Business Opportunities in Laos
Laos is a Southeast Asia country that offers a wide range of business opportunities to companies looking to set up a business. It is one of the fastest-growing economies in Southeast Asia, with a 7% GDP growth rate over two decades. As per EIU forecasts, the country’s GDP is expected to expand to 3.5% in 2023.
Due to rising industrialization and urbanization, the industry and service sectors have contributed 33% and 46% of the total GDP. Trade has multiplied, with exports currently making up more than 33% of GDP. Additionally, more than half of the population in Laos is under the age of 23 and educated, offering talented working employees to businesses.
Companies planning to expand their presence globally can establish a business entity in the country. As per the World Bank’s Ease of Doing Business report 2020, Laos ranks 154 out of 190 economies in terms of starting a business, protecting minority investors, and paying taxes.
Read this guide to understand how to start a business in Laos.
Benefits of Starting a Business in Laos
There are several advantages of doing business in Laos which include:
- Laos derives most of its income from natural resources such as copper, gold, and silver. The abundance of natural resources and government’s active promotion of foreign direct investment in this area has made the nation desirable in terms of businesse looking tos establish a company in the energy and mining industries.
- The fact that Laos is strategically located and adjacent to other significant Asian markets has provided it with a foothold in a market with well over 1.5 billion people. The country is close to Vietnam, Thailand, China, and Cambodia, making it simple for companies to access the significant neighboring marketplaces. Infrastructure investment will certainly pass via Laos on their way from Kunming, China, to Southeast Asian countries, increasing the possibilities for expatriates who want to participate in Laos’ economy.
- Laos’ labor is inexpensive, with a minimum income of about USD 80 per month. This implies that investors may anticipate significantly reduced labor expenses compared to neighboring nations and most other ASEAN nations.
- 10 Special Economic Zones have been created by the Laotian government and provide investors with several financial benefits. Some advantages include fiscal incentives given to international investors, who would otherwise be obligated to pay taxes at 20% or 1% of turnover, whichever is higher. Another incentive is a decrease in tax rates of 20%.
- Another advantage is that Laos has tax deductions on imports if specifically listed items fall inside a special quota, thanks to the European Union and Japan giving the nation these trading rights. For investors, this implies that goods from Laos can enter markets worldwide that are tax-free or have significantly lower tariffs applied.
Requirements for Starting a Business in Laos
To start a business in Laos, you need to fulfill certain conditions, which include:
Visa: Check your eligibility for applying for a work/ business visa to start a business in Laos.
Business name registration in Laos: Companies must apply for company name registration and Enterprise Registration Certificate (ERC). You must send your application to the Enterprise Registry Office (ERC).
Directors/Officers: You must appoint directors/officers to set up a business in Laos. The required number of directors for an LLC, branch, and representative office is 1, whereas a PLC requires at least three directors.
Authorized Capital: Authorized capital differs in Laos depending on the type of business structure you wish to incorporate. LLCs and PLCs require just $1 of authorized capital, whereas a branch requires none. However, if you plan to set up a representative office of your business in Laos, you need a minimum authorized capital of $50,000.
Shareholders: If you are planning to start an LLC, branch, or representative office in Laos, then you need to appoint at least one shareholder before setting up a business in Laos. However, you need at least seven shareholders in the case of a PLC.
Tax registration certificate: Companies planning to expand their businesses in Laos would require a tax registration certificate before starting operations. However, if you plan to set up a representative office in Laos, you don’t require one.
Types of Business Structures in Laos
The following are the primary business structures that global companies frequently employ to set up business in Laos:
Limited liability company
- A USD 1 initial investment is required when forming a limited liability business.
- Then, you must select a board of directors who will make crucial choices for the business.
- LLCs allow shareholding within the business entity.
Public limited company
- This type of corporation requires three directors, a legal representative, and seven shareholders.
- Additionally, this business requires a minimum capital investment of USD 125,000. If established by a resident, PLCs require a minimum capital of USD 6,100 for registration.
- PLC can sell its shares to the public.
- The parent firm makes all decisions about this entity’s operations.
- Airlines, international banks, financial institutions, and insurance companies are the industries that establish branch offices the most frequently.
- Representative offices are not permitted to make direct sales with Laos.
- Consequently, it helps market research and promotes your goods or services.
- It is a valuable technique to learn about the nation before settling here.
Company Registration Process
Refer to this section to understand how to start a company in Laos
Step 1: Look into the minimum authorized capital, foreign shareholding, and operational license requirements that may apply to your sector
- Laos law restricts foreign shareholding and mandates a minimum amount of registered capital for some economic activities that include foreign investors.
- During the initial inquiry phase of the proposed entity, prospective international investors should obtain help with the minimal incorporation prerequisites.
Step 2: Prepare the necessary documents
- To support a proposal for company establishment, companies must prepare the following documents to submit to the Ministry of Industry and Commerce (MOIC):
– Articles of Association
– Contract of Incorporation
– CVs of directors and legal representatives
– A board resolution authorizing the proposed company’s formation and designating the prospective business’s managing director and investor representative(s)
Step 3: Application for Enterprise Registration Certificate
- According to the Companies Act (2015), the firm must submit the company documents, an online application, and the necessary fee to the Office of the Registrar of Companies once they are ready.
- The application form requests information on the business, its governance, its representative office, its central place of operation, its shareholders, its share arrangement, and its members.
Step 4: Obtaining an operating license
- All business operations in the Lao PDR must be registered as an entity.
- The enterprise registrar would initiate an advice letter recommending the venture to collaborate with pertinent sectors to pertain to a business operating license.
Step 5: Tax registration
- It will no longer be necessary for newly established firms in Laos to submit separate applications for registration with the nation’s tax authorities and for receiving the 12-digit Taxpayer Identification Number (TIN).
- The action comes in response to a recent choice to eliminate the necessity that a TIN is submitted as one of the requirements for business incorporation. Businesses will instantly receive a TIN when their Enterprise Registration Certificate is issued, significantly streamlining the procedure (ERC).
- Private buyers just need to register for an ERC via the one-stop investment service, which will be combined with the Tax Revenue Information System, per the updated regulations (TaxRIS).
Step 6: Opening a bank account and issuing a Capital Importation Certificate
- The Company must submit an application for a capital importation certificate to the Bank of Laos PDR (BOL) within thirty (30) days following the ERC’s release.
- Within 90 days of the ERC’s issue, the Company must import 30% of its authorized capital and the remaining amount within twelve months of the ERC’s release.
- The Company should open a Laos PDR bank account before a capital importation certificate can be issued.
How Much Does it Cost to Incorporate a Company in Laos?
The company incorporation costs in Laos are as follows:
Branch of a foreign company
Are Foreigners in Laos on Certain Passes Allowed to Start a Business in Laos?
You may need to apply for investment and labor visas to set up a business in Laos as a foreign investor. The NI-B2 investor visa is for non-citizens who have a company in the nation and intend to engage in capital investments.
If you have a branch, this might pertain to you as an employer, but you’ll need a business registration to prove it. A single entry or numerous entries are possible with NI-B2 visas. Multiple-entry permits are valid for three, six, or twelve months.
There are labor visas for foreigners who want to reside and work in the nation, often known as LA-B2. Before visiting the nation, individuals must apply for these visas at an embassy. All LA-B2s permit multiple entries.
Government Assistance for Foreign-owned Businesses
- Laos has been working harder since 2011 to attract foreign investors. The National Socio- Economic Development Plan (NSEDP) is a five-year plan to develop the country’s full potential to grow the service sectors with sustainable development. It sets a lofty goal of at least 7.5% yearly GDP growth, of which 54–57% will come from domestic and international capital investments.
- The country promotes itself with cheap labor, a safe environment, and a wealth of natural resources. The administration strongly encourages investors to invest in industrial estates, ecotourism, ICT, special economic zones and zones for export processing.
- The Laos Government has passed the 2010 Law on Investment Promotion, shortening the processes, providing access to local financial capital, and unifying regulation for international and domestic investors. The law now highlights applicable rights and benefits for businesses and clarifies the supported business areas after being modified in 2017.
How Multiplier Can Help
Opening a business requires abiding by all applicable laws and ordinances in a foreign country like Laos. Each nation where you intend to establish your firm has unique laws, incorporation procedures, and tax regulations. To start a business in Laos, you must follow all applicable tax laws and regulations. Multiplier and other international PEO service providers can be useful in this regard.
Multiplier maintains the infrastructure required to staff your company without setting up a local subsidiary. Building teams in new countries and exploring new markets can be given additional attention. This makes it possible for you to hire more talented people who are also more reasonably priced.