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Foreign Direct Investment Bank Account

Foreign Direct Investment Bank Account

February 19, 2024

The Bank of the Lao PDR (“BOL”), aiming to improve and strengthen its foreign currency management and monitoring system, issued the Decision on Foreign Currency Management in Connection with Foreign Direct Investment No. 1225/BOL dated 21 December 2023 (“Decision 1225”).

Under the decision, foreign investors are required to open a foreign direct investment bank account with a commercial bank in the Lao PDR to receive registered capital injections or loans from overseas (“FDI Bank Account”).

FDI Bank Accounts must also be used for making overseas payments to repatriate profits, issue dividends, and repay loans and loan interest.

A new FDI Bank Account for a new foreign investment can be opened after the investment licensing and/or enterprise registration is completed. In practice, there is one more step— the company seal must first be obtained.

Any foreign currency bank account opened for the above transactions before Decision 1225 can be converted to be an FDI Bank Account. In addition, if a foreign investor that has an FDI Bank Account wishes to change to a new bank, they must close the old account, transfer all of the balance to the new account, and report to the BOL for its records within 10 working days of opening the new account.

Decision 1225 also states that the funds in the FDI Bank Account can be used for domestic transactions by converting the currency to Lao Kip only with the relevant commercial bank. Currency exchange documents must be kept as evidence for future inspection.

Anyone using other than an FDI Bank Account to process the above transactions will be subject to a penalty of LAK10 million the first time, with the fine doubling for the second and further violations.

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.