burmese language is not required. English translation is acceptable
Authorized capital / Minimum paid-up
capital
► USD 150,000 for manufacturing/
construction activity
► USD 50,000 for service activity
Shares
Minimum 2 shares (decreased to 1 share
under New Myanmar Companies Law)
Form of contribution into capital Cash/In kind
Currency of capital USD only
Tax updates

Brief overview on taxes
► Tax rate for Limited liability company/ Branch Office : 25%
► Company under MIL – Exempt during tax holiday period
► Creditable 2% advance corporate income tax
► The recognition of income and expenditure for tax purpose is based on an accrual
basis
► Tax losses:
► Company incorporated under the Myanmar Companies Act (MCA) and under the
MIL: Carried forward for 3 consecutive years and no carry back
► Company incorporated under SEZ: Carried forward for 5 years from the year in
which the loss was incurred
Corporate Income
Tax
► 10% (for resident and non-residents)
► Income from capital gains is assessed separately from business income
► Capital loss cannot be treated as deductible expenses for corporate income tax
calculation purpose
Capital Gain Tax
Fiscal year (FY)
► 1 April to 31 March (Starting from 1 October 2019, FY will be changed to 1 October to
30 September)
► No alternative fiscal year allowed
Withholding
Tax
► When the payment of income is made by a Myanmar company to Myanmar citizen and/or
resident foreigner or non-resident foreigner, the Myanmar entity is required to withhold tax
at various rates depending on the type of income and status of the payee
► Withholding tax on interest (15%), royalties (10% or 15%), purchase of goods, work
performed or supply of services and hiring within the country, (2% or 2.5%)
Commercial
Tax
► 5% (mostly)
► Commercial tax registration is required for any person who has taxable proceed of sale or
receipt from service within a year
► Subject to sale of goods/special goods produced in Myanmar, importation of goods/special
goods, imported goods/special goods sold in Myanmar, providing services, trading
activities, building developed and sold in Myanmar, sale of golden jewelries, export sale of
goods (Crude Oil and Electric power)
► Commercial tax is not a Value Added Tax (VAT) with full credits system. Only partial offset
system is available with conditions
► Creditable if
► Sales of goods (for trading/manufacturing business) – paid to local suppliers, paid for
imported goods, paid for services fee
► Provision of services (for services business) – paid for expenses used to provide
services, paid to local suppliers, paid for imported goods

Personal Income
Tax
► No requirement for assessment if the net annual income is 4.8 million MMK or less
(threshold) in one financial year.
► Resident foreigner who stayed in Myanmar for 183 days or more in a fiscal year and
resident citizen are taxed on all income derived from sources within and outside
Myanmar based on progressive tax rate ranging from 0% to 25% after deductions (e.g.
personal allowance, family allowance, premium for life insurance and social security
contributions).
► Non-resident foreigner who stayed in Myanmar for less than 183 days in a fiscal year
is taxed on income derived from sources within Myanmar at the progressive rates
ranging from 0%-25% without deductions.
Special Goods
Tax
► Any person who imports, manufactures or exports the special goods shall be liable to
pay special commodities tax at the prescribed rate.
► Under the Union Tax Law 2018, 17 types of goods will be taxed at specific rates
ranging from 5% to 80% while another 5 types of goods will be taxed in Myanmar on
exports at specific rates prescribed on the law.
► There will be 0% tax rate on the sale proceeds received from the exportation of special
goods except for the 5 types of goods.
► There will be a range of tax rate for the special goods as such liquor (tax will be
collected per liter basic) and cigarettes (tax will be collected per item basic).
Tax treaty
DTA
► Currently 8 treaty countries, i.e., Lao PDR, Singapore, Vietnam, Malaysia, Thailand,
India, South Korea and United Kingdom.
► Myanmar has signed tax treaties with Bangladesh and Indonesia, but these treaties
have not yet been ratified as of date.
Practical issues
from claiming the
treaty benefits
► The process in requesting an approval from the MIRD is a long-drawn process.
► In current practice, the withholding tax should be deducted and remitted to the MIRD
for payments before the MIRD approval is obtained. Non-resident foreigners should
request a tax refund for deducted withholding tax subsequently once they received an
approval from the MIRD.
► In order to seek a tax refund from the MIRD, the taxpayer may submit a cover letter to
the MIRD with all supporting documents. Based on our experience, in some cases the
tax refund may take up to 2 years and the likelihood of refund is very low.
Claim Procedure
► The relief under the applicable DTA is not automatically granted.
► The filing of a request letter with supporting documents such as tax residency
certificate, invoice, signed contract and incorporation documents are required to be
submitted to the MIRD to enjoy the treaty benefits.

Domestic tax rate Vs DTA rate
Payments made to
Thai residents
Domestic tax rate
Reduced rate/Exempt under Myanmar-Thailand
DTA
Interest ►15% ►10% if the recipient is the beneficial owner of the
interest.
Royalty ►15% ►5% for the use of or the right to use copyrights of
literary, artistic or scientific works.
►10% for services of a managerial or consultancy
nature or for information concerning industrial,
commercial or scientific experience.
►15% for other cases.
Service fee ►2.5% if services are rendered
within Myanmar
►Exempt if no PE under Myanmar-Thailand DTA.
Capital gains tax ►10% ►Tax to be assessed in the country where capital
assets exist.
►For shares of the capital stock of a company the
property of which consists principally of immovable
property situated in a Contracting State, it may be
taxed in source state.
►In case of a participation of at least 35% in a
company, it may be taxed in source state.
Otherwise, it may be taxed in resident state of
Alienator.
Tax issues commonly faced by foreign investors
Ambiguous tax
system
► Foreign investors face difficulties in complying with the tax system in Myanmar
because they have problems with understanding the tax rules and procedures.
► No clear definition under the Myanmar Income Tax Law as to what expenses are tax
deductible.
► There is no official translation of Myanmar tax laws, notifications and tax forms.
► There is very little clarity on taxation and too much case-by-case decision-making
power by the Myanmar Tax Authority.

Highlight in Union Tax Law 2018
► All tax payers are required to follow the new financial year (i.e. 1 October to
30 September) starting from 1 October 2019.
Highlight in
Union Tax Law
2018
Highlight in New Myanmar Companies Law
► The restriction of foreign shareholding in local company is relieved. It allows foreign
investor up to 35% of shareholding in local company and more than 35% of foreign
ownership interest can be defined as foreign company.
► Single shareholder is allowed for private limited liability companies. The member
limitation for private limited liability is from 1 to 50 and for public limited liability is no
limitation.
► Foreign companies which are not incorporated under Myanmar laws but ‘’carries out
business’’ in Myanmar are required to register with DICA. Although which actions that
would be deemed as ‘’carrying out business’’ is not clearly defined yet, foreign companies
with regular business activity and transactions in Myanmar will need to register. In some
cases, foreign companies may seek the ruling from the Minister to see if registration is
required.
► Existing companies operating in Myanmar will be required to re-register with DICA when
the new Myanmar Companies Law becomes effective.
Highlight in New
Myanmar
Companies Law

Highlight in New Myanmar Companies Law (cont.)
► Small company concept is introduced: an entity which has less than 30 employees
and less than MMK 50million revenue are to be small company.
► Memorandum of association and articles of association will be replaced with a single
company constitution.
► Private limited liability companies are required to have at least one director of any
nationality that must be resident i.e. living in Myanmar for more than 183 days in a
fiscal year. Public limited liability companies are required to have at least 3 directors
and one of whom must be a Myanmar national citizen.
► The requirement for foreign companies to obtain a permit to trade when applying for
company incorporation has removed.
► Authorised capital, par value and share premium concepts has removed.
► The company must satisfy the solvency test immediately after the payment of the
dividend.
Highlight in New
Myanmar
Companies Law
Permitting wholesale and retail in Myanmar by foreign companies
and joint venture companies
Permission to sell
►The performance of a retail or wholesale business by 100% foreign-owned companies
and joint venture companies shall be allowed as follows:
►Goods manufactured in the country or imported except prohibited items may be sold
and distributed through retail or wholesale according to the prescribed procedures.
►Retail and wholesale may be performed in any township in the Regions and States
according to the prescribed procedures.
Ministry of
Commerce and
Trade Notification
No. 25/2018

and joint venture companies (cont.)
Qualifications
►100% foreign-owned companies and joint venture companies shall fulfill the following
qualifications in order to engage in a retail or wholesale business within the country.
►If the retail or wholesale is done by a 100% foreign-owned company:
a) In case of wholesale, the initial investment for goods shall exceed USD 5 million,
excluding the rent for the land.
b) In case of retail, the initial investment for goods shall exceed USD 3 million, excluding
the rent for the land.
►If the retail or wholesale is done by a joint venture company:
a) The following qualifications shall be fulfilled if Myanmar citizens have an equity ratio
of 20% or more in the company:
i. In case of wholesale, the initial investment for goods shall exceed USD 2
million, excluding the rent for the land.
ii. In case of retail, the initial investment for goods shall exceed USD 700,000,
excluding the rent for the land.
b) If Myanmar citizens have an equity ratio of less than 20% in the company, the
company shall comply with the provision in paragraph (a).
Ministry of
Commerce and
Trade
Notification No.
25/2018
and joint venture companies
►100% foreign-owned companies and joint venture companies shall comply with the
following rules when engaging in a retail or wholesale business in the country.
a) 100% foreign-owned companies and joint venture companies formed after the date
of the issuance of these rules shall apply to the Ministry of Commerce and Trade
for the registration of a retail or wholesale business permit with the following
documents:
1) Company registration card;
2) MIC endorsement (copy), MIC permit (copy) (for 100% foreign-owned
companies and joint venture companies which are eligible to obtain an MIC
endorsement);
3) recommendation from the relevant city development committee or township
development committee of the relevant Region or State;
4) list of groups of goods which will be distributed through retail or wholesale;
5) detailed business plan specifying the initial investment amount for the retail
or wholesale business, the location and the area.
b) Retail or wholesale companies shall perform the business on the specified date and
time according to the location, area and number of outlets permitted by the Nay Pyi
Taw, Yangon or Mandalay City Development Committee or the township
development committees of the relevant Regions or States and the local
authorities.
c) Retail or wholesale companies shall comply with the relevant laws, rules,
procedures and regulations in order to distribute safe and standard goods, provide
guarantee services for sold items, and avoid an impact on the environment.
Ministry of
Commerce and
Trade
Notification No.
25/2018

and joint venture companies (cont.)
►Prohibitions
►100% foreign-owned companies or joint venture companies having obtained a
permit for retail or wholesale business shall not distribute, through retail or
wholesale, items prohibited according to the laws, notifications and rules in
force.
►100% foreign-owned companies or joint venture companies shall not operate a
minimart or convenience store with a floor area of less than 929 square metres.
►100% foreign-owned companies or joint venture companies operating a retail or
wholesale distribution shall comply with the laws, rules and procedures in
Myanmar and shall not engage in unfair competition.
Ministry of
Commerce and
Trade
Notification No.
25/2018
Available tax incentives in Myanmar

► Tax incentives
► 3 to 7-year corporate income tax exemption based on development level of
investment
► Corporate income tax exemption on profits reinvested within one year
► Deductions of accelerated depreciation
► Deductions of certain research and development expenditure
► Custom duty and commercial tax exemption machineries, equipment,
instruments, machinery components, spare parts, construction materials during
construction or expansion period
► Custom duty and commercial tax exemption on importation of the raw materials
and semi-finished goods conducted by an export-oriented investment business
for re-export finished goods
► Reimbursement of custom duty and commercial tax both on imported raw
materials and semi-finished goods for re-export finished goods
► Non-tax incentives
► Right to lease land with longer period
► Non-nationalization of business
Common types
of incentives
Myanmar Investment Law
Thilawa
Dawei
Kyaukpyu
Myanmar
Yangon
Thailand
Special Economics Zones (SEZ)
► 5-year corporate income tax exemption (promoted zone)
► 7-year corporate income tax exemption (exempted zone)
► 2nd five-year period: 50% corporate income tax reduction
► 3rd five-year period: 50% corporate income tax reduction on
the profits reinvested within one year
► Import duty exemption on raw materials, machinery and
equipment (exempted zone), trading goods, motor vehicles
and equipment for wholesale trading, export trading and
logistics service (free zone)
► 5-year import duty exemption on machinery and equipment for
construction followed by 50% reduction for another five years
► Commercial tax exemption on a specified list of products
manufactured for export
► 5-year loss carry forward from the year the loss is sustained
► Kyaukpyu SEZ
► Thilawa SEZ
► Dawei SEZ
SEZ
location
SEZ
incentives

Questions
EY contacts
EY UTW Advisory Limited
(A member firm of Ernst & Young Global Limited)
Union Financial Centre (UFC) Tower
Room 08-02, Level 8, Mahabandoola Road and Thein Phyu Road
Botahtaung Township, Yangon, Myanmar
Tel: 951 371293/370008/861 0418
Naing Naing San
Partner
Email: Naing-Naing.San@mm.ey.com
Thu Zar Win
Manager
Email: Thu-Zar.Win@mm.ey.com
Kay Khaing Phyo
Senior Consultant
Email: Kay-Khaing.Phyo@mm.ey.com

Lao PDR
2018
► 20 June 2018
Page 2
Agenda
► Tax System
► Investment incentives
► Generalized System of Preferences (GSP)
► Other consideration
► Q&A

Lao PDR Investment incentives & key updates 2018
Foreign investment
Page 4 Lao PDR Investment incentives & key updates 2018
Type of investment
General Business
General business is an investment in the general business sector, including those
defined in the list of controlled business but not a concession business.
Concession Business
Concession business refers to investment activities which require a prior
permission from the Government to utilize ownership and other rights of the
Government.
Investment in Special Economic Zone (“SEZ”)
Activities for the development of SEZ refers to business activities that develop the
comprehensive infrastructure and new cities to attract investments.
The investors may invest in the following types of investment:

Form of enterprise
Sole Limited
Company
• A Sole Limited Company
has only one shareholder
Limited Company
A Limited Company shall
have more than one
shareholder and maximum to
30 shareholders
Public Company
A Public Company has at
least nine shareholders and
the company’s shares can be
freely transferred and offered
to the public
Company is the most common form of enterprise with capital being divided
into equal shares. Payment of shares may be contributed in cash or in kind.
Form of enterprise (cont.)
Branch
A foreign corporation can only set up a branch office in Laos if it
engages in certain business activities e.g., foreign bank, financial
institution, insurance company, international consulting company
and foreign airline
Representative office
Representative office is only allowed to collect information on
investment for its headquarter to serve as a basis for future
investment consideration and does not have the right to do
business
The investors may set up a branch or representative office in Laos:

Foreign ownership restriction
► Some business activities that do not require high level of knowledge and/or big amount
of capital are only reserved for Lao nationals, such as extraction of herbal products,
ceramic products, tour operators.
► Foreign investors are permitted to invest in some business activities with conditions
imposed such as minimum registered capital or foreign equity cap. Some examples
are as below:
Others: Architecture, engineering and medical business, etc.
Finance and insurance: Commercial bank and bank branch
Accommodation: 3-5 star hotel
Transportation and warehouse: Taxi meter and freight transportation
Wholesale and retail
Construction: Road, bridge, excavation and landfill
Manufacturing: Pharmaceutical products
Land ownership restriction
► Foreign investors are not permitted to own land in Laos.
► Generally, land concessions granted by the state to foreign-invested
enterprises are limited to 50 years. In case of the lease of land by Lao citizen
to foreign companies, it is limited to 30 years. However, in all cases, lease
period may be extended with the approval of the competent authority.
► For the lease or concession of land having an area exceeding 10 thousand
hectares, approval is required from the National Assembly.

Tax system
Tax system
Indirect taxes
Value Added Tax
(“VAT”)
Excise Tax
(“ET”)
Direct taxes
Profit tax
(“PT”)
Income Tax
(“IT”)

Value Added Tax (“VAT”)
Target
VAT Payer
Tax rate
• Goods
• Services
• Individuals, entities under VAT system
• Individuals, entities not under VAT system who
import goods or purchase services from non-
resident and non-established supplier
• 10% applied to import and domestic goods and
services.
• 0% applied to import material, equipment,
machine that cannot be domestically produced
and export products.
Scope of Value Added tax
Value Added Tax is an indirect tax levied on goods purchased/imported, goods/services
using in domestic and the export products.
Excise Tax (“ET”)
Scope of Excise tax
Excise tax is an indirect tax levied on the consumption of certain import goods and
domestically-produced goods and services in Lao.
• Fuel, alcoholic and soft drinks, tobacco, perfume and cosmetics, card
and gambling, firework, motorcycle and car, air-conditioners and etc.
• Tax rates range from 3% to 90%
GoodsGoods
• Entertainment services, bowling, beauty salon, television, internet,
golf, lottery, casino and etc.
• Tax rates range from 10% to 35%.
ServicesServices

Profit Tax (“PT”)
Scope of profit tax
Profit tax is also known as the “Corporate Income Tax”. All enterprises engaged in
manufacturing, trading and services are subject to Profit Tax on their Laos-sourced income.
Foreign companies deriving income from Laos or entering into joint venture contracts with
project owners in Laos are also subject to Profit Tax.
Profit tax rate
Standard rate: 24%
Tobacco business: 26%
Freelancer: 0%-24%
Mining: As agreed with the Government
Withholding Tax (“WHT”)
A foreign contractor having income from Laos shall be subject to withholding profit tax
(Withholding PT) and withholding value added tax (Withholding VAT) with the applicable
deemed rates as below:
Description Withholding PT Withholding VAT
Manufacturing 0.72% 10%
Commerce/Transport 1.2% 10%
Construction 2.4% 10%
Exploration drilling/filling land 3.6% 10%
Entertainment 6% 10%
Agent service 4.8% 10%
Advisory/Other service 2.4% 10%

Income Tax (“IT”)
Scope of Income tax
Income tax is imposed on the income of individuals and legal entities that generate income
in Laos
Different types of income and corresponding income tax rates
Employment
income
(0%-24%)
Dividend
(10%)
Sale of shares
(10%/2%)
Interest
(10%)
Sale of land use
right
(5%/2%)
Royalty
(5%)
Prize from
5,000,000 kip
(5%)
Other
Income
(10%)
Common tax structure for foreign investor
► Foreign investors who registered
a legal entity in Laos shall
declare and pay all Lao common
taxes by themselves based on
their financial records.
Registered
foreign
investors
VAT
PT
IT
WHT

Common tax structure for foreign investor
(cont.)
► Foreign investors who have not
registered a legal entity and have
business activities in Laos such as
construction projects, provide
services. It is common that the Lao
contracting parties shall withhold
and declare Lao taxes (e.g.
Withholding VAT and PT) on behalf
of foreign entities.
► Foreign investor may choose to
register for a temporary tax code
and self- declare taxes as the
same as Lao taxpayer.
Unregistered
foreign
investors
WVAT
WPTIT
Tax compliance requirement
The deadline to declare and pay Lao taxes are as follows:
Tax Declaration Payment
(Withholding)
Value added tax
Monthly: not later than 15th of following month;
or
Quarterly: not later than 15th of following quarter
15th of
following month
Excise tax Monthly: not later than 15th of following month Same deadline
as declaration
Profit tax
Quarterly: not later than 10th of following quarter;
Annual finalization: not later than 1st March of following
year
Personal income tax
Monthly: not later than 15th of following month
No annual finalization is required
Other income Ad-hoc basis: within 10 days from payment date
Withholding profit tax Ad-hoc basis: within 10 days from payment date

Double Tax Avoidance Treaties (“DTAs”)
Laos has entered into double tax treaties (DTTs) with several countries, of which the following are
already effective.
Currently, Laos Government has not yet issued any specific/detail instruction on implementation of tax
treaties. Therefore, the application of tax treaties should require an advanced tax ruling from tax
authority.
Country
Dividend (%) Interest (%) Royalty (%)
Domestic Law DTA Domestic Law DTA Domestic Law DTA
Brunei 10 5/10 10 10 5 10
China 10 5 10 5/10 5 5/10
Luxembourg 10 5/15 10 10 5 5
Malaysia 10 5/10 10 10 5 10
Myanmar 10 5 10 10 5 10
Vietnam 10 10 10 10 5 10
South Korea 10 5/10 10 10 5 5
Thailand 10 15 10 10/15 5 15
Belarus 10 5/10 10 8 5 5
Singapore 10 5/8 10 5 5 5
Indonesia 10 10/15 10 10 5 10
Updates on foreign investment
Some updates relating to Lao taxes are as below:
► New Excise tax rates have been adopted for fuel (9%-39%), alcohol (45%-50%),
cigarette (25%-45%) and entertainment services (20%) effective from 01 Jan 2018.
► Currently, there is no transfer pricing legislation in Lao PDR.
Hot topics relating to Laos taxes are as below:
► VAT on banking and financial activities
► New VAT Law have been amended by National Assembly which is expected to
announce in coming time.
► No Instruction on implementation of tax treaties in Lao PDR.

Promoted by business sectors
• High and modern technologySector 1
• Green agricultureSector 2
• Green agriculture product processingSector 3
• Natural, cultural and historical tourismSector 4
• Education, sport and human resourceSector 5
• Hospital, medicine and medical equipmentSector 6
• Infrastructure developmentSector 7
• Micro financial institutionsSector 8
• Modern trade centerSector 9

Promoted zones and incentives
Based on socio-economic conditions, available infrastructure and geography, there are
three investment zones as below:
► Zone 1: Socio-economic infrastructure is not favorable for investment
► Zone 2: Socio-economic infrastructure is favorable for investment.
► Zone 3: Special economic zone
The incentives available for each zone and each sector are as below:
Sector Profit tax exemption
Land rental fee
exemption
Zone 1
Sector 2,3,5,6 15 years 15 years
Sector 1,4,7,8,9 10 years 10 years
Zone 2
Sector 2,3,5,6 7 years 8 years
Sector 1,4,7,8,9 4 years 5 years
Zone 3 All sectors According to specific regulations
Other incentives
In addition to the profit tax incentives as above, investors may also be entitled to custom duty and other
tax incentives as follows:
► Exemption from custom duty on import of fixed assets and machine that cannot be produced in
Laos.
► Exemption custom duty and VAT at the rate of Zero percent of materials, equipment which may not
be supplied or produced in Lao PDR, to form the fixed assets, and of machinery and vehicles
directly used for production;
► Exemption custom duty of raw materials, equipment and parts to be used in the production for
export and granted duty exemption for export and pay VAT at the rate of zero percent.
► Exemption from Value added tax (VAT) on domestic purchase of raw material, which are not natural
resources for production of export goods
► Exemption from profit tax in the next accounting year if net profit is reinvested to expand the
business operations. The amount of profit entitled to tax exemption shall be in proportion with profit
ratio reinvested.

Special Economic Zone (“SEZ”)
Activities for the development of special economic zones refers to investment business activities that
develop the comprehensive infrastructure to attract investments regarding modern technology,
innovations in agricultural production, clean production and other sustainable and environmental
developments.
► For VAT purpose, trading activities between entities established in SEZ and other Lao entities shall
be considered as import-export activities.
► Developer and investor in the SEZ shall receive special incentives such as customs, taxes, rental
and others according to concession agreement signed with the government.
Generalized System of Preferences (“GSP”)

Overview of GSP
► The GSP is tariff exemption or reduction treatment extended by developed countries to
developing countries and least developed countries (LDCs) with an aim to encourage
their trade and economic development. Laos is a beneficiary of 38 GSP-granting
countries: Australia, Belarus, Canada, European Union (EU 28), Japan, Kazakhstan,
New Zealand, Norway, Russia, Switzerland and Turkey.
(cont.)
Country Preference scheme Rules of Origin Transportation requirement
EU All products except arms and
ammunition (HS chapter 93)
exported from Lao PDR to the
28 member states qualify for
zero duties provided that the
rules of origin are fulfilled.
1. Wholly Obtained or Produced:
criteria which mostly covers
agricultural and agricultural
processed products, minerals etc.
which will be exempted from
import duty at 0% automatically.
2. Substantial transformation criteria:
Change in Tariff Heading (CTH);
Regional value contents (RVC) of
60% of the product value.
Non-manipulation is required.
Particularly, products imported
under GSP will be assumed to
have met direct transport
requirements. In case of
doubt, however, EU customs
authorities may still request
evidence of compliance.

(cont.)
Country Preference scheme Rules of Origin
Transportation
requirement
Australia Obtain the exemption tariff
rate (0%) and unlimited
quota for most import
products.
Products need to be excluded from import duty
under Australia GSP must follow ROO
requirement as following:
Unfinished products: Wholly Obtained: basically
are agriculture products (plants, animals),
minerals, etc. that are products of the origin by
automatically.
Processing products: Have to meet
requirement of Substantial Transformation and
final stage of the products have to produce in
LDCs as following:
1. Value added
2. Products specific rule such textile, fabrics,
hand tools, clothes and others.
Direct consignment
(cont.)
Transportation
requirement
Belarus/
Russia/
Kazakhstan
Reduction or exemption from
normal tariff rate (MFN) which
covered approximately 2800
items (10-digit levels of HS Code)
to certain agricultural and
Industrial products.
Agriculture products are : chapter
02 (meat), chapter 15 (oils and
animal, chapter 16 (foods) and
chapter 20 (vegetable and fruit
productions) and etc.
Industrial products are : chapter
25 (salt), chapter 33 (cosmetics),
chapter 40 ( rubber), chapter 44
(wood), chapter 94 (furniture) and
etc.
Products from Lao PDR that can
obtain preferential treatment to
Belarus, Kazakhstan and Russia
have to fulfill the criteria as follows:
1. Wholly Produced or Obtained
2. Goods produced from imported
raw materials, the value of
materials (raw materials, semi-
finished or finished products)
originating from other countries,
that do not benefit from
preferential tariff treatment, or
goods of unknown origin used in
the production does not exceed
50% of the value of goods.
Direct consignment

(cont.)
Transportation
requirement
Canada Obtain an exempt tariff
rate and unlimited quota
for most products,
except some agricultural
products even though
there is no tariff at all,
but the quota is limited,
such as: milk, chickens
and eggs.
To receive preferential treatment for general
products from Laos under the Canada GSP
Scheme the ROO requirement need to be met as
follows:
1. Wholly Obtained or Produced products: These
are basically agricultural products (plants,
animals), manufactured agricultural and
mineral products and so on.
2. Products that are produced with imported raw
materials should meet the Substantial
Transformation requirement as having at least
40% of value added.
Direct consignment
(cont.)
Transportation
requirement
Japan Obtain an exempt
tariff rate and
unlimited Quota for
most products.
Products that need to be excluded from import duty
under the Japan GSP Scheme must follow ROO
requirements as follows:
1. Wholly Obtained or Produced products: These
are basically agricultural products (plants,
animals), manufactured agricultural, mineral
products and so on.
2. For products which are produced from imported
raw materials, the products must undergo a
process of substantial transformation as follows :
a) Change in Tariff Heading: CTH at 4 digits level
or
b) Value Added ; or
c) Products specific rules such as textiles,
chemical products and so on.
Direct consignment
New
Zealand
About 99.5% of LDC
imports to New
Zealand obtain duty-
free under special
tariff preference.
- Wholly obtained in a LDC
- Party manufactured in a LDC (50% rule)
Direct consignment

(cont.)
Transportation
requirement
Norway Obtain 0 % of import tax
and unlimited of quota
free for all goods from
LDCs.
A product has its origin (originating status) in a
GSP-country if the product is followed the country
concerned:
1. Wholly obtained products: The products are
mainly primary products from agriculture,
hunting and fishing, mineral products extracted
from the soil or seabed of the country
concerned, products from sea fishing, etc.
2. Sufficiently worked or processed products:
Depending on each type of products.
Direct consignment
(cont.)
Transportation
requirement
Switzerland Obtain an exempt tariff
and unlimited quota for
all products.
In order to qualify Switzerland’s GSP,
Exporters have to meet the ROO
requirements as follows:
1. Wholly obtained or produced Goods:
basically are agriculture products (plants,
animals), minerals, etc.
2. Goods produced from import raw
materials that have to gone through
sufficient process.
Direct consignment

(cont.)
Transportation
requirement
Turkey Obtain duty- and quota-free
access to Turkish markets
for all industrial products
falling under chapters 25-97
(except chapter 93) and for
some agricultural products
covered by the customs
union between Turkey and
EU.
In order to qualify Turkey’s GSP, products have
to be on the list of preferential and also must to
meet the origin criteria following:
1. Wholly obtained or Produced (WO)
basically are agricultural products (plants,
animals), agriculture processing products,
minerals etc.
2. Goods produced from import raw materials
(non-origin of raw materials), the value
should not exceed 10% of export value
Direct consignment
Other consideration

Foreign exchange control
The transactions in foreign currency permitted are relatively limited in Laos. The
conversion of LAK into foreign currency is permitted only for some purposes,
such as:
► Import of goods
► Repayment of principal and interest from foreign loan
► Remittance of profit and dividend to foreign investor
► Transfer capital of foreign investor back to home or third country
► Transfer salary of foreigner back to home or third country
► Investment overseas
► Other purposes, e.g. medical treatment, education or travelling in overseas.
Questions

Contact us
Ernst & Young Lao Limited
Ernst & Young Lao Limited,
23 Singha Road, Capital Tower, 6th floor
Nongbone Village, Xaysettha District
Vientiane Capital, Lao PDR
Tel: +856 21 455 077
Fax: +856 21 455 078
Website: http://www.ey.com
Huong Vu, Partner – Tax Market Leader
Email: Huong.Vu@vn.ey.com
Ha Manh Nguyen – Tax Director
Email: Ha.Manh.Nguyen@vn.ey.com
Quoc Luu Bao – Tax Manager
Email: Quoc.B.Luu@la.ey.com

“Doing Business” booklet series
With a local market saturation and intense competition amongst domestic players, a business expansion to overseas is
increasingly gaining attention from investors. An effective tax risk management has posted crucial challenges to many
corporations investing in foreign countries. Changes in foreign tax law will inevitably affect existing and future cross-
border transactions. Taxpayers will need to keep abreast of global tax developments to assess the cash tax impact on
their operations on a timely basis.
As a starting point, to be well prepared for your outbound investment in CLMV+I, read our Doing Business booklet
series: <https://toi.boi.go.th/article/17/1867>
การลงทุนในสปป.ลาว
Doing Business in Lao PDR
2017
การลงทุนในกัมพูชา
Doing Business in Cambodia
2017
การลงทุนในอินโดนีเซีย
Doing Business in Indonesia
2017
การลงทุนในเมียนมา
Doing Business in Myanmar
2017
การลงทุนในเวียดนาม
Doing Business in Vietnam
2017
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firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst
& Young Global Limited, a UK company limited by guarantee, does not provide
services to clients. For more information about our organization, please visit
ey.com.
© 2018 EY Corporate Services Limited.
All Rights Reserved.
This publication contains information in summary form and is therefore intended for general guidance
only. It is not intended to be a substitute for detailed research or the exercise of professional judgment.
Neither EY Corporate Services Limited nor any other member of the global EY organization can accept
any responsibility for loss occasioned to any person acting or refraining from action as a result of any
material in this publication. On any specific matter, reference should be made to the appropriate advisor.
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