Laos Amends its Income Tax Law and Introduces a Minimum Profit Tax on Subsidiaries of Multinational Groups
Author: Dino Santaniello
On June 25, 2026, the Lao official gazette published the amended Law on Income Tax No. 88/NA, effective September 1, 2026. The Law introduces many adjustments. One key highlight, and the focus of this post: the new 'domestic minimum top-up tax' targeting local subsidiaries of multinational groups with a taxable presence in Laos.
Domestic Minimum Top-Up Tax: New Concept Under Lao Law
Article 15 of the Law introduces this concept by reference to "international rules", an expression seemingly pointing towards the Global Minimum Tax under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, through which more than 140 jurisdictions implement common rules to address multinational tax avoidance, including the Pillar Two 15% global minimum tax. Laos is not a member of this Framework but chose to align its domestic law with it, limiting the fiscal benefit of large tax incentive schemes, such as those in concession agreements or special economic zones.
Practical example
If a Lao subsidiary of a multinational group pays an effective tax rate of 10%, below the 15% global minimum, it must pay an additional 5% top-up tax to the Lao tax authorities. Under the Pillar Two mechanism, if Laos does not collect that 5%, the country of the parent company may collect it instead. Laos therefore has a direct fiscal interest in collecting first.
Key Limitations
The rule targets only local subsidiaries belonging to a multinational group with a taxable presence in Laos, not all foreign-invested companies. Implementation depends on separate regulations yet to be enacted, which must also answer key questions such as what qualifies as a multinational group under Lao law, what revenue threshold applies, and if the rule extends to projects already benefiting from negotiated tax incentives.
What Else Changes on September 1
The Law also brings many other adjustments, from tax filing deadlines to deductible expenses. A few worth highlighting:
Profit tax: the Law raises the rate for producers, importers and sellers of alcoholic beverages from 20% to 22%, with 2% going to a public health fund. It also introduces a 30% rate for casinos.
Personal income tax: The 0% band threshold rises from LAK 1,300,000 to LAK 2,500,000 per month. The 5% band now runs from LAK 2,500,000 to LAK 5,000,000, narrower than the previous one. All higher bands remain unchanged, easing the burden on lower and modest incomes after recent inflation.
The Department of Tax can, by law, issue a direct order to freeze funds in bank accounts of individuals or companies in violation of income tax laws and regulations.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific tax or legal counsel regarding your operations in Lao PDR, please consult a qualified professional.