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Incorporation

Setting up a company in Laos

When setting up a company you may want to consider these factors:

  1. Business Factors

    Business factors such as:

    • The industry and type of business
    • Nationality of the headquarters/individual(s) and
    • Presence of existing trade agreements or relationships
  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

  3. Regional Language

    Regional language may be an influence. Although Laotian is the national language, up to six different dialects are spoken, while various other closely related languages are spoken throughout Laos.

Your Options

Foreigners may incorporate companies and trade representative offices or branches in Laos. There are pros and cons to each business type, which entrepreneurs should consider carefully before deciding to incorporate in Laos.

Representative Office

This is one of the relatively faster and simpler ways to set up a company in Laos.

Steps Required:

  • Apply for RO registration certificate
  • Apply for company seal

Time: ~2 months

Cost: LAK 120,000 upwards

When a foreign company decides to try and sell to the Laotian market, there are several options – working through an agency or distributor, or registering a Representative Office (RO). Whereas an agent or distributor may have limited loyalty or little interest in end-user satisfaction, an RO is an effective way for foreign investors to get a feel for the Laos market while demonstrating commitment to the market. It is the easiest type of foreign investment structure to set up and, unlike the wholly foreign-owned enterprise, has no registered capital requirements.

Limited Business Scope of ROs

The defining characteristic of an RO is its limited business scope – an RO is generally forbidden from engaging in any profit-seeking activities, and can only legally engage in:

  • Market research, display and publicity activities that relate to company product or services; and
  • Contact activities that relate to company product sales or service provision and domestic procurement and investment.

A RO has no legal personality, meaning it does not possess the capacity for civil rights and conduct, cannot independently assume civil liability, and is limited in its hiring ability. Lao staff working for an RO, although not limited in number, must be employed through a human resources agency that will sign a contract with the RO on the one hand and with the Lao staff on the other in order to ensure social security and housing fund contributions are paid on a regular basis. No more than four foreign employees can be hired per RO. Foreign staff working for ROs should have an employment relationship with the parent company abroad, and any disputes should be settled under the laws of that country.

Representative offices must be established in accordance with Article 47 of the Investment Promotion Law.

1. Apply for RO registration certificate

The planning and investment sector at the central level considers and issues the RO registration certificate. Because this varies by region, it is hard to give a definitive time period within which this is completed. Once issued, the planning and investment sector will issue permission for the company seal to be carved. This part of the procedure takes no more than 7 days.

Time: ~7 days

Cost: Varies

2. Apply for company seal

Businesses must submit the application form with the Seal Carving Unit, a subsidiary of the Ministry of Industry and Commerce and Ministry of Public Security.

Upon carving of the seal, a letter for registration of the seal is issued by the seal carving unit, which can then be used as approval of official use.

Time: 45 days, simultaneous with previous procedure

Cost: LAK 120,000

Wholly Foreign-Owned Enterprise (WFOE)

WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. WFOEs are often used to produce the foreign firm’s product in Laos for later export to a foreign country.   The WFOE must go through the entire registration and incorporation process, and is the most costly business structure to setup.

Steps Required:

  • Apply for Name Reservation Certificate & Enterprise Registration Certificate
  • Register the Articles of Association
  • Apply for Tax Registration Certificate
  • Obtain approval of company signage
  • Create a company seal
  • Register workers for social security

Time: Approximately 3 months

Cost: ~ LAK 650,000

A Wholly Foreign-Owned Enterprise (WFOE, sometimes incorrectly written as WOFE) is a common investment vehicle for Laos-based businesses wherein foreign parties (individuals or corporate entities) can incorporate a foreign-owned limited liability company.

WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. This can give greater control over the business venture in Laos, and avoid a multitude of problematic issues which can potentially result from dealing with a domestic joint venture partner.

Advantages of Establishing an WFOE

WFOEs are among the most popular corporate models for non-Laotian investors due to their versatility and structural advantages over a Representative Office or Joint Venture:

  • The ability to uphold a company’s global strategy free from interference by Laotian partners (as may occur in the case of joint ventures);
  • A new, independent legal personality;
  • The ability to both receive and remit RMB to the investor company overseas;
  • Increased protection of trademarks, patents and other intellectual property, in accordance with international law;
  • Shareholder liability is limited to original investment;
  • Easier to terminate than an Equity Joint Venture
  • Simpler establishment than a Joint Venture.

Disadvantages of Establishing an WFOE

The disadvantages of establishing a WFOE include the inability to engage in certain restricted business activities, limited access to government support and a potentially steep learning curve upon entering the Laotian market.

The steps for establishing a WFOE in Laos are as follows:

1. Apply for Name Reservation Certificate & Enterprise Registration Certificate

The first step is to apply for a Name Reservation Certificate and the enterprise registration certificate simultaneously with the Enterprise Registry Office (ERO) within the Ministry of Industry and Commerce (MOIC). A completed application for the reservation of company name must be submitted, which contains three potential names for the company to be established, and a signed Contract of Incorporation – if there are multiple shareholders – in the format approved by the Ministry of Industry and Commerce. The applicant must also submit the application for the Enterprise Registration Certificate at the same time and attach the following documents:

  • 3 copies of the Contract of Incorporation
  • 3 copies of the signed Articles of Association, in the format stipulated by the MOIC
  • 3 copies of the resolution of founders of the company
  • 3 copies of the Power of Attorney in the MOIC standard template, if another person has been assigned to submit the application
  • 3 copies of the founders’ ID card/passport for entities
  • 6 photos of the nominated Managing Director, size 3cmx4cm

When the Enterprise Registration Certificate is issued, the MOIC will also issue a letter than can be used by the applicant to register for a Tax ID.

Time: 14 days

Cost: LAK 390,000

2. Register the Articles of Association

Once the company obtains an Enterprise Registration Certificate, it can then register its Articles of Association with the State Assets Management Department (SAMD) within the Ministry of Finance. For registration the following are required:

  • Letter request
  • The original signed Articles of Association
  • A copy of the Enterprise Registration Certificate

 

Time: 5-10 days

Cost: No charge

3. Apply for Tax Registration Certificate

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

Time: 14 days, simultaneous with previous procedure

Cost: LAK 125,000

4. Obtain approval of company signage

The company must then obtain content approval and a building permit from the Ministry of Information Culture and Tourism. For the content approval application, the company is required to complete the application form and provide the following information:

  • The name of the company is Laos
  • Enterprise code under the enterprise registration certificate
  • Office location and contact details of the company
  • The colour in red for letters, and yellow for the background (for domestic companies)

The company sign must not need exceed 2mx4m in dimensions.

With regards to the building permit, the company must complete the application form and attach the signage layout indicating the location and size, and a copy of the company’s licences.

Time: Between 5-14 days

Cost: LAK 10,000

5. Create a company seal

Once the ERO issues the ERC and a letter for seal carving, businesses must submit these documents with the application form with the Seal Carving Unit, a subsidiary of the Ministry of Industry and Commerce and Ministry of Public Security.

Upon carving of the seal, a letter for registration of the seal is issued by the seal carving unit, which can then be used as approval of official use.

Time: 45 days, simultaneous with previous procedure

Cost: LAK 120,000

6. Register workers for social security

The final step is to register workers for social security insurance 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.

Time: 7 days

Cost: No charge 

Joint Venture

A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a partnership between foreign and Laotian investors, who together share the profits, losses and management of the JV. It is used most often when there is a need for a local business partner who can offer distribution channels, government relationships or significant market knowledge. Despite this the JV structure can bring challenges and risks by entering a business relationship with Laotian investors.

Steps Required:

  • Minimum contribution of equity investment
  • Obtain Enterprise Registration Certificate
  • Submit Articles of Association
  • Submit contracts and agreements and other relevant documents

Time: ~1 month

Cost: LAK 390,000

A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a partnership between foreign and Laotian investors, who together share the profits, losses and management of the JV.

A JV is a limited liability company, where the liability of the JV’s investor(s) is generally limited to the assets of the JV. The “total investment” of a JV is the amount of capital required to start-up the business until it becomes self-sufficient from its

Advantages of a Joint Venture

  • The use of local partner’s existing workforce and facilities
  • Existing channels for sales and distribution
  • Use of a partner’s network to build good relationships, avoid red tape and other bureaucratic complexities
  • Entry into industrial sectors which exclude wholly foreign-owned investment

Disadvantages of a Joint Venture

  • Cost & complexity of establishment – authorities carefully inspect all documents presented to them and may ask for clarification or changes
  • Conflicting interests with partners
  • Merging different management styles
  • Liability associated with inheriting staff
  • Risks with technology transfer and intellectual property management
  • Division of profits

The steps are as follows:

1. Minimum contribution of equity investment

Foreign investors who invest in a JV must contribute a minimum of 30% of the total equity investment into the JV.

2. Obtain Enterprise Registration Certificate

The first step is to apply for the enterprise registration certificate with the Enterprise Registry Office (ERO) within the Ministry of Industry and Commerce (MOIC). A completed application for the reservation of company name must be submitted, which contains three potential names for the company to be established, and a signed Contract of Incorporation – if there are multiple shareholders – in the format approved by the Ministry of Industry and Commerce. The applicant must also submit the application for the Enterprise Registration Certificate at the same time and attach the following documents:

  • 3 copies of the Contract of Incorporation
  • 3 copies of the signed Articles of Association, in the format stipulated by the MOIC
  • 3 copies of the resolution of founders of the company
  • 3 copies of the Power of Attorney in the MOIC standard template, if another person has been assigned to submit the application
  • 3 copies of the founders’ ID card/passport for entities
  • 6 photos of the nominated Managing Director, size 3cmx4cm

When the Enterprise Registration Certificate is issued, the MOIC will also issue a letter than can be used by the applicant to register for a Tax ID.

Time: 14 days

Cost: LAK 390,000

3. Submit contracts and agreements and other relevant documents

For any JV in Laos, the contract detailing the relationship between the domestic and

foreign investor must be provided as well as:

  • The resume of the investor
  • Certificate of financial status and experience of the investor
  • Document about the status of foreign legal entity, if applicable
  • Copy of ID card for Laos nationals, or passport for foreigners

 

Time: Simultaneous with previous step

Cost: Free of charge

4. Register the Articles of Association

Once the company obtains an Enterprise Registration Certificate, it can then register its Articles of Association with the State Assets Management Department (SAMD) within the Ministry of Finance. For registration the following are required:

  • Letter request
  • The original signed Articles of Association
  • A copy of the Enterprise Registration Certificate

Time: 5-10 days

Cost: No charge

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Laos, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Laos, they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Laos
  • the company needs help with tax, employment, immigration and payroll compliance in Laos

The complexity of employment regulations in Laos makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Laos allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Laos.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Laos. Read more about outsourced employment through Shield GEO.

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