June 25, 2025
VIENTIANE – The government has proposed a 5 percent profit tax for micro-enterprises, replacing the current income tax system. Under the new scheme, small businesses that make no profit will be exempt from tax payments—a measure aimed at supporting micro-enterprises and easing their financial burden.
Minister of Finance Mr Santiphab Phomvihane presented the proposed amendments to the income tax law on Tuesday, during the ongoing Ordinary Session of the National Assembly.
The meeting was chaired by the Vice President of the National Assembly, Mr Sommad Pholsena.
Under the new system, micro-enterprises will be able to deduct operational costs before calculating their tax obligations. This means businesses that do not earn a profit will not have to pay any tax, a significant change from the current income-based model.
At present, the 2019-version income tax law requires micro-enterprises with annual revenues between 50 million and 400 million kip to pay tax based on gross income, regardless of whether they make a profit. The fixed tax rates are 1 percent for agriculture, industry and manufacturing, 2 percent for trade, and 3 percent for services.
The proposed switch to a profit-based model aims to reflect the real financial conditions of small businesses, promote fairness, and encourage better financial reporting.
Mr Santiphab said the change would also help promote proper accounting practices and financial transparency.
He explained that when small businesses maintain proper financial records, they have a better chance of securing loans from commercial banks and other financial institutions.
This access to finance, he said, is essential for small business growth and job creation.
According to the Ministry of Industry and Commerce, a micro-enterprise is the smallest type of registered business, with annual revenue not exceeding 400 million kip.
Although the shift is expected to reduce income tax revenue from micro-enterprises by 65 to 75 percent, the Ministry of Finance believes the shortfall can be partly offset by collecting Value Added Tax (VAT).
Once micro-enterprises enter the VAT system, they will be subject to a 10 percent VAT rate based on their revenue.
The new profit-based tax is part of a broader amendment to the income tax law. The revised law also aims to boost tax revenue from multinational companies and align Laos with international tax practices.
One of the major changes will require multinational companies that meet criteria set by the Organisation for Economic Co-operation and Development (OECD) to pay a minimum profit tax of 15 percent.
In a move to support the stock market, companies listed on the stock exchange will benefit from a reduced 10 percent profit tax for the first 10 years after registration. Previously, listed companies paid 13 percent tax for four years, after which the standard 20 percent rate applied.
The amended law will also expand the categories of taxable income to include carbon credit sales, income from the sale of agricultural and authorised forest products, and other forms of income generation.
Mr Santiphab said the revisions will create clearer, more consistent rules for tax collection, which in turn will help build investor confidence and support business growth.
As of May 31 this year, revenue collection stood at 7.967 trillion kip, equal to 53.8 percent of the 2025 target, a 50 percent increase compared to the same period last year.