Expat Taxes in Laos

Expat Taxes in Laos

Learn about the expat taxes in Laos.

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Introduction

The number of Americans residing in Laos is believed to be in the thousands. For a variety of reasons, including the friendly natives, the high quality of life, the natural surroundings, and the culture and food, living in Laos is a fantastic experience.

For a variety of reasons, including the friendly natives, the high quality of life, the natural surroundings, and the culture and food, living in Laos is a fantastic experience. What precisely do you need to know about filing US expat and Laotian taxes as an American expatriate residing in Laos?

Regardless of where they live or how their income is derived, all US citizens and green card holders who make a minimum of about $10,000 (or just $400 for self-employed persons) must submit a US federal tax return and pay taxes to the IRS.

The good news is that if you pay income tax in Laos, you may use numerous exclusions and exemptions to avoid paying tax to the IRS on the same income.

US Taxes for US Expats

If you make more than $10,000 (or $400 in self-employment income), you must file IRS Form 1040, regardless of where the money comes from. While all unpaid US taxes must be paid by April 15th, expats are given an automatic extension of filing until June 15th, which can then be extended again until October 15th upon request.

You must also submit form 8938 to report any overseas assets worth more than US$200,000 per person, excluding your property if it’s owned in your own name.

If you have at least US$10,000 in one or more overseas bank and/or investment accounts during the tax year, you must additionally file FinCEN form 114, generally known as a Foreign Bank Account Report or FBAR.

If you pay Laotian income tax, there are many exemptions that will allow you to pay less tax or no US income tax to the IRS on the same income.

The primary ones are the Foreign Earned Income Exclusion, which allows you to deduct the first $100,000 of foreign earned income from US tax provided you can show you’re a Laotian resident, and the Foreign Tax Credit, which provides you a $1 tax credit for every dollar of tax you paid in Laos.

If required, these exclusions can be combined. Even if you don’t owe any taxes to the IRS, you must submit a federal return if your income exceeds US$10,000 (or $400 if you’re self-employed).

It’s not worth not submitting or omitting anything on your return because the US and Laotian governments exchange taxpayer information, and Laotian banks pass on US account holders’ account information to the IRS. For expats, the consequences for improper or incomplete filing are severe to say the least.

If you’re a US citizen, green card holder, or US/Laotian dual citizen who has been residing in Laos but was unaware that you were required to submit a US tax return, don’t worry: the IRS Streamlined Procedure allows you to file your taxes without paying any penalties for being delayed. However, don’t wait too long in case the IRS comes after you.

Expat Taxes in Laos
Vientiane in Laos

Laotian Taxes for Residents and Expats

Laotian residents and non-residents are taxed only on income earned in Laos, on a scale ranging from 0% to 25%, with the exception of expats who signed work contracts in Laos before to 3/1/11, who are taxed at a fixed rate of 10% for the life of their contract.

In Laos, there is no legislative definition of residency for tax reasons, therefore expats should obtain credible local assistance if they are unsure about their tax duties.

The fiscal year in Laos is the same as the fiscal year in the United States, which is the calendar year. If your sole source of Laotian income is work in Laos, you will be taxed at source and will not be required to file a tax return. Tax returns are expected by March 31st if not filed before. Laos Tax Department is the name of the country’s tax authority.

Personal Income Taxation in Laos

All single traders and independent contractors are liable to Personal Revenue Tax on their business income received within Laos. Income received in Laos in the form of salary, as well as any other sort of payment, is subject to Personal Income Tax for both locals and foreigners.

Personal Income Tax applies to expats who work in Laos and get payment from within the country. This is true independent of their occupation or length of stay in Laos. This also applies to international visitors who remain in Laos for longer than 183 days.

Personal Income Tax Rates

The following rates apply to personal income tax in Laos:

  • Manufacturing is subject to a 1% personal income tax, which applies to agriculture, industry, and other producing industries.
  • The rate of taxation on commerce is 2% of gross income.\
  • The gross revenue of services is taxed at a rate of 3%.

In addition, in Laos, the following monthly Personal Income Tax rates apply:

  • For a monthly income level ranging from 0 to 1,300,000 LAK (Lao Kip), the PIT calculation is based on 1,300,000 LAK. Personal income tax is charged at a rate of 0%, hence the total tax liability is 0 LAK.
  • For a monthly income threshold ranging from 1,300,000 LAK (Lao Kip) to 5,000,000 LAK (Lao Kip), the PIT calculation starts at 3,700,000 LAK. Personal income tax is charged at a rate of 5%, resulting in a total tax burden of 185,000 LAK.
  • For a monthly income level ranging from 5,000,001 LAK (Lao Kip) to 15,000,000 LAK (Lao Kip), the foundation for PIT calculation is 10,000,000 LAK. Personal income tax is charged at a rate of 10%, resulting in a total tax burden of 1,185,000 LAK. This particular level is taxed at 1,000,000 LAK.
  • For a monthly income level ranging from 15,000,001 LAK (Lao Kip) to 25,000,000 LAK (Lao Kip), the foundation for PIT calculation is 10,000,000 LAK. Personal income tax is charged at a rate of 15%, resulting in a total tax burden of 1,500,000 LAK. The tax for this particular threshold is 2,685,000 LAK.
  • For a monthly income threshold ranging from 25,000,001 LAK (Lao Kip) to 65,000,000 LAK (Lao Kip), the foundation for calculating PIT is 40,000,000 LAK. Personal income tax is charged at a rate of 20%, resulting in a total tax burden of 8,000,000 LAK. This particular level is taxed at 10,685,000 LAK.
  • The relevant tax rate is 25% for monthly income thresholds of 65,000,001 LAK (Lao Kip) or more.

Similarly, the following are Laos’ yearly Personal Income Tax Rates:

  • For an annual income threshold ranging from 0 LAK (Lao Kip) to 15,600,000 LAK (Lao Kip), the PIT calculation is based on 15,600,000 LAK. Personal income tax is charged at a rate of 0 percent, hence the total tax liability is also 0 LAK.
  • For an annual income threshold ranging from 15,600,001 LAK (Lao Kip) to 60,000,000 LAK (Lao Kip), the basis of computation for PIT is 44,400,000 LAK. Personal income tax is charged at a rate of 5%, thus the total tax burden is also 2,220,000 LAK.
  • For an annual income threshold ranging from 60,000,001 LAK (Lao Kip) to 180,000,000 LAK (Lao Kip), the basis of computation for PIT is 120,000,000 LAK. Personal income tax is charged at a rate of 10%, hence the total tax burden is also 14,220,000 LAK. The tax for this particular threshold is 12,000,000 LAK.
  • For an annual income threshold ranging from 180,000,001 LAK (Lao Kip) to 300,000,000 LAK (Lao Kip), the basis of computation for PIT is 120,000,000 LAK. Personal income tax is charged at a rate of 15%, hence the total tax burden is also 32,220,000 LAK. The tax for this particular threshold is 18,000,000 LAK.
  • For an annual income threshold ranging from 300,000,001 LAK (Lao Kip) to 780,000,000 LAK (Lao Kip), the basis of computation for PIT is 480,000,000 LAK. Personal income tax is charged at a rate of 20%, hence the total tax burden is also 128,220,000 LAK. The tax for this particular threshold is 96,000,000 LAK.
  • The relevant tax rate is 25% for an annual income of 780,000,001 LAK (Lao Kip) or more.
  • Dividend Withholding Tax: A 10% Withholding Tax is also levied on dividends.
Expat Taxes in Laos
Water lilies in Laos

Corporate Income Taxation in Laos

Corporate Income Taxation applies to entities registered in Laos on their worldwide income. This contains all legal entities formed in Laos. Companies incorporated in Laos under foreign law, on the other hand, are exclusively liable for money generated and derived in Laos.

The following is the typical corporate tax rate:

  • Companies listed on the Laos stock exchange are taxed at a rate of 13% for the first four years after registration, down from 19% before.
  • Tobacco product manufacturers, importers, and distributors pay a 22 percent tax on profits.
  • Companies in the mining industry with concession agreement: Profits in this group are taxed at a 35% rate.
  • Trading and Research Centers: These enterprises are subject to a 5% earnings tax.
  • Green technology companies: The applicable profit tax rate is 7%.
  • All other firms that do not fit into one of the aforementioned categories: The relevant tax rate is 20%.

Lump Sum Taxes

Small and medium-sized businesses are subject to this taxation structure. The Profit Tax is compensated by this tax. The following are the lump-sum tax rates:

  • There is no lump sum tax imposed on businesses with yearly revenue of less than 50 million LAK.
  • For a revenue of more than $50 million but less than $400 million:
    • Lump Sum Tax is imposed at a rate of 1% on manufacturing and agricultural businesses.
    • For commerce-related businesses, the Lump Sum Tax is imposed at a rate of 2%.
    • Lump Sum Tax is charged at a rate of 3% on service carrying firms.

It is highly advised to consult with a US expat tax professional if you have any concerns or questions regarding your tax status as a US expat residing in Laos.

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