Presidential Edict No. 003/P Dated 19 March 2024 – VAT Rate to be Reset Back to 10% in 2024

As we expected, Presidential Edict No. 003/P issued 19 March 2024 will reset the VAT rate of 7% that became effective less than two and a half years ago back to 10%. This change in rate will occur either late in the second quarter or early in third quarter of 2024, 15 working days after the date that the edict is published in the Lao Official Gazette.

Now, taxpayers will face the same set of questions as when the rate changed from 10% to 7%:

• How will the input VAT paid at 7% be treated with regard to offsetting against the new 10% output VAT?
• Will the Government instruct taxpayers to clear out the 7% input VAT first by writing it off or expensing it?
• How will accounts payable and accounts receivable at 7% be treated? Will it have to be adjusted to 10%?

All these issues pose practical problems that require precise instructions from the tax authorities to ensure a smooth transition to the new rate. We will update you when there is further information and a clear date for the new rate implementation.

If you have any questions about this alert or need further information regarding the above, please contact the undersigned, your usual VDB Loi adviser, or Chanhsamone Phetsavang (Senior Tax Consultant) at [email protected].