Client Alert: Stricter Fines for Failure to Pay Land Lease and Concession Fees, and Royalties

On 30 April 2026, the Government of the Lao PDR issued Decree No. 112 on Fines and Other Measures for Violations Relating to State Assets (“Decree 112”) to set out the penalties for various violations involving state assets, including their unauthorized use, misappropriation, unlawful disposal, and damage. Decree 112 entered into effect on 16 June 2026.

This article highlights and summarizes the provisions most relevant to businesses, namely the administrative fines applicable to the failure to pay state land lease and concession fees and royalties on the use of natural resources.

Fines for failure to pay state land lease and concession fees

Under general practice, the non-payment of state land lease or concession fees is typically treated as a contractual breach, with the applicable remedies determined by the relevant lease or concession agreement.

Decree 112, however, provides a default administrative penalty if the agreement does not specify a penalty for late or non-payment. In such cases, the following fines apply to the outstanding amount:

• First violation: 10% per month of the outstanding payment
• Second violation: 20% per month of the outstanding payment
• Third and subsequent violations: 30% per month of the outstanding payment

Fines for failure to pay royalties on the use of natural resources

Decree 112 also provides administrative fines for the late payment or non-payment of royalties for the use of natural resources. The applicable penalties vary depending on the type of resource involved.

Mineral resource royalties, including those relating to construction activities

• First violation: 10% per month of the unpaid royalty
• Second violation: 20% per month of the unpaid royalty
• Third and subsequent violations: 30% per month of the unpaid royalty

Forestry resource royalties, including those relating to forestry activities and non-timber forest products

• First violation: 200% of the unpaid royalty
• Second violation: 300% of the unpaid royalty
• Third and subsequent violations: 400% of the unpaid royalty

Natural water resource royalties (manufacturing and service activities)

• First violation: 200% of the unpaid royalty
• Second violation: 300% of the unpaid royalty
• Third and subsequent violations: 400% of the unpaid royalty

Incorrect royalty declarations

Decree 112 also imposes penalties where a person incorrectly declares royalty information, including the amount, quantity, quality, category, or type of natural resource used. The fines are calculated based on the amount of royalties affected by the incorrect declaration, as follows:

• First violation: 200% of the affected royalty amount
• Second violation: 300% of the affected royalty amount
• Third and subsequent violations: 400% of the affected royalty amount

Other measures

In addition to administrative fines, Decree 112 sets out other enforcement measures, which depend on the nature and seriousness of the violation. These include disciplinary measures, warnings, the requirement to adhere to a memorandum of compliance, and in serious cases, seizure of the assets used in the commission of the violation, suspension or revocation of business licenses, and the termination of state land lease or concession agreements.

What businesses should know

The significant financial penalties for failure to pay lease and concession fees and royalties on natural resource use make timely compliance and proper recordkeeping more important than ever. Businesses holding land leases or concessions, or engaging in activities involving mineral, forestry, or water resources should be mindful of these statutory fines and ensure their timely and correct compliance with payment obligations.

Should you have any questions regarding the above regulation, or how these fines may affect your business or operations in the Lao PDR, please contact the undersigned or your usual VDB Loi adviser.