Significant advances in tax regulations
On May 6, 2025, the Lao government announced an update to its draft Income Tax Law, marking an important step toward alignment with international tax standards. This bill formally introduces Transfer Pricing (TP) rules and establishes the implementation of the Global Minimum Tax (GMT) under Pillar 2 of the OECD/G20 BEPS 2.0 project.
Introduction of Transfer Pricing rules
Historically, Laos has had limited transfer pricing regulations. However, the new draft law emphasizes the need for transactions between related parties to be conducted in accordance with the arm’s length principle. Although comprehensive documentation such as the Master File or Local File is not currently required, it is anticipated that these will be required in the near future.
Laotian tax authorities are stepping up audits, focusing particularly on companies with losses, intercompany service charges, intellectual property remuneration, and financing agreements. Failure to comply with these new regulations could result in penalties of 50% on underreported corporate income tax.
Implementation of the Global Minimum Tax
Laos plans to implement the Global Minimum Tax as of January 1, 2026. This tax establishes a minimum rate of 15% for multinational companies that have reached certain revenue thresholds in at least two of the last four fiscal years. This measure seeks to prevent tax base erosion and ensure that multinationals contribute equitably in the jurisdictions where they operate.
Implications for multinational companies
The introduction of these regulations represents a significant change in Laos’ tax landscape. Multinational companies operating in the country should prepare to comply with the new documentation requirements and ensure that their intercompany transactions are aligned with the arm’s length principle. In addition, they should assess the impact of the Global Minimum Tax on their tax and operating structures.
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Kaohoon International: DFDL Update: Laos to Introduce Transfer Pricing Rules and Global Minimum Tax