Ministry of Justice updated collection, Year 2002
LAO PEOPLE’S DEMOCRATIC REPUBLIC
PEACE INDEPENDENCE DEMOCRACY UNITY PROSPERITY
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National Assembly No. 03/95/NA
14/10/95
Law
On the
Promotion of Domestic Investment
Chapter I
General Provisions
Article 1: Role of the Law on the Promotion of Domestic Investment
The Law on the Promotion of Domestic Investment has the role of determining principles, forms, regulations, and measures regarding the promotion, protection, and management of domestic investment, to mobilize and make efficient use of investment sources, resources, and labor which are the latent driving forces of all parts of the economy in the territory of the Lao People’s Democratic Republic, contributing to the building of the country’s development for greater wealth, strength, for better standards of living for all peoples as well as for investors.
Article 2: Domestic investment
Domestic investment is the application of capital to production, the business operations of Lao citizens, including Lao nationals living abroad, resident aliens and stateless persons who live permanently in the Lao PDR.
Article 3: Socio-Economic Sectors in which Investments are Allowed
Domestic investors may invest in production, agro-forestry businesses, the processing industry, energy, mining, handicraft, communications, transportation, cons- ruction, tourism, trade, services, education, cultural, public health sectors, etc., save for those activities that prejudice national peace [and security], those that have serious immediate or long term impact upon the environment, health, the national culture or that is contrary to the rules and laws of the Lao PDR.
Article 4: Types, Forms, Vehicles of Investment
Domestic investments may be carried out:
· According to type of enterprise [whether that be] state, collective, private or joint-venture;
· In the form of a sole trader enterprise or as a company;
· In the vehicles of a partnership company, a limited company or a public company as defined in the Business Law.
Article 5: Method of Promoting Domestic Investment
The State promotes domestic investment by providing the services in information, technical expertise, credit, taxes and duties, and other means as provided for in this Law.
Article 6: Protection of the Rights and Interests of Investors
Assets and investments belonging to domestic investors will be fully protected by the rules and laws of the Lao PDR and will not be requisitioned, seized, or nationalized except if necessary for a public use in respect of which the investor will be compensated reasonably and actually.
Chapter II
Rules for the Management and Protection of Domestic Investment
Article 7: Filing an Investment Application
Any person seeking to invest in any socio-economic sector must file an application to establish and to register an enterprise with the commercial division as provided for in Article 16 of the Business Law.
Article 8: Investment Management
Domestic investment is to be managed by the commerce divisions and relevant sectors.
Article 9: Rights and Interests of the Investors
Domestic investors have the following rights and interests:
1. To receive protection from the State in accordance with rules and laws;
2. To freely carry out legal production and business;
3. To be owners of their materials, assets and the yields from their investments, i.e. the right to manage, use, transfer and succeed to such assets in accordance with rules and laws;
4. To receive facilitation in requesting credit with financial institutions in accordance with [relevant] rules;
5. To receive technical and technological assistance or instruction from the State regarding production and business operations;
6. To receive promotion and encouragement from the State in respect of marketing to include goods pricing;
7. To receive facilitation from the State in the establishment of and undertakings in respect of production, both domestically and abroad in accordance with rules and laws;
8. Are able to repatriate income or transfer such to a third country for investors whose native land is abroad after having completely fulfilled their legal obligations to the Government of Lao PDR in accordance with rules and laws;
9. To receive facilitation from the State in the entry into and exit from and stay in the Lao PDR for investors and his/her family whose native land is abroad;
10. To receive other facilitation from the State in respect of his/her production and business operation in accordance with rules and laws.
In the event there is a duty-free zone or a special economic promotion zone, the Government will issue specific separate provisions regarding the rights, interests, and obligations of domestic investors [relative thereto].
Article 10: Investors’ Obligations
Domestic investors have the following obligations:
1. To implement the project according phases and timing;
2. To carry out production and business operations in accordance with authorization to do so, a feasibility study, in accordance with the Business Law and other rules and laws of the Lao PDR;
3. To keep accounts as provided for in the Enterprise Accounting Law;
4. To report production and business activities reflecting reality and in a timely manner;
5. To completely, and timely fulfill tax and duty obligations and other obligations in respect of investment;
6. To attend to training and building professional expertise to Lao rank and file employees. In recruiting such employees, if Lao nationals and expatriates have equal qualifications, priority shall be given to the Lao nationals.
[ Investors are to ] attend to social welfare, health, and worker safety;
7. To provide facilitation to organizations and activities of mass organizations, primarily trade union organizations within one’s enterprise;
8. To strictly adhere to the Labor Law;
9. To protect the environment, ensure that the production regime does not affect the public, public peace and order or national security;
10. To create reserves according to rules and laws
11. To properly, clearly, and accurately notify one’s project address to the Committee for Domestic Investment Promotion. If one seeks to move or change the project address, permission must first be received from the relevant sector and Committee for Domestic Investment Promotion must be notified at least ninety days in advance.
Chapter III
Prioritized Investment
Article 11: Prioritized investments
In the promotion of domestic investment, the state prioritizes investments in the souci-economic sector, investment zones, an amount of capital or technology in respect of which the Government will determine from time to time.
Article 12: Prioritized Sectors
The State gives priority to certain sectors, i.e.: the agora-forestry sector, industry and handicrafts, telecommunications, transportation, education, public health, culture, sport, science and technology serving production, business, and the environment.
Article 13 : prioritized Areas
The State gives priority to investments carried out in target areas, rural areas, mountainous areas, remote areas, and other prioritized areas as determined by the Government .
Article 14: Amount of Capital and Prioritized Technology
Large-scale investments or investment using advanced technology, that are significant in socio-economic development of the Lao PDR will be prioritized by the State.
Article 15 : Detailed Definition regarding priority
The Government will determine details regarding projects and priorities in sectors, areas, amount of capital, and technology as provided for in Articles 12,13, and 14 of this Law
Article 16 : Application for Priority
Anyone seeking priority in their investment must file an application with the Committee for Domestic investment Promotion by disclosing the following details:
Name and surname, nationality, profession, address, objectives, level of projected activity, sector to be invested in, capital, capital sources to be used, area and place to de invested in, number of partners or shareholders, raw materials, technology to be used, including product distribution and other details which are seen necessary as provided for in the [ application ] form.
Article 17 : Conditions for Granting Priority
The investor who will receive priority must completely fulfil the following conditions :
· The investment is in accordance with a prioritized goal
· Have financial status and must notify a capital source that is guaranteed for the investment,
· Have a good business history and have suitable technicians to carry out production and business operations.
· Have legally established an enterprise, have properly kept accounts and adhered to regulations according to the [applicable] rules for those who have already been involvolved in production and business operations,
· Investments that do not pose serious danger to the environment
· Have a permanent profession and have resided in Lao PDR at least five years for an alien or a stateless person.
Article 18 : Rights, Interests and Obligations of those who have Received Priority
In addition to the rights, interests, and obligations of domestic investors as provided for in articles 9 and 10 above, the investor who has received priority will still receive additional rights and duties as follows :
1. The State will promote [the investor] by allowing [them] to use a development fund to support prioritized domestic investments by providing medium and long-term loans. The Government will determine the organization and the activities of that fund;
2. The State creates conditions to encourage banks and other financial institutions to provide prioritized investors with medium and long-term low-interest credit. In addition, the State will also encourage the banks and other financial institutions to provide loan guarantees for those investors both domestically and externally;
3. The State reduces or exempts the following taxes and duties:
· Importation of machinery, equipment, and vehicles necessary to a project’ s production and import taxes and duties will be collected upon such at one percent of that value;
· Importation of raw materials, semi-finished products, plant and animal species, or pesticides that are not locally available or are not adequate for production, processing or export assembly will be exempt from duties and business turnover tax on imports. When such goods are exported there will also be an exemption of export duties on those goods;
· For raw materials and semi-finished products for processing or assembling as products to substitute for imported goods, a one percent import duty must be paid and those goods shall be exempt from the business turnover tax on imports;
· Prioritized investments that carry out activities in urban areas are to pay profit taxes at the rate of twenty percent of net profits derived from the year end accounts;
· Prioritized investments that carry out activities in rural areas or general plains areas are to pay profits tax at the rate of fifteen percent of net profits derived from the year end accounts;
· Prioritized investments that carry out activities in target areas, mountainous areas, remote and unpopulated areas will receive a reduction of or exemption from the profit tax for two to five years. At the end of that tax reduction or exemption period, profits tax is to be paid at the rate of ten percent of the net profit derived from the year end accounts.
Profit tax reduction or exemption is determined in Articles 31 and 38 of the Tax Law. That reduction or exemption shall commence from the first day of production or business operations. For import tax exemption, defined in Article 18, clause 3 , paragraphs 1,2, and 3, shall commence from the date of the Priority Certificate.
During the profit tax exemption period, there will also be an exemption from the dividend and the de minimum profit tax as well.
4. The State will assist in finding the investment location, will support the building and thinning of technical personnel, and will facilitate undertakings and business relations both domestically and externally.
5. The investor must fulfil obligations according to the conditions and priority objectives as established by the Government. In case of violation, priority will be lost.
Chapter IV
Organization of the Committee for Domestic Investment Promotion
Article 19 : Location and Role
The Government organizes a Committee for Domestic Investment Promotion at the central and local levels, hereinafter referred to in abbreviation as “CDIP” which has the role to study and draw up strategic investment plans, and to promote and protect domestic investment.
The CDIP at the local level has a permanent office to assist in works at the Committee for Planning and Cooperation.
The CDIP at the local level is to establish a permanent office at the Planning and Cooperation Division to assist the CDIP’s works at the provincial and municipal levels.
Article 20 : Rights and Duties of CDIP
CDIP has the following rights and duties:
1. To mobilize and induce those who have capital to invest by organizing meetings to disseminate specific policies of promotion;
2. To advertise, disseminate, and provide data necessary for investment,
3. To consult and advise in respect of methods and procedures to apply for investment approvals and the process for requesting priority for those who are interested;
4. To study and consider applications for investment priority and give a response within a period of forty-five days from the date that the application is received. In the event that an investor has completely met all conditions, a Priority Certificate is to be issued. The Priority Certificate must indicate the sector in which investment is to take place, tax and duty exemptions or reductions and timing. Other contents are defined in the form of that certificate;
5. To study and consider tax and duty exemptions or reductions including the period for implementing such policies as provided for in the Customs Law and the Tax Law;
6. To encourage relevant sectors in respect of investment approvals;
7. To study and establish proper protective measures for investments in conformity with the laws;
8. To follow-up and monitor adherence to an investments prioritized objectives;
9. To study methods of resolving problems arising in respect to investments;
10. To coordinate with relevant sectors and local administrative authorities in the studying and consideration of granting priorities approval, tax and duty exemptions or reductions and follow-up and monitoring the adherence to prioritized objectives of the investor.
Consideration and approval in respect of requests for priority at the central level are the right and duty of the Government. For localities, it’s the right of the provincial or prefecture CDIP.
Chapter V
Dispute Resolution, policies toward Productive