Laos
Laos Increases Tax-Free Income Threshold to Support Lower-Income Workers
The new personal income tax regulations raise the tax-free income limit, providing relief amid economic pressures.
Laos has officially increased the monthly income threshold exempt from personal income tax from LAK 1.3 million (USD 58.8) to LAK 2.5 million (USD 113.5), as part of a new personal income tax system that took effect this month. This adjustment aims to provide greater financial relief to lower-income workers while keeping the existing tax rates unchanged, according to the Ministry of Finance.
The revised tax system, which was established by a presidential decree on August 6, 2025, applies to various forms of employment income, including salaries, wages, bonuses, and allowances. Under the new regulations, individuals earning up to LAK 2.5 million monthly will not pay income tax. For those earning above this threshold, income will be taxed progressively, with rates ranging from 5 percent to 25 percent applied only to the portion of income that exceeds each bracket.
For example, an individual with a monthly income of LAK 6 million (USD 272) will not be taxed on the first LAK 2.5 million. The next LAK 2.5 million will be taxed at 5 percent, while the remaining LAK 1 million will incur a 10 percent tax. This structure is designed to ease the tax burden on lower-income earners, which is particularly significant in the context of rising living costs.
The new regulations also introduce updated tax rates for various income categories. For instance, income from the transfer or sale of agricultural land will be taxed at 1 percent, while a 2 percent tax applies to income from share sales, property transfers, and business activities exceeding LAK 100 million (USD 4,528) annually. Additionally, lottery prizes above LAK 10 million (USD 454) and gifts exceeding LAK 5 million (USD 227) will be subject to a 5 percent tax.
These changes come as Laos seeks to strengthen its public finances and alleviate economic pressure on households, which have faced challenges due to high inflation and currency volatility. Official data indicates that the economy expanded by 5 percent in the first half of 2026, while inflation rates have shown signs of slowing, reaching 7.4 percent in June.