New BOL Decision on the Use of Foreign Currency

On 3 January 2025, the Bank of the Lao PDR (“BOL”) issued Decision on the Use of Foreign Currency No. 11/BOL (the “FCU Decision 2025”) to implement and provide further guidelines on the utilization of foreign currency as regulated under the Law on Foreign Currency Management No. 15/NA dated 7 July 2022 and the Order on Implementing Foreign Currency Management No. 10/PM dated 17 July 2023.

Type of foreign currency utilization

The FCU Decision 2025 outlines three types of foreign currency use in the Lao PDR, as follows:

1. The pricing, labeling, and advertising of fees for goods and services, and other fees. However, Lao Kip (“LAK”) should be featured as the primary currency, with foreign currency provided as a secondary currency.
2. The paying or receiving of fees relating to goods, services, and other fees in the Lao PDR, including, but not limited to:
   • fees relating to goods and services supplied to exporters having revenue in foreign currency – this is referred to as the “global supply chain.”
   • visa fees or other payment obligations in connection with the entry into and exit out of the Lao PDR.
   • cross-border activities relating to transportation, insurance, and warehousing.
   • loan interest, fees, and other expenses in connection with commercial bank services.
   • dry-port, hotel, tourism, and casino service fees.
   • payment obligations with the government of the Lao PDR.
   • grant-in-aid.
   • other fees that are approved by the BOL.
3. The pricing structure for imported goods and services can be based on foreign currency, but local products and services that do not use any means of production imported from overseas must be priced under a pricing structure based solely on LAK.

Approval to use foreign currency

The FCU Decision 2025 specifies that the target group permitted to utilize foreign currency are entities that conduct international business or organizations that participate in international operations.

The FCU Decision 2025 also classifies the above target group into two categories: those that require approval to use foreign currency in the Lao PDR from the Foreign Currency Management Department (“FCMD”) of the BOL and those that do not require approval.

The group that requires approval from the FCMD to use foreign currency, includes, but is not limited to:

• Exporters or concessionaires and lessees who have payment obligations with the government of the Lao PDR in foreign currency (only paying)
• Cross-border business operators (pricing, labeling, advertising, and receiving)
• Entities that have obligations to make payments to overseas and to provide goods and services to exporters that have export revenue in foreign currency (pricing and receiving)
• Insurance business operators offering coverage internationally, such as travel insurance and reinsurance (pricing and receiving)
• Tourism business operators (pricing, advertising, and receiving)
• Casino business operators (only receiving)

The group that is exempt from requiring approval from the FCMD to use foreign currency in the Lao PDR includes:

• Governmental authorities on the issuance of monetary policy instruments
• Governmental authorities or organizations, state enterprises, and embassies or consulates for fees relating to visa fees, payment obligations in connection with the entry into and exit out of the Lao PDR, and grant-in-aid (pricing, labeling, advertising, granting, paying, and receiving)
• Commercial banks (pricing, labeling, advertising, paying, and receiving)
• Lodging services, such as hotels, resorts, or inns (pricing, labeling, advertising, and receiving)
• International bidding projects (pricing, paying, and receiving)

Applications

The application for approval of the use of foreign currency issued by the FCMD must include the following information:

• Request letter explaining the reasons for using the foreign currency
• Copies of the following corporate certificates and licenses:
  • Enterprise registration certificate
  • Investment license or business operation license
  • Tax payment certificate from the previous year
  • Annual plan of revenue and expenses in LAK and foreign currency and the estimated level of foreign currency that will be exchanged with commercial banks in the Lao PDR
• Other documents that might be requested by the FCMD on a case-by-case basis

The approval is valid for 12 months from the date of issuance and is renewable 30 days prior to its expiry date. The approval will be issued within 10 working days—special circumstances (urgent requests) can be considered if reasonable grounds are provided. The issued approval must be collected within 10 working days, or it will be cancelled.

The application for the renewal must include the following documents:

• Request letter explaining the reasons for using foreign currency
• Copies of the following corporate certificates and licenses:
  • Tax payment certificate from the previous year
  • Annual plan of revenue and expenses in LAK and foreign currency and the estimated level of foreign currency that will be exchanged with commercial banks in the Lao PDR
  • Evidence of money exchanged with the commercial banks in the previous year
  • Bank statements for the foreign currency bank account for the previous year
• Other documents that might be requested by the FCMD on a case-by-case basis.

Penalties

The FCU Decision 2025 outlines penalties for violations, as follows:

• Educated (for a first offense), if the violation continues, a fine of between LAK10 million and LAK20 million for a violation where the value cannot be determined or the value is lower than LAK100 million or equivalent.
• Educated (for a first offense), if the violation continues, a fine of 5% of the value of the violation, but not less than LAK20 million, for violations having a value of more than LAK100 million or equivalent.
• First violation with a value of LAK100 million or more will be fined 3% of the value of the violation, but not less than LAK15 million
• For repeat violations, the fine will be double the last fine.
• In the event of a second violation, the approval of the use of foreign currency will be cancelled and it will be published in the media.

If you have any questions about this alert or need further information regarding the above, please contact the undersigned or your usual VDB Loi adviser.