DOING BUSINESS IN LAOS IN 2020
Since 2003, Healy Consultants Group PLC has assisted our Clients with registering their business in Laos. Our services include i) Laos business registration and licensing ii) corporate bank account opening services in Laos and abroad iii) employee recruitment strategies iv) visa strategies and v) office rental solutions in Laos.
|Compare different Laos entities||Tax resident LLC||Fast setup solutions||Free zone LLC||Representative office||Branch office|
|Also known as||Limited company||Shelf company||SEZ company||RO||Branch|
|Best use of company?||All products/ svcs||Close client deal now||Manuf/ export trading||Marketing/ research||Specific projects|
|How soon to invoice Clients?||4 weeks||2 weeks||4 weeks||6 weeks||6 weeks|
|How soon can you hire staff?||4 weeks||2 weeks||4 weeks||6 weeks||6 weeks|
|How soon can you sign a lease agreement?||1 week||1 week||1 week||1 week||1 week|
|How long to supply corporate bank a/c?||6 weeks||6 weeks||6 weeks||6 weeks||6 weeks|
|How long to supply co. reg / tax numbers?||4 weeks||2 weeks||4 weeks||6 weeks||6 weeks|
|Corporate tax rate on annual net profits?||24%||24%||0%||Cannot trade||24%|
|Limited liability entity?||Yes||Yes||Yes||No||No|
|Government grants available?||Yes||Yes||Yes||No||No|
|Govt. approval required for foreign owners?||Yes||Yes||Yes||Yes||Yes|
|Res. director/partner/ legal rep. required?||No||No||No||No||No|
|Min. paid up share capital?||US$1||US$1||US$1||US$50,000||None|
|Can bid for Government contracts?||Yes||Yes||Yes||No||Yes|
|Corporate bank account location?||ACLEDA Bank||BCEL||Indochina Bank||ICBC Vientiane||Standard Chartered|
|Can secure trade finance?||Yes||Yes||Yes||No||Yes|
|VAT payable on sales to local customers?||10%||10%||0%||Cannot trade||10%|
|Average total business set up costs?||US$14,750||Request a proposal||Request a proposal||US$19,950||US$28,050|
|Average total engagement period?||2.5 months||2 months||2.5 months||3 months||3 months|
Laos business setup summary
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Advantages and disadvantages
Advantages of Laos company registration
- A limited liability company can be registered in Laos with a minimum of one shareholder and one director of any nationality. By using Healy Consultants’ services, our Clients will not need to travel to Laos in order to complete their engagement;
- Laos is an attractive place to form a company in the mining and energy sectors because:
- Laos’ territory benefits from abundant natural resources, notably when it comes to copper, gold and silver. The government is also actively promoting foreign investment in this industry, which is determinant for the country’s foreign exchange and economic development;
- Laos is also the emerging powerhouse of Southeast Asia and a significant exporter of electricity to Thailand, thanks to several dams currently existing or under construction on the Mekong River;
- Laos also benefits from a strategic location, with frontiers to Vietnam, China, Thailand and Cambodia. Infrastructure projects connecting Kunming in China to these Southeast Asian nations will most likely pass by Laos, creating opportunities for investment projects by foreigners.
- Laos is also an attractive market for foreigners setting up businesses in the tourism and light manufacturing industries because:
- The workforce in Laos is very low-cost, with a minimum wage of approximately US$80 per month. Investors can therefore expect low labor costs than in neighboring Thailand and most other ASEAN countries;
- In spite of its poor infrastructure, Laos is still strategically placed within close proximity to major Asia markets and has access to a regional market of well over 1.5 billion people;
- The Laos government has established 10 Special Economic Zones which offer a number of investment incentives such as reduced tax rates of 20%. Also tax holidays are granted to foreign investors who would otherwise have to pay taxes at the rate of 20% or 1% of turnover, whichever is higher;
- The European Union and Japan have granted Laos trading privileges such as tax exemptions on imports where certain listed items fall within a special quota. This in turn means products from Laos can access global markets with either free of tax or with much lower tariffs.
- The government of Laos with the aid of Asian Development Bank had launched a Destination Management Plan in 2016, which allowed Laos to become an excellent location for tourism development and related industries. This plan is aimed to market and promote i) the hospitality skills; ii) train people for providing guided tours; and iii) carry out responsible tourism in the country. The government also plans to promote ecotourism to attract an increasing inflow of tourists over the coming years.
Disadvantages of Laos company registration
- It is difficult for foreigners to start a business in Laos because:
- Its takes at least four months to register a company in Laos and open its local corporate bank account, due to bureaucratic procedures and the need to obtain multiple approval from various Government agencies, which will vary according to the specific of the planned business;
- The minimum share capital for a company registered in Laos is US$1. However, foreigners forming a company in Laos are required, depending on the nature of the investment, to inject a capital of at least US$125,000. This capital must be paid-up before company incorporation;
- Some industries are furthermore either closed to foreign investors or subject to important restrictions. They notably include fishery, construction and hotel and restauration industries. The detailed list of closed and restricted sectors can be found in the Investment Guide to Laos by UNCTAD-ICC (appendix 1);
- It is required to translate all documents to be submitted by the shareholders, directors and bank signatories into the local language (Lao), resulting in additional costs and time spent on the engagement;
- For all the reasons above, Laos is currently ranked by the World Bank as the 2nd most difficult country in Asia for its procedures to start a business.
- After Laos company formation, our Clients will also have to face the following difficulties:
- Low sales – Laos is one of the world’s least developed countries, with a population of only seven million and a GDP per capita of only US$1,700;
- Poor connectivity to overseas markets – Laos is a landlocked country, with very poor roads and no railroads therefore making it quite difficult to transport products within as well as out of the country. According to World Bank’s Doing Business in Laos the cost of exporting a container from Laos is US$1,950 which is quite high in comparison to other East Asia and Pacific countries where it costs US$856;
- Corruption and bribery – Laos is ranked as the third most corrupt country in Southeast Asia least corrupt country on the 2018 Corruption Perceptions Index by Transparency International;
- Communication challenges – In Laos, very few people speak English, consequently language is a barrier when conducting business especially outside the tourism industry.
- Laos still has some major restrictions on its foreign trade regime that puts a barrier on the country’s global integration with the world market. This further hinders Laos’s business and investment environment. Some of the main barriers to the country’s trade and commerce activities are i) inequality in its tax administration system towards foreign investors; ii) time-consuming and lengthy procedures to acquire government approval for investment and iii) inadequate and poor supply of infrastructural facilities.
Best uses for a Laotian companyMost Clients willing to register a company in Laos are either foreigners living in Laos and willing to start a small business in the hospitality and restauration industry or large foreign corporations involved in infrastructure or mining projects in Laos.
- Time to incorporate: Seven weeks
- Cost to set up: US$18,750
- Minimum capital: US$1
- Physical office required: No
- Shareholders: 1
- Directors: 1
- Company secretary: No
- Resident director: No
- Corporate tax rate: 24%
- Corporate tax base: Worldwide
- Shelf companies: No
- Main company type: Limited Company
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