Term of the Representative Office
According to the Law on Investment Promotion, a representative office may be established in the Lao PDR provided that it is approved by the Ministry of Planning and Investment. Such approval shall have a term of 1 year. It may be renewed for another 2 times, 1 year for each approval. In this regard, the total term of the representative office shall not exceed 3 years. After the term of the representative office has expired, the investors may establish a company in the Lao PDR in accordance with relevant laws and regulations depending on the type of business and investment.
General Scope of the Rights of the Representative Office
The representative office has the right to carry out activities in accordance with its rights and obligations; particularly in collecting information on investment for its mother company serving as a basis for consideration of the future investment in the Lao PDR. In this regard, the scope of the rights which the representative office is allowed to operate is as follows:
- Collecting information and studying the possibility for future investment;
- Coordinating and collaborating, both domestic and international, in order to facilitate its mother company; and
- Implementing MOUs or contracts that it has entered into.
Apart from this, the representative office is prohibited from conducting business operations, creating income, issuing invoices and announcing that it is unable to pay debt or is bankrupt.
Tax Liability of the Representative Office
The representative office is subject to tax liability as same as other legal entities established under Lao law as follows:
- Profit Tax: 24% of the profit of the company; and
- VAT: 10%.
However, since the representative office is prohibited from conducting any business operations or from creating income, it shall report its profit as 0 in the tax form provided by the Ministry of Finance.
Apart from this, the representative office shall have an obligation to submit the salary tax of its employees to the Ministry of Finance within the 15th day of the next month. However, it should be noted that such salary tax is normally not the liability of the representative office. On the contrary, it is the liability of each employee to pay tax for its income received from salary. The representative office shall have only the obligation to submit the salary tax collected from its employees to the Ministry of Finance.
Work Permit of Foreign Employees of the Representative Office
The representative office may employ foreign employees as same as other legal entities or projects in the Lao PDR. In this regard, the law has provided quotas for which each legal entity or project may employ foreign labors as follows:
- 10% of the total number of its employees for the position that requires physical skill; and
- 20% of the total number of its employees for the position that requires specialized skill.
The representative office may acquire a higher number of foreign labors than what is specified by law by providing a reasonable reason or necessity while applying for a Quota Certificate at the Ministry of Labor and Social Security. However, this is subject to the discretion of the authority.
Accounting Principles of the Representative Office
The representative office shall have the obligation to prepare an accounting report as same as other legal entities established under Lao law. The accounting audit must be conducted according to the international calendar year, as of 1 January – 31 December of every year.
Mr. Rawat Chomsri, Partner
Email: rawat@siampremier.com
Ms. Natchar Leedae, Advisor
Email: natchar@laopremier.com
Ms. Salin Thewphaingam, Advisor
Email: salin@laopremier.com