On 14 May 2021, the Ministry of Planning and Investment ("MPI") issued Instruction No. 0760/MPI on the Promotion of Investment Incentives concerning the State Land Rental and Concession Fee ("Instruction"). The Instruction supplements the Law on Investment Promotion of 2016 by clarifying (i) the procedural requirements in obtaining an incentive certificate; (ii) the general investment and activity-specific requirements; and (iii) zone categories for various districts. This Instruction applies to enterprises in Lao PDR that invest in investment promotion activities and are authorized to invest in accordance with the Law on Investment Promotion No. 14/NA dated 17 November 2016 ("Law on Investment Promotion").
Incentive Certificate
Legal entities must submit an application for an incentive certificate to the appropriate section of MPI (which will coordinate internally and with other governmental agencies, including the Ministry of Finance). If the activity of the applicant is deemed eligible and all requirements are met, the authorities will issue the incentive certificate within 30 working days. However, according to the Instruction, large investment projects that have signed a concession agreement with the Lao government, and are subject to a National Assembly resolution on incentives beyond those provided in the Law on Investment Promotion, do not have to apply for an incentive certificate.
The Instruction sets out the obligations that incentive certificate holders must comply with. Failure to rectify any breach within the prescribed time after an initial warning may result in the tax incentives being withdrawn.
Investment Requirements
The Instruction sets out two categories of investment requirements:
- General investment requirements - All legal entities seeking investment promotion incentives shall fulfil the Horizontal Requirements in the Instructions. This includes the minimum levels of investment in the promoted sectors and minimum quotas for employment of Lao technical staff or workers, as well as the requirement to pay registered capital, fulfil tax obligations and comply with all applicable laws and regulations.
- Specific investment requirement - There are also specific requirements that apply to 108 activities within the promoted sectors in the Law on Investment Promotion.
Zones
The Law on Investment Promotion offers different promotional incentives based on the location or "zone" of the activity, with zone 1 being remote areas with limited infrastructure, zone 2 for areas with better socio-economic infrastructure to support investment, and zone 3 for special economic zones. The Instruction clarifies the districts that fall into zone 1 and zone 2. With respect to the areas classified as zone 3 (i.e. special economic zones), they shall comply with the specific regulations such as the Decree on Special Economic Zone.
