Investment in Lao PDR

Transcription

1 Investment in Lao PDR A Practical Guide 29 April, 2011 By Mark Jerome Partner KPMG Lao

2 Investment Time Lines 1

3 Investment Time Lines Time required to incorporate a local company - United Kingdom 15 minutes - Thailand 3 months - Lao 6 months Planning Point Start EARLY!!! 2

4 Foreign Investment Law 3

5 Foreign Investment Law Current law last updated in 2004 New law written in Not yet enacted - Less favorable tax environment Planning Point There may be advantages in investing under the current law with the low tax rates on offer - It is not clear whether the current rules may be grandfathered should there be a law change now 4

6 Foreign Investment Law Type of investment under FIL - Wholly owned foreign company - Joint venture with Lao investors - Business co-operation by contract Other types of investment - Branch Banking and Insurance only - Partnership not used to any degree 5

7 Foreign Investment Law Foreign investment without a local presence - Contracted relationship i.e. Distributorship agreement with Lao companies - Import/export arrangements - Representative office non-revenue generating 6

8 Foreign Investment Law Planning Point Decide what vehicle you need Do you need to invest under the FIL? If so do you need to agree contracts - i.e. Joint venture agreement? These contracts need to be submitted as part of the investment process We see delays all the time on this issue 7

9 Foreign Investment Law Ministry of Planning and Investment (MPI) - Authority in charge of investment Investment Promotion Department (IPD) - Within MPI and in charge of operation management Investor needs to submit to IPD - Standard application form in Lao - Feasibility study of project - Articles of Association - MOU Joint venture - Enterprise name certificate - Any other information requested 8

10 Foreign Investment Law Planning Point Before starting the application process agree whether it is an allowable activity Certain activities are reserved for locals and these can change KPMG can discuss with the relevant Ministry before you start the FIL process 9

11 Foreign Investment Law Licenses required - Investment licence - Tax licence (Annual) - Business operation licence - Capital Importation certificate - Bank of Lao - Company seal - Company sign approval 10

12 Foreign Investment Law THEN- Depending on activity - Exploratory licenses - Concession agreements - This list goes on dependent upon sector, location and activity Planning Point This all takes time and that time can be extended where the activity is outside of Vientiane. This needs to be allowed for in your business plan. 11

13 Foreign Investment Law Foreign Investment Law provides investors with: - Legal regime protecting assets of foreign investors - Ability to lease land - Ability to remit foreign currency overseas 12

14 Taxation 13

15 Taxation Tax Rate VAT One domestic VAT rate of 10% Excise Tax From 5% to 90% depending on the goods or services Income Tax The rate is capped at 28% Profit Tax The new rate from 1 October is 28 % for foreign invested companies depending on the zone and activity 14

16 Taxation Tax Minimum Tax Rate 0.25% of turnover for domestically produced goods 1% of turnover for services and trading company Import Duties From 5% to 40% Fees Fixed or ad Valorem 15

17 Taxation Other tax Incentives For certain activities and within Minimum investment there are further tax breaks on offer Zone 1 - Areas with no economic infrastructure - Corporate tax holiday for 7 years - Thereafter 10% 16

18 Taxation Other tax Incentives For certain activities and within Minimum investment there are further tax breaks on offer Zone 2 - Areas with a moderate level of economic infrastructure - Corporate tax holiday for 5 years - Thereafter 7.5% for 3 years - Thereafter 15% 17

19 Taxation Other tax Incentives For certain activities and within Minimum investment there are further tax breaks on offer Zone 3 - Areas with good economic infrastructure - Corporate tax holiday for 2 years - Thereafter 10% for 2 years - Thereafter 20% 18

20 Taxation Special Economic Zones There are certain special zones that have favorable tax treatment The rules will be specific for each zone, as will the benefits 3 special zones at: - Savan-Xeno - Luang Namtha - Bokeo 19

21 Accounting for tax Taxation Lao tax law requires use of locally licensed accounting software for corporate tax submissions Many companies maintain 2 sets of books as a consequence Planning Point This is often over looked with companies preparing accounting based on their usual accounting software This will not be accepted by the tax department KPMG can assist - We have a designated department dealing with Lao tax accounting 20

22 Accounting & Audit 21

23 Accounting & Audit Audit is required for companies with a balance sheet total of more than approximately USD 6m Currently no Lao accounting standards - Rules determined by the Accounting Law (2007) Changes are being considered: - IFRS / IFRS for SMEs - Accounting and Auditing standards Lao Accounting for tax is not subject to audit 22

24 War Story 23

25 War Story Tax liability assessed as twice the total of four years profits Why? VAT and BTT ignored Benefits-in-kind for staff ignored Withholding taxes on cross border payments ignored High level of travel costs - Only.04% of turnover is an allowable deduction Lack of receipts - Some deductions denied 24

26 Key Points 25

27 Key Points Very bureaucratic Government employees can be pedantic Build the slowness into your time frame Take proper advice Recruitment will be difficult Staff turnover may be high Use your expatriates carefully limited supply 26

28 KPMG in Lao PDR 27

29 KPMG in Lao PDR About us One office - Located in Vientiane Around 50 employees - Both expatriates and Lao nationals Largest firm in Lao 28

30 What we do Audit Accounting Tax and legal Services Advisory Services Translation Services Work Permit Services KPMG in Lao PDR 29

31 KPMG in Lao PDR Why are we different We service work from Lao - we do not fly in teams from Vietnam or Bangkok We invest in our people to service our clients locally We have locally resident partners We are committed to developing our Lao business and people We are part of KPMG Thailand and can access those resources - i.e. specialist staff, training, technical assistance etc. 30

32 Question / Comments 31

33 Thank You 32

34 Presenters contact details John Bowes Mark Jerome KPMG Lao Co., Ltd KPMG Lao Co., Ltd KPMG Lao Company Limited, a Lao limited liability company [and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).