Laos, a landlocked country in Southeast Asia, offers foreign investors a wide range of business opportunities. Laos is well integrated with the international and regional arenas. It is also a member of multiple global organizations, like the Association of Southeast Asian Nations, giving it the scope to be part of several investment treaties. There are several tax incentives for investments in Laos too.
The country’s safety is also worth noting as ample natural resources support business growth in related sectors such as agriculture and hydro-power. The affordable labor cost in the country and stable economic environment makes Laos a good bet for new investments.
Setting up a sole proprietorship in Laos can be beneficial to expand your business globally. As per UNCTAD World Investment Report 2021, the FDI inflows to Laos hiked up to USD 968 million in 2020 from USD 557 million in 2019. It also ranks 154th on Ease Of Doing Business, and this might reach 143rd rank by the end of this year.
If you establish a sole proprietorship in Laos, you can take advantage of its political and economic stability. Read up on ways to register a sole proprietorship in Laos and the related considerations.
Who can be a Sole Proprietor in Laos?
A sole proprietorship refers to a one-person company. It is a structure for business setup from the individual standpoint, without the need to form a Board of Directors.
It is the simplest form of doing business in Laos. Any individual can set up a sole proprietorship in Laos, irrespective of nationality. Foreign citizens may also establish a sole proprietorship if the registration requisites are met.
Benefits of Sole Proprietorship in Laos
Setting up a sole proprietorship in Laos has several benefits for any entrepreneur. These are listed as follows:
- Sole proprietorships in Laos are not subject to the double taxation system.
- Individual tax slab rates applicable to the same.
- Setting up sole proprietorship in Laos provides privacy and security to single owners.
- Sole proprietorships in Laos do not have a base investment or minimum investment markups.
- An individual benefits from all business profits because of zero legal separation in proprietorships from the individual or owner.
Documents Required for Registering Your Business in Laos
The documents you need to register a sole proprietorship in Laos are listed below-
- For foreign nationals- passports and proof of address
- Work permit from immigration
- Articles of Association
- Lease Agreement
- Bank Statements
- Personal details of the investor
- Depending on the application of the formation of proprietorship, the government could ask to see the employment contracts of the main employees, if any.
- Business plan
- Enterprise Registration Certificate
- Tax Identification Number (TIN)
- Company stamp
- An industry-related license
Other Criteria for Establishing a Sole Proprietorship in Laos
To establish a sole proprietorship in Laos, you must keep in mind some other criteria needed for a case-to-case basis.
- There are no rules about capital for such a business.
- Make sure to complete all your registrations. The documents you must have in this context are-
- Business name
- Proposal to State Asset Management Department in case you have a property to establish an office in
- Documents for an enterprise registration certificate
- Certificates as applied with relevant sectors
- Power of Attorney when processing on others’ behalf
- Other documents linked to the application for a business operating-related license.
- The proprietorship is ready as soon as the approvals are met.
Post-registration compliances
- The proprietor needs to open a local bank account post-establishment of the sole proprietorship.
- Keep a permit with approval from the Immigration Department.
Taxation
- Sole traders don’t need to pay add-on taxes. A company owner pays personal income tax on all individual profits as per tax slabs.
- The government has introduced a VAT at 0% scheme for all imports.
- Some companies established in Special Economic Zones get more government incentives.
INCOME RANGE IN LAK | TAX RATE IN % |
0 LAK -15,600,000 LAK | 0 |
15,600,001 LAK-60,000,000 LAK | 5 |
60,000,001 LAK – 180,000,000 LAK | 10 |
180,000,001 LAK-300,000,000 LAK | 15 |
300,000,001 LAK- 780,000,000 LAK | 20 |
780,000,001 LAK-higher | 25 |
How to Register a Sole Proprietorship Company in Laos?
To start investing in Laos as a new hub, set up a business plan after thoroughly researching the territory. Read well into the sole proprietorship structures, operational modes, and advantages before you start a sole proprietorship in Laos.
The government is attempting to make starting a business as a sole proprietor easier. Here is how to register a sole proprietorship in Laos:
STEP 1- Make necessary applications
- Apply for the Name Reservation Certificate and an Enterprise Registration Certificate or ERC.
- You must send all applications to the Enterprise Registry Office.
- If business activity comes under the Controlled Business List or CBL, the application needs to be sent to the concerned sectors for any comments.
STEP 2-Registration
- Register Articles of Association with the State Assets Management Department under the Ministry of Finance. For registration, keep the following handy-
- A letter of request
- Original version of the signed Articles of Association
- ERC copy
STEP 3- Tax registration
- Apply for a tax registration certificate at Laos’ Tax Department at the Ministry of Finance.
STEP 4- Approvals
- Obtain the Approval of Content on Company Signage and the Company Signage Building Permit with the Ministry of Information Culture and Tourism.
STEP 5-Carve the company seal at MOIC
- Register the company seal at the Provincial Department of Public Security.
Additional Registrations
Register workers at the Social Security Office. Register for VAT with the Tax Department under the Ministry of Finance when the company’s annual turnover exceeds LAK 400 million. For accounting requirements, follow the International Financial Reporting Standards.
Conclusion
A sole proprietorship in Laos has few specific requirements but gets ample incentives in tax contexts from the government. When you expand your business and hire in Laos, payroll management and hiring could be tough. In this context, Multiplier is the right choice for sole proprietors.
Multiplier is a reputed employment solution for companies planning to expand businesses globally. It offers trusted EOR solutions to ease management hassles for employee management internationally. You can utilize its payroll services and help manage freelancer payments with ease.