Law on the Promulgation of Foreign Investment

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

LAO PEOPLE’S DEMOCRATIC REPUBLIC
PEACE INDEPENDENCE DEMOCRACY UNITY PROSPERITY
________________

National Assembly No. 73/PO
22 October 2004

DECREE
of the
PRESIDENT
of the
LAO PEOPLE’S DEMOCRATIC REPUBLIC

On the Promulgation of the Amended La w on the Promotion of Investment

Pursuant to the Constitution of the Lao People’s Democratic Republic in
Chapter VI, Article 67, Paragraph 1 regard ing the promulgation of the Constitution
and laws adopted by the National Assembly.

Pursuant to the Resolution of the Na tional Assembly of the Lao People’s
Democratic Republic No. 11/NA, dated 22 October 2004 regarding the adoption of
the Amended Law on the Management of Foreign Investment.

Pursuant to the Proposal of the Nati onal Assembly’s Standing Committee No.
27/NASC, dated 10 November 2004.

The President of the Lao People’s Democratic Republic
Decrees that:

Article 1. The Law on the Promotion of Foreign Investment is hereby
promulgated.

Article 2. This decree shall enter into force on the date it is signed.

Vientiane, 15 November 2004

President of Lao People’s Democratic Republic

[Seal and Signature]

Khamtay SIPHANDONE

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

LAO PEOPLE’S DEMOCRATIC REPUBLIC
PEACE INDEPENDENCE DEMOCRACY UNITY PROSPERITY
________________

National Assembly No. 11/NA
22 October 2004

LAW ON THE
PROMOTION OF FOREIGN INVESTMENT

Chapter 1
General Provisions

Article 1. Objectives

The Law on the Promotion of Foreign Investment defines the
principles, regulations and measures re garding the promotion, protection and
management of foreign investment in the Lao People’s Democratic Republic,
with the aim of enhancing relationships and economic cooperation with
foreign countries, [enhancing] the ut ilisation of financial resources and
knowledge to increase production capacity for the purpose of industrialisation
and progressive modernisation as well as to contribute to gradually improving
the people’s living conditions, and to st rengthen and to develop the country.

Article 2. Definitions

Foreign investment means the importation of capital, which includes
assets, technology and expertise, into the Lao People’s Democratic Republic
by foreign investors for business purposes.

Foreign investor means a foreign indi vidual or legal entity investing in
the Lao People’s Democratic Republic.

Domestic investor means Lao indivi duals or Lao legal entities, or
aliens or apatrids 1 residing in the Lao People’s Democratic Republic who take
part in joint ventures or co-ope rate with foreign businesses.

Asset means currency, materials 2 and intellectual property.
1 Readers may wish to refer to the Law on Lao Nationality for the distinction between aliens
and apatrids (i.e., persons residing in the Lao Peop le’s Democratic Republic but who are unable to
certify their nationality).

2 The term “materials” is typically used to refer to tangible things.
1

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Foreign investment enterprise means a one hundred percent foreign
investment enterprise, a joint ventur e or business cooperation by contract
established in the Lao People’s Democratic Republic.

Article 3. Promotion of Foreign Investment

Foreign investors may invest in production, [and] business in all
sectors and zones of investment in the Lao People’s Democratic Republic,
except in business activities which are detr imental to national security or cause
a negative impact on the environment in the present or long term, or are
detrimental to health or fine national traditions.
3

The State supports foreign investor s investing in [the] sectors and
zones of investment as provided in Articles 16 and 17 of this law by
establishing policies on customs [and] taxes, [by issuing] regulations [and] measures, [and] by providing information, services and other facilities to
foreign investors.

Article 4. Protection of Foreign Investment

The assets and investment of fore ign investors in the Lao People’s
Democratic Republic shall be fully prot ected by the laws and regulations of
the Lao People’s Democratic Republic against seizure, confiscation or
nationalisation, except if n ecessary for a public purpose, in which case the
foreign investors shall be compensated in accordance with the laws and
regulations.

Chapter 2
Forms of Foreign Investment

Article 5. Forms of Foreign Investment

Foreign investors may invest in th e Lao People’s Democratic Republic
in the following forms:

1. Business cooperation by contract;
2. Joint ventures between foreign and domestic investors; [and] 3. One hundred percent (100%) foreign-owned enterprises.

Article 6: Business Cooperation by Contract

A “business cooperation by contract” 4 is a business arrangement
between domestic and foreign legal ent ities without establishing a new legal
entity in the Lao People’ s Democratic Republic.

3 The Lao word for this term connotes both customs and traditions.
4 The quotation marks have been added and are not in the original.
2

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The objectives, forms of cooperation, business term, rights and
obligations, responsibilities and benefits of each party must be determined in a
contract.
5

Article 7. Joint Ventures

A “joint venture” 6 is an enterprise established and registered under the
laws of the Lao People’s Democratic Republic, operated and jointly owned by
foreign and domestic investors. The organisation, management, operation and
the relationship between the shareholders of the joint venture are set out in an
agreement made by both parties and in th e articles of such joint venture.

Foreign investors investing in a joint venture must contribute at least
thirty percent (30%) of the [joint ve nture’s] registered capital. Capital
contributed in foreign currency must be converted into Kip based on the
exchange rate of the Bank of the Lao People’s Democratic Republic on the
day of the capital contribution.

Article 8. One Hundred Percent (100%) Foreign Owned Enterprise

A one hundred percent (100%) foreign owned enterprise is an
enterprise established in the Lao People’s Democratic Republic in which the
investment is made by a foreign invest or only. Such enterprise may be
incorporated as a new legal entity or as a branch of a foreign investment
enterprise.

Article 9. Registered Capital

The registered capital of a foreign investment enterprise must not be
less than thirty percent (30%) of its total capital. During the business
operation of a foreign investment enterprise, the assets of the enterprise must
not be less than its registered capital.

Article 10. Representative Offices

A foreign legal entity established un der the law of another country may
establish a representative office in the Lao People’s Democratic Republic to
collect information, study the feasibility of investment and coordinate matters
for the purpose of applying for investment.

Representative offices or agents which operate for commercial
purposes do not come under this law.

5 Readers may wish to refer to the Contract Law for information on formalities relating to the
formation of contracts.
6 The quotation marks have been added and are not in the original.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 11. Term of Authorized Investment

The investment term of a foreign investment enterprise depends on the
nature, size and conditions of the busine ss activities or project but shall not
exceed fifty years and may be extended with the approval of the government.
However, the investment term of a foreign investment enterprise shall be for a
maximum of seventy-five years.

Chapter 3
Rights, Benefits and Obligations of Foreign Investors

Article 12. Rights and Bene fits of Foreign Investors

Foreign investors have the following rights and benefits:

1. To receive support from the governm ent in establishing and operating
their production, [and] business in accordance with the laws and
regulations;
2. To obtain protection of their rights a nd legitimate interests relating to
business operations;
3. To own assets;
4. To receive benefits from the lease of or a concession over land, such as
[the right] to use or sell the assets associated with the leased land or
concession, to create secu rity interests over such assets in favour of
any persons or financial institutions or [to take such assets] for the
purpose of a joint venture, to subleas e the right to use land, to transfer
the land lease or concession agreement in accordance with the terms of
the lease, to use the [land] lease contract or concession in a joint
venture or to grant a security intere st [over the land lease contract or
concession] in favour of other pers ons. The details of the rights,
benefits and obligations of foreign investors relating to the land lease
or concession must be in complia nce with the Land Law and other
relevant laws;
5. The use of foreign labourers, if n ecessary, must not exceed ten percent
(10%) of the enterpri se’s labour force;
6. Foreign investors and their families, including foreign professionals
and foreign employees of an ente rprise, shall be provided with
facilities such as multiple entry visas and, if approved by the
government, long term residence in the territory of the Lao People’s
Democratic Republic, and shall ha ve the right to request Lao
nationality in accordance with the Law on Lao Nationality;
7. To receive protection of their inte llectual property which has been
registered with the relevant author ities in the Lao People’s Democratic
Republic;
8. To repatriate profits, capital and ot her income after full payment of
duties, taxes and other fees in accordance with the regulations and
laws, to their home countries or a third country through a bank located
in the Lao People’s Democratic Republic;
4

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

9. To open a Kip account and a forei gn currency account with banks
located in the Lao People’s Democratic Republic;
10. To request justice from or to file a claim with the relevant authorities
in the event that their business opera tions have been affected; [and] 11. To obtain other rights and benef its as provided in the laws.

Article 13. Obligations of Foreign Investors

The obligations of foreign investors are:

1. To operate production, [and] busine ss activities in accordance with
their licence, the procedures set ou t in their feasibility study, their
contract and the laws and regulations;
2. To maintain accounts in accordance with the Enterprise Accounting
Law of the Lao People’s Democratic Republic. If necessary, to use an
internationally recognised accounting system, subject to the approval
of the Ministry of Finance. To report on their business performance
and to consolidate annual financia l statements and send them to the
CPMI
7 and other relevant authorities;
3. To fully pay duties, taxes and other fees relating to their business
operations in a timely manner;
4. To facilitate the organisation and activities of the mass organisations in
their enterprises;
5. To give priority to re cruiting Lao workers; [a nd] to train and upgrade
the professional skills of and transf er technology to Lao workers;
6. To address matters of social se curity, healthcare and safety of
employees in their enterprises;
7. To protect the environment, and ensu re that their business activities do
not severely impact on the public, na tional security or public order;
8. To maintain a reserve in accord ance with laws and regulations;
9. To maintain insurance and social se curity policies in accordance with
the laws and regulations relating to insurance and social security;
10. If an enterprise is relocated, to in form the relevant authorities and to
maintain its premises in normal condition;
11. To report on the performance of bu siness operations to the CPMI and
other relevant authorities; [and] 12. To perform such other obligations as set out in the laws and
regulations.

Article 14. Personal Income Tax of Foreign Employees

Foreign employees working in a fore ign investment enterprise must
pay personal income tax at the rate of ten percent (10%) of their total income
to the Lao government, except employees of a country with which the Lao
Government has signed a double taxation agreement.

7 The Lao abbreviation for this committee was used. This abbreviation is defined in Article 19.
5

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Chapter 4
Incentives for Foreign Investment

Article 15. Incentives for Foreign Investment

The State shall consider granting incentives for foreign investment in
accordance with the sectors and zones of investment promotion as provided in
Articles 16 and 17 of this law.

Article 16. Promoted Activities

The government defines promoted activities as follows:

1. Production for export;
2. Activities relating to agriculture or forestry, and agricultural, forestry
and handicraft processing activities;
3. Activities relating to industrial pr ocessing, industrial activities using
modern techniques and technology, re search and development, and
activities relating to the protection of the environment and biodiversity;
4. Human resource development, skills development and public health;
5. Construction of infrastructure;
6. Production of raw materials and e quipment to be supplied to key
industrial activi ties; [and] 7. Development of the tourism i ndustry and transit services.

Article 17. Promoted Zones

The government determines 3 promoted zones for foreign investment
based on geographical location and socio-economic conditions. The zones are
as follows:

Zone 1: Mountainous, plain and plateau zones with no economic
infrastructure to facilitate investments.
Zone 2: Mountainous, plain and plateau zones with a moderate level of
economic infrastructure suitable to accommodate investments to
some extent.
Zone 3: Mountainous, plain and plateau zones with good infrastructure to
support investments.

The details of the promoted zones for foreign investment shall be
determined by the government.

Article 18. Incentives Relate d to Duties and Taxes

Foreign investment enterprises in vesting in activities within the
promoted sectors and zones determined in Article 16 and 17 of this law shall
be entitled to the following duty and tax incentives:

6

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Investments in Zone 1 shall be entitled to a profit tax exemption for 7
years and thereafter shall be subject to profit tax at the rate of ten percent
(10%).

Investments in Zone 2 shall be ent itled to a profit tax exemption for 5
years, and thereafter shall be subject to a reduced profit tax rate of half of
fifteen percent for 3 years and thereafte r a profit tax rate of fifteen percent
(15%).

Investments in Zone 3 shall be ent itled to a profit tax exemption for 2
years and thereafter shall be subject to a reduced profit tax rate of half of
twenty percent for 2 years and thereafter a profit tax rate of twenty percent
(20%).

Profit tax exemption starts from the date the foreign investment
enterprise carries out operations. For tree plantation activities, profit tax
exemption commences from the date the enterprise starts making a profit.

Once the profit tax exemption period is over, the foreign investment
enterprise must pay profit tax in accordance with the laws and regulations.

In addition to the incentives me ntioned above, foreign investment
enterprises shall be entitled to the following incentives:

1. During the tax exemption period an d during the tax reduction period,
the enterprise is entitled to an exemption of minimum tax;
2. The profit used for the expansion of licensed business activities shall
be exempted from profit tax during the accounting year;
3. Exemption from import duties and taxes on equipment, spare parts and
vehicles directly used for produc tion, on raw materials which do not
exist domestically or which exist but are insufficient, and on semi-
finished products imported for proc essing or assembly for the purpose
of export; and
4. Exemption from export duty on export products.

Raw materials and semi-finished produc ts imported for processing or
assembly for import substitution shall be exempted from import duties and
taxes or shall be subject to reduced rates of import duties and taxes.

Special economic zones, industrial zones, border trade areas and other
specific economic zones must follow the laws and regulations of such specific
areas.

7

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Chapter 5
Application for a Foreign Investment License

Article 19. Application for [Foreign] Investment

An application for foreign investment in the Lao People’s Democratic
Republic must go through the one st op service of the Committee for
Promotion and Management of Investment (“CPMI”).

Foreign investors wishing to invest in the Lao People’s Democratic
Republic must submit an application to the CPMI at the central or provincial
levels with attachments, such as copi es of the passport and resume of the
foreign investor; feasibility study or bus iness plan; information related to the
business [of the investor] if it is a lega l entity; and a copy of the joint venture
agreement in the case of a joint venture.

Article 20. Consideration of a Fo reign Investment Application

Upon receipt of an application with its attachments in accordance with
Article 19 of this law, the CPMI must coordinate with relevant sectors and
local authorities, when necessary, to consider and to respond in writing to the
foreign investor pursuant to the following timeframes:

• Projects which fall in the list of promoted [activities]: fifteen working
days;
• Projects which fall in the list of open activities with conditions:
twenty-five working days;
• Projects which involve the grant of a concession: forty-five working
days.

Foreign investors who are qualified under this law shall obtain a
foreign investment licence, an enterpri se registration certificate and a tax
registration certificate at the same time from the CPMI at the place where the
foreign investors are licensed; thereaf ter they shall be considered as
enterprises established in conformity with the laws of the Lao People’s
Democratic Republic.

Within 90 days from the date of receipt of an investment licence, the
foreign investment enterprise must commence business activities in
accordance with the steps in the feasibility study stipulated in the foreign
investment licence and in conformity w ith the laws and regulations of the Lao
People’s Democratic Republic. If such timeframe is not followed, the foreign
investment licence shall be terminated.

8

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Chapter 6
Management of Foreign Investment

Article 21. Management Authorities Related to Foreign Investment

Management authorities related to foreign investment are:

1. The Committee for Promotion and Management of Investment at
central and provincial levels;
2. Sectors 8 and other relevant se ctoral organizations.

Article 22. Rights and Duties of CPMI at the Central Level

The Committee for Promotion and Ma nagement of Investment at the
central level is established by the Prim e Minister, located at the Committee for
Planning and Investment and has the following rights and duties:

1. To study strategies and incentives to promote and attract foreign
investments and to propose them to the government for approval;
2. To issue decisions, orders , instructions and notifications regarding the
protection and promotion of foreign investments;
3. To prepare a plan and a list of available investment projects for
attracting foreign investment;
4. To disseminate policies, laws and regulations; and to provide
information to and to facilitate foreign investors;
5. To consider issuing or withdrawing a foreign investment licence within
its scope of rights and duties, particularly within projects involving the
grant of a concession;
6. To supervise and coordinate with th e sectoral organizations and local
authorities in implementing this Law on the Promotion of Foreign
Investment;
7. To monitor, inspect, assess a nd report to the government on the
business operations of foreign investment enterprises;
8. To be a focal point in supporting, promoting and solving problems
occurring in relation to the busine ss operations of foreign investment
enterprises;
9. To organise the annual meeting of CPMI and consultative meetings
with foreign investors; and
10. To exercise such other rights and perform such other duties as
provided in the laws and regulations.

Article 23. Rights and Duties of CPMI at Provincial Levels

The Committee for Promotion and Mana gement of Foreign Investment
at provincial levels is established by th e chairman of the CPMI at the central
level. The CPMI at the provincial leve l acts as a support to the provincial
governors, the capital city governor, the Special Zone Head and the CPMI at
8 See Article 24.

9

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

the central level in promoting and managing foreign investment. The CPMI at
the provincial level are located at th e provincial Planning and Investment
Divisions and have the following rights and duties:
9

1. To implement strategic plans, policies to promote and attract foreign
investments within their locality;
2. To disseminate policies, laws and regulations, provide information and
facilitate foreign investors;
3. To consider issuing or withdrawing foreign investment licences within
their scope of rights and duties;
4. To coordinate with various rele vant sectors in implementing the
incentive policies within their approved projects and in implementing
the decisions, orders, in structions and notifications of the higher-level
authorities;
5. To monitor, inspect, assess and report to the provincial governors, the
capital city governor or the Special Zone Head and CPMI at the central
level regarding foreign investment;
6. To act as a focal point in solving problems related to foreign
investment;
7. To organise the CPMI annual mee tings at provincial levels and
consultative meetings with foreign investors; [and] 8. To exercise such other rights and perform such other duties as
provided in the laws and regulations.

Article 24. Rights and Duties of other relevant Sectors and Sectoral
organizations

The relevant ministries, ministry-e quivalent organisations and other
sectoral organizations must promot e, manage foreign investments in
accordance with their rights and duties as follows:

1. To coordinate with the CPMI at the central level in drafting laws,
regulations, policies and plans in relation to foreign investment;
2. To prepare a plan and list of availa ble foreign investment projects to
attract foreign investment to their sectors, and to disseminate
information to attract and promote investment; [and] 3. To participate in the process of consideration and approval of
investment projects;
4. To supervise the sectors both at central and local levels in
implementing incentive policies and in improving procedures
regarding implementation of investment projects;
5. To inspect and assess business ope rations of foreign investment
enterprises and participants in bus iness cooperation contracts within
their scope of rights and duties and then report to the higher
authorities; [and] 6. To exercise such other rights and perform such other duties as
provided in the laws and regulations.

9 For readability, the structure of this paragraph has been modified.
10

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The administrative authorities and sectors at the local level [which are] described above must coordinate with th e CPMI at the local level within the
scope of rights and duties described in this Article.

Chapter 7
Dispute Resolution

Article 25. General Principles

If a dispute arises in relation to their busines s operations, the parties
must implement the principle of [dispute resolution through] amicable
settlement, mediation, or filing a claim.
10

Article 26. Mediation of Disputes

Disputes related to business ope rations which cannot be settled
amicably shall be submitted for mediation to the CPMI that issued the licence.

If the CPMI is not able to mediate such dispute, such dispute must be
submitted to the Office of Economic Dispute Resolution for resolution. 11

Article 27. Filing of a Claim

The parties to a dispute related to business operations which cannot be
mediated may file a claim to the Office for Economic Dispute Resolution or to
the People’s Court for consideration according to [formal dispute resolution
procedures].
12

Chapter 8
Policies toward Those Who Have Performed Well and Measures Against
Violators

Article 28. Policies toward those who have performed well

Individuals or organisations who ha ve had outstanding achievements in
implementing this law and in contributing to national socio-economic
development shall receive rewards as deemed reasonable.

Article 29. Measures against Inve stors who violate [the Law]

Individuals or legal entities who violate this law shall be subject to
measures depending on the seriousness of the violation in the form of
10 This list has a sequential connotation.
11 The term “resolution” may connote assisting the parties to resolve the matter (i.e., unlike
arbitration).
12 This reference appears to be a general term refe rring to both formal arbitration (before the
Office of Economic Dispute Resolutio n) or formal court proceedings (before the People’s Courts).
11

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

warnings, suspension, withdrawal of their foreign investment licence or being
sued in a court of law.

Article 30. Measures against other Violators

Individuals who violate investment laws and regulations by abusing
their power or position to hinder or obstruct the promotion and approval of
investment, falsify documents, mislead investors, receive bribes or commit
any acts causing damage to the State or investors must compensate for such
damages and must be subject to discip linary and other measures in accordance
with the laws of the Lao People’s Democratic Republic.

Chapter VIII
Final Provisions

Article 31. Implementation

The government of the Lao People’s Democratic Republic shall
implement this law.

Article 32. Effectiveness

This law shall enter into force sixty days from the date of the
promulgating decree issued by the Pres ident of Lao People’s Democratic
Republic. Thereafter, the Law on the Pr omotion and Management of Foreign
Investment No. 01/94/NA, dated 14 Marc h 1994 shall be abrogated without
affecting the rights, benefits and oblig ations granted to investors under or
those [rights, benefits and obligations] which need to be exercised under the
Law No. 01/94/NA. Foreign investors who have been licensed under the Law
No. 01/94/NA and who wish to obtain incentives provided by this Law on
Promotion of Foreign Investment must submit a request in writing to the
CPMI within 120 days from the date of effectiveness of this law.

Vientiane, 22 October 2004
President of the National Assembly

[Seal and Signature]

Samane VIYAKETH
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