The Government has issued the Decree on Special Economic Zones ("SEZs") No.188/GOV, dated 07 July 2018 ("Decree"), which provides tax incentives to investors in Lao Specific and Special Economic Zones.
Based on the Decree, SEZ developers engaged in road construction, electricity and water supply and drainage systems will be awarded value-added tax ("VAT") exemption. SEZ developers engaged in other construction activities are mandated to pay 50 percent of the VAT rates as stipulated in the VAT law.
Those investing in industries such as tourism, industrial production, services, health, education and real estate will enjoy a 16-year profit tax exemption in "zone 1" locations or the poor and remote zones with socio-economic infrastructure unfavorable to investment. They will enjoy an 8-year profit tax exemption if they invest in "zone 2" locations or zones with socio-economic infrastructure favorable to investment. After the stipulated period, they will need to pay 35% of profit tax rates as provided for in the taxation law.
Factories that aim to produce for 100% export will enjoy VAT exception and pay 50% of VAT rates as stipulated in the laws.
A foreigner who purchases properties in SEZs amounting to US$100,000 or more will be given a 10-year multiple-entry visa. This privilege is extended to his wife and children. The multi-entry visa may be extended.
SEZs were established in Laos in 2002. There are currently 12 such zones. Based on the latest report from the SEZ Promotion and Management Office, there are approximately 377 domestic and overseas investors in the zones, covering an area of 19,612 hectares with a total registered capital of US$8 billion.
Policy-makers have drafted a law that provides guidelines for the development and management of a railway network. This is to maximise the benefits of rail transport and drive socio-economic development.
Under article 4 of the draft law, local and foreign companies are encouraged to invest in railway development and commercial operation in various forms, such as public-private partnerships and concessions.
The draft law outlines the process that railway developers must undergo, including carrying out surveys and feasibility studies, and coming up with designs. They must also comply with other relevant procedures to ensure the proper development, management and commercial operation of a rail network. The draft law also offers early and reasonable compensation for people who will be relocated as a result of the development of a railway system.
The draft law, which is being canvassed to gather public feedback, is expected to be submitted to the National Assembly for debate and approval at the end of this year.
The Government, which currently owns just 3.5 km of the rail track that links Vientiane with Thailand's Nong Khai province, plans to develop a rail network to convert it from being a landlocked place to one that is linked within the region. The construction of a 417-km railway connecting Vientiane to the Chinese border is on track and is expecting its completion in 2021. Plans for other railways are also in the pipeline, with the aim of connecting parts of Laos to neighbouring countries.
The Government believes that a railway network is crucial to attract foreign investment and promote production-based industries and services. Local businesses welcome this initiative, highlighting that their competitive edge is currently being undermined by the high cost of road transport. With an efficient railway network in place, they are able to lower their overhead and operating expenses.
