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Payroll & Tax in Laos

Laos payroll & taxation

There are specific rules for payroll and taxation in Laos, depending upon whether your company employs foreign nationals or local Lao employees. As Laos has some complex compensation and taxation laws, and many companies in Laos do not actually require a payroll all year round, they therefore look to outsourcing payroll.

Your Payroll Options in Laos

Remote payroll

A remote payroll in Laos is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Laos. The only option for a non-resident company to payroll its employees (both local and foreign) in Laos is to use a fully outsourced service like a GEO or FESCO which will employ and payroll the staff on their behalf.

Local payroll administration

In some cases, a company will register their business in Laos under one of the forms available, (RO, WFOE or JV) but prefer to have another company administer its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal payroll

Larger companies with a commitment to Laos may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Lao payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Lao employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Laos to a GEO, like Shield GEO. This is possible for both foreign workers and Laos nationals. This is the easiest, fastest and safest way to payroll staff in Laos.

Shield GEO manages all aspects of payroll for workers in Laos, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Laos

Information Explanation
Currency ?

Lao kip (LAK)

Employee Information Required ?

The information required from new employees for payroll are:

  • Information about each worker employed by the enterprise, including their name, date of birth, and address.
  • All indications concerning the work performed, wages or salary to be paid, and any leave requirements or holiday entitlments
Tax Registration Requirements ?

Enterprises operating in Laos are required to submit the following documents to the Tax Department in order to register to pay direct and indirect taxes:

  • Application form
  • Resident certificate of managers
  • List of assets
  • List of employees and estimated salaries
  • Copy of lease agreement
  • Office location certificate
  • Map signed and sealed by the village chief
  • 2 photos, size 3cmx4cm, of the Managing Director(s)
  • Copy of the resolution of formation
  • Copy of the ERC
  • Copy of ID cards

The process takes around 14 days at a cost of LAK 125,000.

Social Security Registration ?

To register workers for social security insurance, an application must be made with the Social Security Office, with the application forms available at the agency in charge of registration.

Employees and employers are both required to participate in the social security regime and are expressly forbidden from entering into alternative agreements to avoid participation in the official scheme.

This process takes approximately a week.

Documentation Required for New Employees ?

The following documentation is required for new employees:

  • Employment contracts
  • Work permits (LA-B2 visa), applicable for foreign workers only
  • Evidence of established internal regulations, stipulating calculation and payment of wages, working hours, health and safety measures, and personal leave

Tax Figures

Information Explanation
Corporate Income Tax ?

24%

Income Tax Rate ?
Grossed income Tax Rate (%)
LAK 1 - 1,500,000 5%
LAK 1,500,001 – 4,000,000 10%
LAK 4,000,001 – 8,000,000 15%
LAK 8,000,001 – 15,000,000 20%
> LAK 15,000,000 25%

Government employees are subject to a flat tax rate of 10%.

Payroll Tax ?

N/A

Sales Tax ?

VAT: 10%

Withholding Tax ?

Dividends: 10%
Royalties: 5%
Interest: 10%

These may be reduced under applicable tax treaties.

Income Tax (Personal Allowance) ?

N/A

Employee Social Security (EE SS)

Employees contribute 4.5% of their salary towards a general pension payment under the compulsory social security system.

Employer Social Security (ER SS)

Employers contribute 5% of the employee’s salary towards a general pension payment under the compulsory social security system.

Payments

Information Explanation
Payment Mode ?

There is no statutory method for paying workers, the standard methods are either direct bank payment or payment via cheque.

Frequency of Salary Payment ?

This is at the discretion of the employer.

Invoice / Payslips required ?

There is no legal requirement to provide invoices or payslips.

Minimum Wage ?

The minimum wage is LAK 900,000 per month.

Employee Entitlements

Information Explanation
Working on Sundays ?

Yes

Disclosure and Confidentiality of Personal Information ?

No specification under law.

Employee Protection and Anti-discrimination Rights ?

Section XII of the Labour Law prohibits discrimination based on health, gender or marital status.

Time Off Work ?

Workers are entitled to annual leave and arrange this privately with their employer.

Medical Leave ?

Fully paid sick leave for up to 30 days is available to workers.

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

Whilst the legal position on resignation and/or end of service payment has altered the payable amount, payment is still set out under law and will differ depending on the length of the employee’s service.

Severance / Redundancy Pay ?

Employees who have worked for one to five years entitled to 5 weeks’ wages. Employees with service of five to ten years are entitled to 26 weeks’ pay, and employees with service of over ten years are entitled to a full year’s pay.

Termination of Employment ?

For manual work, 30 days’ notice must be given, while for specialized skills, 45 days’ notice is required.

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