All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Laos: Lotteries and prizes now taxable

harrison.jpg

Daniel Harrison

As part of the tax reform brought about by the Amended Tax Law (No. 05/NA, dated December 20 2011), Laos introduced an income tax of 10% for lotteries and prizes – received in cash or in kind – for an amount greater than one million Lao Kip (approximately $128). Notably, lotteries and prizes in cash or in kind in the amount of one million Kip or less are explicitly designated non-taxable under the Amended Tax Law. Furthermore, while under the law it may seem that only amounts below one million are not taxable, the one million figure essentially acts as a tax-free threshold – whereby only the excess of lotteries and prizes exceeding one million are taxed at 10%, creating a one million Kip tax-free amount for any windfall received.

It is also notable that prizes received for achievements in relation to scientific research and inventions, and rewards or prizes paid by an official authority to those who assist with "promoting compliance of the laws and regulations (of Laos)" are specifically non-taxable – regardless of value.

Administration

While the Amended Tax Law is not entirely clear on how the tax is administered, and further supplementary implementing regulations are still pending approval, it is understood that the tax is to be collected via withholding by the provider of such lotteries or prizes (Article 52).

However, this poses a difficult question: how can the income tax be withheld where the taxable item is a non-cash prize? This is a common occurrence in Laos, as the telecommunications companies and banks frequently run marketing promotions with non-cash prize giveaways – with prizes sometimes being as valuable as a motor vehicle.

Implementing regulations

It is expected that the pending implementing regulations will clarify the manner in which the tax is both calculated and collected. Having seen a draft of these regulations, which we acknowledge may change before approval, it is expected that the regulations will stipulate that where a non-cash prize is received, the recipient must obtain a tax payment certificate from the tax authorities to claim the prize.

It is also expected that the regulations will reiterate that in the event of a cash payment, the income tax will be collected via withholding by the payer and then reported to the tax authorities.

Non-compliance

The implementing regulations are also expected to clarify what happens in the situation where the provider of a cash prize fails to withhold tax or distributes non-cash prizes in the absence of a tax payment certificate, and we expect that the provider of such prizes will be responsible for the income tax and any applicable fines – not the recipient.

Current status

With the income tax on lotteries and prizes provisions having been in force since October 1 2012, and in the absence of further implementing regulations, it is not clear how entities which provide such windfalls to customers have dealt with the tax so far.

Given the above, it is uncertain whether we may see this income tax being flagged in the tax audits of the 2012 and 2013 years, or if the tax authorities/Ministry of Finance will waive certain aspects of the tax given the delay in providing further guidance on complying with it.

Daniel Harrison (daniel.harrison@vdb-loi.com)

VDB Loi

Tel: +85 62 145 4679

Website: www.vdb-loi.com

more across site & bottom lb ros

More from across our site

The European Parliament raises concerns over unanimity in voting on pillar two, while protests break out over tax reform in Colombia.
Ramesh Khaitan speaks to reporter Siqalane Taho about tax morality, transfer pricing regulations, Indian tax developments, and the OECD’s two-pillar solution.
Join ITR and KPMG China at 10am BST on October 19 as they discuss the personal, employment, and corporate tax-related implications of employees working from overseas.
Tricentis and Boehringer Ingelheim, along with a European Commission TP specialist, criticised the complexity of pillar one rules and their scope at an ITR event.
Speakers at ITR’s Managing Tax Disputes Summit said taxpayers can still face lengthy TP audits, despite strong documentation preparation
Gig economy companies in New Zealand will need to fully account and become liable for the goods and services tax of underlying suppliers on their platforms, under new proposals.
Join ITR and Thomson Reuters at 2pm (UAE) / 11am (UK) on October 13 as they discuss how businesses can prepare for Tax Administration 3.0 and future-proof against changes such as e-invoicing and increasing digitisation.
ITR has partnered with global TP leaders from Deloitte to discuss transfer pricing controversy around the globe, and to share advice on how to navigate an increasingly uncertain and risky TP landscape.
Sources say they are not satisfied with pillar one protections in the marketing and distribution safe harbour, even though it was designed to give businesses greater tax certainty.
Political support for qualified majority voting is at a peak as unanimity rules continue to block the European Council from passing a directive on pillar two.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree