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Hiring in Laos
Laos, officially known as the Lao People’s Democratic Republic, is a country in Southeast Asia. Vientiane is the capital and the largest city of Laos. Agriculture, mining and tourism are some of the major sectors of the economy. Laos is rich in minerals such as coal, gold, bauxite, and copper. Moreover, Laos’s economy relies on investment and trade. Laos’ main trading partners are China, Thailand, Vietnam, Indian and Japan. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Laos’ legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. Labor Code stipulates that employees are entitled to 15 days of annual leave. Residents and non-residents are subject to PIT. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Laos’ Labor Code and tax laws.
statutory labor requirements
Probation Period
- The probationary period may not exceed 30 days
Annual Leave
- The Labor Law provides that employees who have worked consecutively for a period of one year are entitled to 15 days of annual leave.
- However, employees working in sectors that are deemed to be dangerous to health are entitled to 18 days per year
Public Holidays
- New Year's Day (1st January)
- Army Day (20th January)
- International Women's Day (9th March)
- Lao New Year
- Labor Day (1st May)
- Children's Day (1st June)
- Lao National Day (2nd December)
Maternity Leave
- Female employees are entitled by law to receive full wages in case of maternity leave, which can range from 90 to 105 days, or 120 days in the case of multiple births.
- In the event of miscarriage, female employees are also entitled to maternity leave, with the number of days to be determined by the attending physician
Paternity Leave
- Fathers are not entitled to paternity leave
Sick Leave
- The law provides that, upon presentation of a medical certificate, employees are entitled to sick leave fully paid up to a maximum of 30 days each year.
- However, workers working on a daily or hourly basis under a specific employment contract are entitled to sick leave only if they have worked for more than 90 days for the same employer.
Work Hours
- The Labor Law limits working hours to 48 hours per week.
- Work that is performed beyond this limit will be considered as overtime.
- Likewise, the law provides that an employee cannot work more than six days per week and eight hours per day.
Overtime
- According to the Labor Law, overtime cannot exceed three hours per day or 45 hours per month.
- In addition, an employee cannot work overtime for more than four consecutive days, except in emergencies.
- Overtime wages differ according to the type of overtime, with the Labor Law providing different rates for different days and periods in which the overtime is performed (e.g. overtime on regular days, overtime at night, overtime on public holidays).
Notice Period
- There is no defined notification period for a fixed-term contract, and such terms are generally agreed upon in the employment contract.
- With respect to an indefinite-term contract, each party may terminate the contract at any time provided notification is provided to the other party at least 30 days in advance for contracts involving physical labor employees, and at least 45 days in advance for contracts involving employees who use intellectual/special skills.
- Alternatively, the employer can choose to make payment in lieu of notice to the employee who will be terminated.
Severance
- The Labor Law provides for severance payments to be made for the following types of termination of employment:
-
- In the case of general unilateral termination of the contract, the severance value is 10% of the employee’s last wage multiplied by the number of months worked.
- In the case of unjustified unilateral termination of a contract, the severance value is 15% of the employee’s last wages, multiplied by the number of months worked, with no capped amount for severance payment.
- In the case of the death of an employee, the employer must pay 50% of the compensation that would have been received by the employee for general unilateral termination of the contract.
13th / 14th Month Pay
- No
- There is no statutory requirement to pay the 13th or the 14th month salary.
- Employees may agree on bonuses with their employers.
income tax
- All sole traders and independent contractors are subject to PT on their business income derived in Lao PDR.
- Both Lao and foreign individuals earning income in Lao PDR in the form of salaries, benefits in kind, and other remuneration are subject to PIT.
- Expatriates who work in Lao PDR and obtain remuneration in Lao PDR are obligated to pay PIT, regardless of the period of their employment and stay in Lao PDR.
- Foreigners who stay in Lao PDR for a period or periods aggregating more than 183 days in any one-year period and obtain remuneration from a foreign country are obligated to pay PIT.
- The PT rates are as follows:
-
- 1% of gross revenue for manufacturing on agriculture, industry, and other production industries
- 2% of gross revenue for commerce
- 3% of gross revenue for services.
- The annual PIT rates for both Lao and foreign individuals are as follows:
|
Annual income base (LAK) |
Basis of computation (LAK) |
Tax rate (%) |
PIT of each threshold (LAK) |
Total PIT (LAK) |
|
|
From |
To |
||||
|
0 |
15,600,000 |
15,600,000 |
0 |
0 |
0 |
|
15,600,001 |
60,000,000 |
44,400,000 |
5 |
2,220,000 |
2,220,000 |
|
60,000,001 |
180,000,000 |
120,000,000 |
10 |
12,000,000 |
14,220,000 |
|
180,000,001 |
300,000,000 |
120,000,000 |
15 |
18,000,000 |
32,220,000 |
|
300,000,001 |
780,000,000 |
480,000,000 |
20 |
96,000,000 |
128,220,000 |
|
780,000,000 |
and above |
- |
25 |
- |
- |
deductible expenses
- Annual personal deduction of a maximum of LAK 5 million per dependent spouse, parent, and/or children (limited to three persons or a maximum of LAK 15 million per year) may be claimed.
- Deduction for charitable contributions are not allowed.
- Generally, business expenses (including accrued expenses) are deductible unless specifically indicated as non-deductible under the Lao Income Tax Law.
- Reserves and provisions are not deductible until actually incurred.
|
Deductible Expenses |
|
|
Employment Expenses |
|
|
Personal Deductions |
|
|
Business Deductions |
|
immigration
- The LA-B2 is the most common type of visa issued to foreigners living and working in Laos.
- It is a multiple entry visa and is available for a period of three-month, six-month, or one-year duration.
- Foreign applicants must ensure that they register for the visa before entering the country from a Lao consular post located in their country of residence or home country; the visa cannot be applied for while residing in Laos.
- To be eligible for the LA-B2 Visa, foreign applicants must first secure employment legally and obtain a sponsorship letter from a locally licensed and incorporated entity in Laos.
- The sponsoring entity is required to seek approval from the Lao Ministry of Foreign Affairs (MFA) in the capital Vientiane and present a financial guarantee for the prospective foreign employee.
- Once the approval is made, the Lao consular post issues the LA-B2 visa allowing the applicant to enter the country.
- A work permit is issued by the Ministry of Labor and Social Welfare, and a Stay Permit by the Immigration Department, Ministry of Public Security.
- The application for the Work Permit and SP must be registered by the employer, sponsoring the foreign applicant, within one month from the day of receiving authorization from the Lao MFA.
|
Type of Permit/Visa |
Documentation |
Validity |
Eligibility |
|
LA-B2 |
|
3 months, 6 months or 1 year |
|
value added tax
- The standard VAT rate is 10%.
- Exports of goods are zero-rated, except the export of natural resources that are not finished goods, which are subject to 10% VAT.
|
VAT |
|
|
Standard Rate |
10% |
|
Zero Rate |
0% |
withholding tax
Dividends
- Dividends paid to domestic and foreign individuals and legal entities are subject to a 10% withholding tax
- The withholding tax rate on dividends paid to nonresidents may be reduced under a tax treaty
Interest
- Interest paid to domestic and foreign individuals and legal entities (except for banks and financial institutions) is subject to a 10% withholding tax.
- However, interest earned on deposits, government bonds, and debentures is exempt
- The withholding tax rate on interest paid to a nonresident may be reduced under a tax treaty
Royalties
- Royalties paid to domestic and foreign individuals and legal entities are subject to a 5% withholding tax
- The withholding tax rate on royalties paid to a nonresident may be reduced under a tax treaty
Fees for Technical Services
- Service fees paid to foreign persons are subject to a withholding tax ranging from 1.4% to 3%
|
Type of Payment |
Residents |
Nonresidents |
||
|
Company |
Individual |
Company |
Individual |
|
|
Dividends |
10% |
10% |
10% |
10% |
|
Interest |
10% |
10% |
10% |
10% |
|
Royalties |
5% |
5% |
5% |
5% |
|
Technical Service Fee |
0% |
0% |
1.4% to 3% |
1.4% to 3% |
termination
The employment will be terminated when one of the following conditions is met:
-
- the expiration of the contract, or completion of tasks set out in the contract
- the death of the employee or the employer
- the termination of the company;
- the employee has been sentenced to imprisonment; or
- the employer and employee have provided mutual consent
- There is no defined notification period for a fixed-term contract, and such terms are generally agreed upon in the employment contract.
- With respect to an indefinite-term contract, each party may terminate the contract at any time provided notification is provided to the other party at least 30 days in advance for contracts involving physical labor employees, and at least 45 days in advance for contracts involving employees who use intellectual/special skills.
- Alternatively, the employer can choose to make payment in lieu of notice to the employee who will be terminated.
- The Labor Law provides for severance payments to be made for the following types of termination of employment:
-
- In the case of general unilateral termination of the contract, the severance value is 10% of the employee’s last wage multiplied by the number of months worked.
- In the case of unjustified unilateral termination of a contract, the severance value is 15% of the employee’s last wages, multiplied by the number of months worked, with no capped amount for severance payment.
- In the case of the death of an employee, the employer must pay 50% of the compensation that would have been received by the employee for general unilateral termination of the contract.
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Probationary Period |
|
Annual Leave |
|
Public Holidays |
|
Maternity Leave |
|
Sick Leave |
|
Overtime Pay |
|
Notice Period |
|
Severance Pay |
|
Social Security Benefits |
payments and invoicing
- PT is determined on a calendar-year basis.
- Employers must withhold the PIT payable from their employees' salaries each month and submit the PIT declaration and payment before the 20th (previously 15th) day of the following month.
- Employees are now required to obtain a Tax Identification Number (TIN) and file annual PIT returns by 31 March of the following year.
- If any additional PIT should be paid, the PIT should be paid within 15 working days from the date that the tax authority issues the tax payment form.
- If the total monthly PIT paid is more than the annual PIT, the tax authority should refund the excess PIT within 10 working days.
- For individuals who are subject to PT, the tax return is due, and the tax is payable, based on the agreement with the tax authority.
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Lao ranked 154th in the World in 2019 in terms of ease of doing business
employee accruals
| Christmas Bonus% |
0% |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
Employees are entitled to severance pay that is equal to 10% of their previous month's salary) (0.83% of annual salary) |
| Vacations % | The Labor Law provides that employees who have worked consecutively for a period of one year are entitled to 15 days of annual leave (4.28% of annual salary) |
| Notice % |
Employees are entitled to 30 days of notice period for one year of service or more (8.24%) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% | 0% |
| Total percentage of Salary (yearly) | The total employment accruals as a percentage of salary per anum are equal to 13.35% |
employer accruals
Additional information (Country Accruals)
| Social security | 6.00% |
| Pension contributions | 15.00% |
| Maternity | 90days |
| Vacations | 4.11% |
| Social security cap | 4.5million LAK |
| Description | The government is encouraging all enterprises (including individuals) to register (including their employees) in the Social Security Scheme. Both the employer and employee must contribute to the social security fund. The social security contributions are as follows: 6% of the gross remuneration must be contributed by the employer. 5.5% of the gross remuneration must be contributed by the employee. Social security contributions are paid at the same time as the PIT based on gross remuneration and are deductible when calculating PIT. Although the rate of the social security contribution is 6% and 5.5%, respectively, the total base amount to be calculated is capped at LAK 4.5 million. Expatriates who work in Lao PDR for more than 12 months are required to be registered in the social security scheme in Lao PDR. |
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | The Labor Law provides that employees who have worked consecutively for a period of one year are entitled to 15 days of annual leave. | This equals 4.1% (15/365 days) of annual income |
| Maternity Leave | Female employees are entitled by law to receive full wages in case of maternity leave, which can range from 90 to 105 days, or 120 days in the case of multiple births | This equals 28.76% (105/365 days) of annual income |
| Sick Leave | The law provides that, upon presentation of a medical certificate, employees are entitled to sick leave fully paid up to a maximum of 30 days each year. | This equals 8.22% (30/365 days) of annual income |
| Overtime | According to the Labor Law, overtime cannot exceed three hours per day or 45 hours per month. | Depends on the number of overtime hours worked |
| Severance | The Labor Law provides for severance payments to be made for the following types of termination of employment: • In the case of general unilateral termination of the contract, the severance value is 10% of the employee’s last wage multiplied by the number of months worked. • In the case of unjustified unilateral termination of a contract, the severance value is 15% of the employee’s last wages, multiplied by the number of months worked, with no capped amount for severance payment. • In the case of the death of an employee, the employer must pay 50% of the compensation that would have been received by the employee for general unilateral termination of the contract. |
This equals 10% of monthly salary |
| Social Security | The social security contributions are as follows: • 6% of the gross remuneration must be contributed by the employer. |
This equals 6% of annual income |
