2018  2019

© VDB LOI Limited 2018
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Published by VDB LOI Limited November 2018
Printed in Cambodia by Nova Cambodia
Disclaimer: All information is considered correct as of the publication date; however it is not intended
to be relied upon. For the most up-to-date information, please contact one of our advisers or visit
our website at www.vdb-loi.com.

Contents
Quick Reference Tax Rate Tables................................................................i
Tax on Income.......................................................................................... iTax on Salary........................................................................................... i
Withholding Tax ...................................................................................... ii
Registration Tax ...................................................................................... iii
Specific Tax on Certain Merchandise and Services.................................. iii
Other Taxes.............................................................................................. iv
Abbreviations ......................................................................................... v
Overview...................................................................................................1
Tax service agents................................................................................... 2
Tax Audits .................................................................................................3
Tax on Income...........................................................................................4
Residency................................................................................................. 4
Rates of tax.............................................................................................. 4
Prepayment of Tax on Income ................................................................ 4
Tax deferrals ........................................................................................... 5
Calculation of taxable income ................................................................ 5
Deductible expenses ............................................................................... 6
Depreciation ........................................................................................... 7
Utilization of losses ................................................................................. 8
Minimum Tax ...........................................................................................9Withholding Tax .......................................................................................10
Overview ................................................................................................. 10
Resident WHT ......................................................................................... 10
Non-resident WHT .................................................................................. 10
Additional Dividend Distribution Tax ...................................................... 11
Deductibility of withholding taxes .......................................................... 11
Tax on Salary ............................................................................................12
Overview ................................................................................................. 12
Residency ................................................................................................ 12
Taxable salary ......................................................................................... 12
Deductions .............................................................................................. 12
Rates of tax.............................................................................................. 13
Fringe Benefit Tax.................................................................................... 13
National Social Security Fund.................................................................. 13
Value Added Tax........................................................................................14
Overview................................................................................................. 14
Scope of application................................................................................ 14
Sale of land and buildings....................................................................... 14
Non-taxable goods and services.............................................................. 14

Registration............................................................................................. 15
Rates of tax ............................................................................................. 15
Basis of taxation ..................................................................................... 15
Proper VAT invoices................................................................................. 16
Specific Tax on Certain Merchandise and Services......................................17
Overview ................................................................................................. 17
Rates of tax ............................................................................................. 17
Basis of taxation ..................................................................................... 17
Customs Duty ...........................................................................................18
Import duties .......................................................................................... 18
Export duties ........................................................................................... 18
Other Taxes ..............................................................................................19
Tax on property rental ............................................................................ 19
Fiscal stamp tax ...................................................................................... 19
Patent tax ............................................................................................... 19
Registration tax ...................................................................................... 19
Unused land tax ...................................................................................... 20
Accommodation tax ............................................................................... 20
Public lighting tax ................................................................................... 20
Property tax ............................................................................................ 21
Administration .........................................................................................22
Double Taxation Agreements ....................................................................24
ASEAN Economic Community ...................................................................26
Transfer Pricing .........................................................................................27
Qualified Investment Projects ...................................................................28
Penalties ..................................................................................................29

Quick Reference Tax Rate Tables
Tax on Income
Type

TOI rate

Standard
Oil or natural gas production sharing contract and the
exploitation of natural resources, including timber, ore,gold and precious stones
Gross premiums received in the tax year for the
insurance or reinsurance of property or risk in
CambodiaTax deferral period, such as for a QIP

20%
30%

5%

0%

Tax on Salary
Taxable Monthly Salary
Khmer Riel (KHR)
From
From
From
From
Over

0
1,200,001
2,000,001
8,500,001
12,500,000-

1,200,000
2,000,000
8,500,000
12,500,000

Equivalent to
US$*
0
300
500
2,125
3,125

-

300
500
2,125
3,125

Progressive
Tax Rate
0%
5%
10%
15%
20%

*Using an exchange rate of KHR4,000:US$1

Page

i

Withholding Tax
Resident withholding tax
Type of payment

Rate

Services (except by those registered for tax)
15%
All services provided by residents that are not registered for tax.
Royalties
Interest payments
All interest payments other than the interest paid by a domesticbank.
Rental payments except those made on subleases from acompany in the real estate rental business
Interest paid by a domestic bank on fixed term deposits

15%
15%

Interest paid by a domestic bank on non-fixed term deposits

4%

10%
6%

Non-resident withholding tax
Type of payment
All payments of Cambodian-sourced income:
•
•
•
•
•
•

Page ii

Income from services performed in Cambodia
After-tax net income from business activities carriedon by a non-resident through a PE
Royalties, rent and other income related to movable or
immovable property
Interest
Management and technical services (currently
undefined in the LOT)
Dividends

Rate
14%

Registration Tax
Applied on:
Transfer of ownership of all immovable property, including
buildings and other structures, and land, which also
includes the contribution of immovable property as capitalin kind into a Cambodian company
Transfer of ownership of all means of transportation,
including passenger vehicles
Transfer of ownership or possession of shares in a
Cambodian company
Registration of “government contracts related to the supply
of goods or services”
Certain legal documents

Registration
Tax rate
4%

4%
0.1%
0.1%
KHR1,000,000

Specific Tax on Certain Merchandise and Services (not an exhaustive
list)
Goods/Services
Local and international air tickets sold in Cambodia
Entertainment services
Locally produced or imported cigarettes and cigars
Locally produced alcoholic beverages (excluding beer)
Locally produced beer
Locally produced non-alcoholic beverages
Lubricant, brake oil, raw material for producing engine oil(imported)
Local and international telecommunications services

Rate
10%
10%
20%
35%
30%
10%
10%
3%

Page iii

Other Taxes
Item

Rate

Tax base

Minimum Tax

1%

TurnoverFringe Benefit Tax

20%

Value of fringe benefit

Property Tax

0.1%

Patent Tax
Public Lighting Tax

Value of property as per the Property
Evaluation Commission
From KHR400,000 – KHR5,000,000 per businessactivity
3%
Sales value or assumed gross margin ofalcohol and cigarettes/cigars

Accommodation Tax

2%

Tax on Property Rental
Unused Land Tax

10%2%Page iv

Room charges and other related
services
Gross rental income
Value of land as per the Unused Land
Valuation Commission

Abbreviations
Term
ADDT
AEC
ASEAN
AT
CDC
DTA
FBT
GDT
LOT
MT
NSSF
PE
PLT
PTOI
QIP
ST
TOI
TOS
TSA
VAT
WHT

Definition
Additional Dividend Distribution Tax
ASEAN Economic Community
Association of Southeast Asian Nations
Accommodation Tax
Council for the Development of Cambodia
Double Taxation Agreement
Fringe Benefit Tax
General Department of Taxation
Law on Taxation
Minimum Tax
National Social Security Fund
Permanent establishment
Public Lighting Tax
Prepayment of Tax on Income
Qualified Investment ProjectSpecific Tax on Certain Merchandise and Services
Tax on Income
Tax on Salary
Tax service agent
Value Added Tax
Withholding Tax

Page

v

Overview
Over the past two years, the General Department of Taxation (“GDT”) has eliminatedthe different estimated and real regime systems of taxation and moved to a single
taxation regime (referred to as the “self-declaration regime”), which is a formalized
system of taxation and incentives, with taxpayers being subject to audits.
Taxpayers are classified into three categories, as follows:
1. Small taxpayers are sole proprietorships or partnerships that:•Have annual turnover of from KHR250 million to KHR700 million(approx. US$62,500 to US$175,000); or•
Have turnover of at least KHR60 million (approx. US$15,000) for any
three-month period ending in the current fiscal year; or•Expect turnover for the next three-month period to be at least KHR60
million (approx. US$15,000); or•
Participate in any bidding or quotation for the supply of goods orservices, including market stall management (Phasi).
2. Medium taxpayers are:•Enterprises that have annual turnover of from over KHR700 million to
KHR4 billion (approx. US$175,001 to US$1 million); or•Enterprises that have been incorporated as a legal entity,
representative office; or•
National and subnational government institutions, all typesof organizations or associations, including non-governmentalorganizations; or•Foreign consulates and embassies, international organizations, andtechnical cooperation agencies of other countries.
3. Large taxpayers are:•Enterprises that have annual turnover exceeding KHR4 billion (approx.
US$1 million); or•
Branches of foreign companies or subsidiaries of multinational
companies; or•Enterprises registered as Qualified Investment Projects (“QIPs”).
Anyone falling within one of the above categories is required to begin the tax
registration process within 15 working days of commencing business activities
or incorporating. One of the main hurdles in registering for tax is the GDT’s
requirement that one of the principals of the entity appear in person at the GDT at
the time of registration.

Page 1

A taxpayer’s classification will determine the amount of patent tax that must be
paid. Additionally, small taxpayers have fewer requirements when it comes torecordkeeping. Small taxpayers are permitted to use a simplified accounting system,
whereas medium and large taxpayers are expected to keep proper accounting
records and books in line with Cambodian Accounting Standards.

Tax service agentsOn 12 April 2013, Prakas on Tax Service Agents No. 455 SHV.PrK was issued requiringthat those who offer tax services for entities other than their own employer mustbe licensed as a tax service agent (“TSA”). With the GDT’s issuance of Notification
No. 17509 GDT on 18 October 2016 advising that TSA licenses had been issued to
34 companies, this requirement is now being enforced.
For taxpayers, this means that they may continue to file their own monthly andannual returns and represent themselves at the GDT. However, if they hire outside
tax service assistance, a licensed TSA must be engaged, and they must provide awritten power of attorney for the TSA to act as their tax representative.
As of 1 January 2017, individuals or companies that do not have a TSA license are
not allowed to provide tax services, or act as a taxpayer representative. Thosefound to be in breach of this provision will be penalized and taxpayers who engage
unlicensed TSAs will be subject to a fine of KHR5 million.

Page 2

Tax Audits
Taxpayers may be subject to tax audits at the discretion of the GDT. These may be
conducted up to 10 years after the initial filing of a tax return.
There are three kinds of tax audits:
1. Desk audit: This level of control is designed to verify the accuracy of declared
information by cross-checking it with the tax return or other information
requested by the tax administration.
2. Limited audit: This audit is more extensive. The tax auditors will use allavailable resources, including visits to the taxpayer’s place of business, toverify the accuracy of the taxpayer’s returns.
3. Comprehensive tax audit: In practice, this is the same as a limited audit,
only more extensive and thorough. The important distinction between acomprehensive audit and a limited audit is that once the audit has been
completed, and any resulting tax reassessments have been paid, all tax
years covered by the audit will be closed.
Although a comprehensive tax audit is normally final, if the tax administration has
reason to believe a taxpayer has committed tax evasion or fraud they may re-open
the case. Taxpayers achieving Gold or Silver Compliance Status are exempt fromdesk audits, and may be subject to other audits on a less frequent basis.

Page 3

Tax on Income
Residency
Tax on Income (“TOI”) applies to both resident and non-resident persons, but
residents are taxed on their worldwide income.
Legal persons are considered residents of Cambodia for tax purposes if the principal
place of business is in Cambodia or if they are managed from Cambodia; therefore,
a company incorporated in Cambodia is taxed as a resident.
A non-resident taxpayer will be deemed to be a Cambodian resident for tax
purposes if such taxpayer is found to have a permanent establishment (“PE”) in
Cambodia. In such an instance, the non-resident will be subject to tax in Cambodia
in respect of its Cambodian-sourced income.
Income derived from Cambodian-based activities or assets located in Cambodia isdetermined to be Cambodian-sourced.

Rates of tax
The TOI rates are as follows:
TypeStandard
Oil or natural gas production sharing contract and the
exploitation of natural resources, including timber, ore,gold and precious stones
Gross premiums received in the tax year for the insurance
or reinsurance of property or risk in Cambodia
Tax deferral period, such as for a QIP

TOI rate
20%
30%

5%
0%

For insurance companies, the 5% on premiums applies only to non-life insurance
or reinsurance, and life insurance or reinsurance that does NOT have any type ofsavings component. Per the 2017 Financial Management Law dated 19 December
2016, any income from any other activities, including the insurance or reinsuranceof life that has a savings component, is taxed as normal at the standard 20% rateon taxable income.

Prepayment of Tax on Income
Taxpayers are subject to a Prepayment of Tax on Income (“PTOI”) calculated at
1% of monthly turnover. Note that this is not actually a separate tax; rather it is a
Page 4

prepayment of either Minimum Tax (“MT”) or TOI. The payment is made monthly
and is offset against the MT or TOI, whichever is higher, due when the annual TOI
return is filed at year-end.
In order to calculate PTOI, we must consider what is included in “turnover”.
Turnover, also referred to as revenue, is not a clearly defined term under the Law on
Taxation (“LOT”). In the GDT’s questionnaire booklet published in 2015, turnover isdefined as “the total revenue generated from the sale of goods or services that arepart of the taxpayer’s ordinary business activity inclusive [of] all taxes, except value
added tax”. Based on this, it appears that the GDT considers turnover as the revenue
generated by the taxpayer’s main business activities only, and thus, turnover would
not include interest income and proceeds from the disposal of assets.

Tax deferrals
Foreign investors seeking to make significant investments into Cambodia outsideof the sectors restricted by law may apply to the Council for the Development of
Cambodia (“CDC”) for QIP status.
Most QIP companies benefit from a deferral of TOI (often referred to as a “TOI
holiday”) during which investment activity income is exempt from both TOI andPTOI. We use the term deferral, as later on distribution, any income generated
during this time will be subject to the additional dividend distribution tax (“ADDT”),
which taxes income not previously subject to TOI at the usual rate of 20%.
The tax deferral period is divided into three sections: (1) the trigger period, which
begins upon issuance of the Final Registration Certificate and ends either upon
the first year of profit or three years after revenue is first derived; (2) a three-year
period; and (3) the priority period, which is between 0 and 3 years, depending on
the industry and level of investment.

Calculation of taxable income
Taxable income must be calculated on an annual basis by adjusting the accounting
income for expenses that are not allowable or are subject to limitation under the
tax law, such as entertainment expenses.
Income included in calculating taxable income comprises business income from theoperations of the entity, along with other types of income, such as capital gains
from the disposal of assets, rental income, royalty income, and interest income.

Page 5

Deductible expenses
As a general rule, expenses are deductible if they are paid or incurred in a tax year
to carry on the business of the taxpayer. There are further provisions which disallow
specific types of expenses, as follows:
Type of expense

Deductibility

Personal expense
Donations and grants(not including charitable
contributions)
Tax payments, tax penalties, andinterest on penalties
Loss on sale of property between
related parties

Non-deductible
Non-deductible

Expense not related to thebusiness, extravagant expense oflittle use to the business
Amusement, recreation, or
entertainment expense
WHT, TOS, and FBT paid on behalfof recipients
Expense pertaining to previous orsubsequent periods
Provisions

Non-deductible

Depreciation

Non-deductible
Non-deductible

Non-deductible
Non-deductible
Non-deductible
Generally non-deductible, with some
exceptions
Deductible when calculated using themethod set out in the tax law

Unpaid expense due to unrelated Deductible if it is a genuine liability
parties
Unpaid salary
Deductible if paid within 60 days after
the end of the tax year
Related party expense that is not Deductible if paid within 180 days after
salarythe end of the tax year

Page 6

Type of expense
Interest expense

Deductibility
Deduction is limited to an amount equal
to 50% of adjusted income without
taking into account any interest income
or expense, plus the interest income
Deduction limited to an amount equal
to 5% of taxable income, without taking
the charitable contribution deduction

Charitable contribution

There is a further limitation on the deductibility of interest expenses with regard to
related parties. For loans from a related party, the interest rate cannot exceed themarket interest rate; while for those from an unrelated party, the allowed interest
rate is up to 120% of the market interest rate.
The market interest rate is determined and announced on an annual basis by the
GDT and is an average of the interest rates of at least five large commercial banks.
For 2017, the market interest rate was 9.31% per annum for US$ and 12.12% for
KHR.

Depreciation
Under Cambodian tax law, depreciation rates and methods are specified based on
the asset class, and therefore, only the depreciation expense allowed under therate for the asset’s particular class may be deducted in calculating taxable income.
Asset

Tangible
Property

Page 7

Class 1: Buildings andbasic components
Class 2: Computers,
electronic information
systems, data handlingClass 3: Automobiles,
trucks, office furnitureand equipment
Class 4: All other tangible
assetsDepreciation
Rate

Depreciation
Method5%Straight Line50%

Declining
Balance25%

Declining
Balance20%

Declining
BalanceAssetIntangible
Property

Having no specific usefullife
Having a specific usefullife

Depreciation
Rate

Depreciation
Method10%Straight Line

Over the useful Straight Linelife of theproperty

Instead of the tax deferral, QIP companies may elect to benefit from a special
depreciation rate of 40% in the first year of use of the asset in addition to thenormal tax depreciation charge. This special depreciation rate applies only totangible assets used in “manufacturing and processing” and the asset should beheld for a minimum of four years, otherwise the QIP will be required to add back a
portion of the depreciation expense.

Utilization of losses
If a company sustains a loss, this can be utilized against future income and can be
carried forward for up to five years.
The accumulated tax losses can be carried forward if all of the following conditions
are met:••••There is no change in the business activities of the entity;
There is no change in the ownership of the entity;
The loss is recorded in the tax return that has been submitted to thetax administration within the period of time as specified in the tax
provisions; andThe GDT has not issued a unilateral tax assessment for any of the tax
years in question.

Page 8

Minimum Tax
MT is a separate and distinct tax from TOI, and is calculated at 1% of annual turnover.
Turnover is not defined under the LOT, but is inclusive of all taxes excluding value
added tax (“VAT”).
A taxpayer will be subject to either TOI or MT, whichever is greater. If only MT is due,
this should have already been paid in advance by the PTOI payments, which are also
calculated at 1% of turnover.
Note that QIPs are not subject to MT, but will still be required to pay PTOI every
month after the conclusion of their TOI deferral period.
Newly-introduced legislation allows for an exemption from MT for all taxpayers
maintaining proper accounting records, imposing MT only on taxpayers found tohave “improper accounting records”.
Prakas 638 details what are considered improper accounting records, and statesthat a GDT committee will evaluate taxpayers’ accounting records based on thecriteria detailed in the Prakas. This evaluation will take place every two years. At thetime of publication, the committee had not yet been formed, however the GDT has
indicated that taxpayers with audited financial statements, or those having Gold
Compliance Status may be assumed to have proper accounting records.

Page 9

Withholding Tax
Overview
Certain payments are subject to a withholding tax (“WHT”) that must be deductedby the payer at the time of payment. WHT is imposed at varying rates dependingon the transaction type and whether the payment recipient is a resident or a nonresident.
WHT is a tax on the income recipient; however, the responsibility for deducting
and making payment to the GDT is placed on the party that makes the payment,
referred to as the Withholding Agent.

Resident WHT
Payments of certain Cambodian-sourced income by a resident taxpayer carrying ona business in Cambodia, to a Cambodian resident, are subject to the following WHT:
Type of payment to a resident

Rate

Services (except by those registered for tax)
All services provided by residents that are not registered for tax.
Royalties
Interest payments
All interest payments other than the interest paid by a domesticbank.
Rental payments except those made on subleases from acompany in the real estate rental business

15%

Interest paid by a domestic bank on fixed-term deposits

6%Interest paid by a domestic bank on non-fixed-term deposits

4%

15%
15%

10%

Non-resident WHT
WHT at the rate of 14% must be deducted from payments of Cambodian-sourced
income made to non-residents by residents carrying on business, including PEs of
non-resident taxpayers, except for payments of premiums for the reinsurance ofproperty or risk in Cambodia. Per Article 33 of the LOT, Cambodian-sourced income
includes:••Income from services performed in Cambodia
After-tax net income from business activities carried on by a nonresident through a PE
Page 10

••••Royalties, rent, and other income related to movable or immovable
property
Interest
Management and technical services (currently undefined in the LOT)
Dividends

Additional Dividend Distribution Tax
If dividends are paid out of earnings that have not been subject to at least 20% TOI,
then ADDT will apply to the dividends.
Therefore, when a dividend is paid out of income realized during a tax deferral
period, or out of retained earnings that were realized during a tax deferral period
and so not previously subject to TOI, the dividend will be subject to ADDT at 20%.
If a dividend is received from another enterprise and the proper amount of TOI
was paid on the income used for such distribution, then ADDT will not need to be
paid on any of that dividend income used in an enterprise’s subsequent dividend
distribution. This is with the caveat that the dividend income received must havebeen recorded into a separate dividend income account and that portion can beclearly identified.
Previously, there was a 9% TOI rate that existed for QIPs. Although QIPs are nolonger taxed at the 9% rate, there are QIP companies that have retained earnings
that when earned were taxed at 9%.
The ADDT amount is determined as the difference between what the taxpayer
actually paid, and the amount the taxpayer should have paid.
The ADDT rates are therefore as follows:
Dividend paid out of earnings subject to TOI at:
0%9%20% or 30%

ADDT rate
20%
11/91
Nil

Deductibility of withholding taxes
WHT is a tax on the income recipient and not the Withholding Agent. Hence, if the
WHT is not deducted from the payment and is borne by the Withholding Agent, it
is not deductible by the Withholding Agent.

Page 11

Tax on Salary
Overview
Employers are liable to deduct Tax on Salary (“TOS”) from payments of salaries,
wages, and other remuneration made to all employees. Employees that are
tax residents of Cambodia are taxed on their worldwide employment income at
progressive rates, whereas non-residents are taxed only on their Cambodiansourced employment income at a flat rate.

Residency
An individual is considered a resident for tax purposes if they fulfill any one of thefollowing criteria: (1) their residence is in Cambodia; or (2) their principal place ofabode is in Cambodia; or (3) they are present in Cambodia for more than 182 daysin any period of 12 months ending in the current tax year.

Taxable salary
Salary as defined by the LOT includes “remunerations, wages, bonuses andovertime, compensations, and fringe benefits which are paid to an employee,or which are paid for the direct or indirect advantage of the employee for thefulfillment of employment activities” and is taxed at TOS rates.
Payments that are exempt from TOS include reimbursements of business expenses
incurred by the employee on a work assignment, indemnity payments upon
employee dismissal up to a limit, social security contributions, and uniforms andequipment required for the performance of employment duties.

Deductions
Deductions for dependent family members reduce the monthly taxable base on
which TOS is calculated. A deduction of KHR150,000 per month (approximately
US$37.50) may be deducted for each minor dependent child under 14, or under
25 and in full-time education, and a deduction for the same amount for one nonworking spouse.

Page 12

Rates of tax
Non-residents are subject to TOS only on their salary income at a flat rate of 20%.
Residents are taxed at progressive rates as follows:
Taxable Monthly Salary
Khmer Riel (KHR)
From
From
From
From
Over

0
1,200,001
2,000,001
8,500,001
12,500,000-

1,200,000
2,000,000
8,500,000
12,500,000

Equivalent to
US$*
0
300
500
2,125
3,125

-

300
500
2,125
3,125

Progressive
Tax Rate
0%
5%
10%
15%
20%

*Using an exchange rate of KHR4,000:US$1

Fringe Benefit Tax
Employers may also provide employees with additional cash or in-kind employee
benefits, such as home leave air tickets or private use of motor vehicles. These
fringe benefits are subject to a flat Fringe Benefit Tax (“FBT”) of 20% on the market
value of the fringe benefits provided to an employee.
The Ministry of Economy and Finance issued Circular No. 011 on 6 October 2016
which allows for certain benefits provided to all employees to be exempt from
FBT. These include items such as meal allowances or transportation allowances.
Although the circular does not specify that this applies only to Cambodian
employees, the practice thus far is that it does not apply to expatriate employees. In
order to access this exemption, an employer must provide notification to the GDT.

National Social Security Fund
Employers having one or more employees must register with the National Social
Security Fund (“NSSF”) and make NSSF contributions on a monthly basis. The NSSF
contribution is 0.8% of average monthly salary up to a maximum contribution of
KHR9,600 (approximately US$2.40) for work-related injuries and compensation
for loss of earning capacity due to injuries sustained at work, plus 2.6% of averagemonthly salary up to a maximum contribution of KHR31,200 (approximately US$7)
for healthcare.

Page 13

Value Added Tax
Overview
VAT is applicable on the taxable supply of goods and services. An entity registeredunder the VAT provisions is required to charge VAT on all sales of taxable supplies(output VAT). Such entities can offset the VAT paid on purchases (input VAT) against
their output VAT.

Scope of application
Taxable supplies are the supply of goods, services or imports for taxable sale orfor use in producing taxable supplies. Taxpayers must charge and collect VAT on
taxable supplies. The supply of goods includes the transfer of the rights to movable
property; meaning all property except land or money.

Sale of land and buildings
As per Notification No. 1728 dated 9 October 2013, the GDT has confirmed that forthe sale of land with buildings, registered taxpayers are required to charge VAT on
the building component (but not on the land component).

Non-taxable goods and services
In order to promote the provision of certain key public services, specific taxable
supplies have been exempted from VAT. The following is a list of non-taxable
supplies under the LOT:
•
•
•
•
•
•
•
•
•
•
•

Public postal services
Hospital, clinic, medical and dental services, and the sale of medical
and dental goods incidental to the performance of such services
Transportation of passengers by a wholly state-owned public
transportation system
Insurance services
Primary financial services
Imported articles for personal use that are exempt from customs duty
Non-profit activities in the public interest that have been recognizedby the Ministry of Economy and Finance
Education services
The supply of electricity and clean water
Unprocessed agricultural products
Services related to the collection and/or cleaning of solid or liquid
waste
Page 14

If a business makes non-taxable supplies only, it will not be able to claim any input
VAT; the VAT on purchases must be borne as a cost. If a business makes a mix of nontaxable and taxable supplies, it will be able to claim a portion of input VAT based on
the portion of taxable supplies.

Registration
Compulsory VAT registration applies to any self-declaration taxpayer who makes
taxable supplies. Further, all companies, import/export businesses and QIPs mustregister for VAT. Other taxpayers are required to register as VAT taxpayers if theymeet certain turnover thresholds. Other businesses not compelled to register by
law may register voluntarily.

Rates of tax
Taxable supplies made in or imported into Cambodia are subject to VAT at one of
two rates:
Type of supply

RateStandard rate
10%0%
Zero-rated supplies, which include:•
Exported goods•
Exported services•
The supply of international transportation services•
Services in support of the supply of internationaltransportation•
Other specific sectors, including supporting industries
that supply the export-oriented garment, textile andfootwear industries; the supply of rice; and the importand supply of certain goods for agricultural purposes
Zero-rated supplies are not the same as non-taxable supplies, as it is possible for
entities providing zero-rated supplies to claim input VAT credit.

Basis of taxation
For local supplies, the cost of the goods or services is the tax base. For imports,
the tax base is the CIF value plus customs duty plus any Specific Tax on Certain
Merchandise and Services (“ST”).

Page 15

Proper VAT invoices
Taxpayers must issue proper VAT invoices for all sales of taxable supplies. VAT
invoices must:•••

Be sequentially numbered for the year, and the format must meet the
GDT’s requirements
Be in Khmer or if in both Khmer and English, the English must be
written below the Khmer
Contain the following:-Name, address, and VAT tax identification number of the
supplier, and of the customer-Date of issuance-Description of the transaction, quantities, and selling prices of
the goods or services-Separate total price before VAT and VAT amount charged

The GDT will seek to deny expense deductions or input VAT claims if they are notsupported by proper VAT invoices.

Page 16

Specific Tax on Certain Merchandise and Services
Overview
ST is a form of excise tax imposed on the importation or domestic production andsupply of certain goods and services. Tax is levied once only; for imports, this is at
the inward checkpoint, and for domestic goods, it is upon the sale from the factory
if the products are locally produced.
We expect that, in light of the reduction in import duty tariffs as noted in the
Customs Duty section, greater emphasis will be placed on excise tax in the future.
Accordingly, it is likely that there will be a number of changes to the calculation andcollection of ST.

Rates of tax
The ST amount due is calculated by applying the applicable rate to the applicable
tax base, as per the table below (not an exhaustive list):
Goods/Services
Local and international air tickets sold in Cambodia
Entertainment services
Locally produced or imported cigarettes and cigars
Locally produced or imported alcoholic beverages(ex-cluding beer)
Locally produced or imported beer
Locally produced or imported non-alcoholic beverages
Lubricant, brake oil, raw material for producing engine oil(imported)
Local and international telecommunications services

Rate
10%
10%
20%
35%
30%
10%
10%
3%

Basis of taxation
For locally supplied goods, ST is calculated on the “ex-factory selling price”, which
is defined as 90% of the selling price excluding VAT and ST. For locally supplied
services, the tax base is the invoice price of the services supplied.
For imported goods, ST is calculated inclusive of customs duty and the cost,
insurance and CIF value, excluding VAT.

Page 17

Customs Duty
Import duties
There are a number of goods on which import duty applies when they are brought
into Cambodia, with some exemptions, including goods temporarily imported
into Cambodia, goods for personal use, goods exempted by international treaty,
humanitarian aid, and imports for use by a QIP. Exemptions from import duty may
also be granted by the CDC for specific industries.
Customs duty is levied on goods entering Cambodia at rates from 0% to 35%.
Cambodia is part of ASEAN and therefore party to the ASEAN Free Trade Agreement
and Common Effective Preferential Tariff scheme. This requires ASEAN Member
States to offer preferential tariff rates on a broad range of products originating fromother ASEAN countries.
Accordingly, the customs duty rates in Cambodia have been reduced so that now
many goods coming from other ASEAN countries have a maximum 5% import duty
imposed.

Export duties
There are no export duties other than on a limited list of restricted products at rates
of 2% to 10% as follows:••••

Natural rubber
Uncut precious gemstones
Processed woodFish, crustaceans, mollusks and other aquatic products

Page 18

Other Taxes
Tax on property rental
House and land rental tax is set at 10% of gross rental income from the lease ofbuildings and land, when the lessor is an individual.

Fiscal stamp tax
A fiscal stamp tax is due on advertising leaflets and banners, levied at different
bands of rates, based on the dimensions of the advertising item, the number ofletters and whether the lettering is Khmer only or includes a foreign language.

Patent tax
Patent tax is a registration tax that is paid by all business enterprises uponestablishment of a business and by 31 March on an annual basis thereafter. Patenttax ranges from KHR400,000 to KHR5,000,000 (approximately US$100 to US$1,250)
depending on the taxpayer’s classification, and must be paid for each separatebusiness activity, and for each branch located in a different province.

Registration tax
Also referred to as seal tax or stamp duty, registration tax is a tax imposed on thetransfer of ownership or possession of certain types of property.
It is payable by the person who receives the ownership and is applied to the transfer
value at rates as follows:
Applied on:
Transfer of ownership of all immovable property, including
buildings and other structures, and land, which also
includes the contribution of immovable property as capitalin kind into a Cambodian company
Transfer of ownership of all means of transportation,
including passenger vehicles
Transfer of ownership or possession of shares in a
Cambodian company
Registration of “government contracts related to the
supply of goods or services”
Certain legal documents
Page 19

Registration
Tax rate
4%

4%
0.1%
0.1%
KHR1,000,000

There are certain exemptions and relief available on the transfer of immovable
property between relatives.
The tax base used to calculate the registration tax on the transfer of immovable
property is the value set by the Ministry of Economy and Finance for all cities andprovinces in Cambodia.

Unused land tax
Land is determined to be unused if it does not have any structure on it or there isa structure, but it is unused. Unused land tax is levied on an annual basis at a rateof 2% on the market value per square meter, with the market value determinedby the Unused Land Valuation Commission. The unused land tax is paid annuallyby the landowner. Since the introduction of property tax, it was understood that if
property tax is paid on a piece of land, then unused land tax no longer applies. Thiswas codified under Article 12 of the 2015 Law on Financial Management dated 18
December 2014.

Accommodation tax
Accommodation tax (“AT”) is an indirect tax imposed on the supply ofaccommodation services at a rate of 2%. AT must be charged by hotels, hotel
apartments, motels, lodges, guesthouses, campgrounds and similar, but does notinclude the rental of houses or apartments.

Public lighting tax
Public lighting tax (“PLT”) is an indirect tax imposed on sales of alcohol and cigarettes
at all stages of supply, on both imports and domestically-produced goods, at a rateof 3%. All types of cigarettes, including e-cigarettes, and alcohol are subject to PLT,
including beer, grape wine and spirits, with the exception of palm wine. In late 2017,
the method of calculating PLT was amended such that for importers and producers
the tax base remains the selling price, but for distributors, the tax base was reduced
to 20% of the selling price.

Page 20

Property tax
Property tax is a direct tax imposed on the value of immovable property, including
land and buildings, on property valued above KHR100,000,000 (approx. US$25,000)
at a rate of 0.1%. The property value is per the valuation issued by the Property
Evaluation Commission.
Property taxpayers may be individuals or companies. Owners, possessors or “final
beneficiaries” of immovable property may be liable for the property tax. A final
beneficiary includes those with the right to use the property, and so includes longterm lessees.

Page 21

Administration
Tax

Filing and payment date

Tax on Income

TOI must be paid and filed within 3 months of the end of
the tax year, which is normally 31 December unless anapplication to amend the tax year is approved.

Prepayment of
Tax on Income

PTOI must be paid and filed by the 20th of the following
month.

Minimum Tax

MT must be paid at the same time the annual TOI return isdue, that is, 3 months after the end of the tax year.

Withholding Tax

WHT must be paid to the GDT by the 20th of the monthfollowing the month in which the payment is made or
accrued.

Additional
Dividend
Distribution Tax

ADDT must be paid and declared on the PTOI return, by the20th of the month following the month the dividend was paidout.

Value Added Tax VAT is to be paid on the 20th of each month for the VAT
liabilities accrued during the previous month. VAT on
imported goods is collected by the customs administration
at the time of import.
Tax on Salary

TOS and FBT are deducted by the employer and remitted
to the GDT by the 20th of the month following the monththat the salary and fringe benefits were provided to theemployee.

Specific Tax
on Certain
Merchandise
and Services

ST on domestic sales must be paid and declared on the PTOI
return, by the 20th of the month following the time of supply.
ST on imported goods is due at the time of import, and iscollected by the customs administration along with VAT andcustoms duty.

Customs Duty

Customs duty is collected by the customs administration at
the time of import.

Patent Tax

Patent tax is payable by 31 March each year.

Registration Tax

Registration tax is due within 3 months of the transfer.

Unused Land Tax Unused land tax is due on an annual basis by 30 September
each year.
Accommodation AT is declared in the PTOI return, due with payment by theTax
20th of the month following the time of supply.

Page 22

Tax

Filing and payment datePublic LightingTax

PLT is declared in the PTOI return, due with payment by the20th of the month following supply.

Property Tax

Property tax is due on an annual basis by 30 September eachyear.

Page 23

Double Taxation Agreements
The past two years have seen major developments for Cambodia, with thesigning of its first double taxation agreements (“DTAs”). The first DTA was signedwith Singapore on 20 May 2016. The second one was signed with China, a major
investment partner, on 13 October 2016 (note that Hong Kong and Macau are notincluded as they have their own taxation systems). The third one was signed with
Brunei on 27 July 2017. On 7 September 2017, a DTA with Thailand was signed.
On 1 January 2018, the DTAs with Singapore and Thailand entered into force. In
order to utilize DTA benefits, an application must be made to the GDT which if
approved, is valid for one year.
Below is a comparison table showing the key points of the four DTAs.
Term

BruneiChina

PE time test:
Building site
183 days 9 months
Project services
183 days
Dividend withholding tax
10%
10%Interest withholding tax
10%
10%
Royalties withholding tax
10%
10%
Technical service fees
14%
10%

Singapore

Thailand6 months
183 days
10%
10%
10%
10%

6 months
183 days
10%
10%
10%
10%

The significant differences between the DTAs are highlighted below:•••

Technical service fees: The Brunei DTA provides for technical service
fees to be taxed at 14%, in contrast to the lower rate of 10% in theother three DTAs.
Article 3 Beneficial Ownership issue: In the Singapore DTA, a trust isdeemed to be the beneficial owner, which is quite unusual, in that
normally reduced rates of withholding tax under a DTA are available
only to a beneficial owner eligible for treaty relief (i.e. a resident in theother Contracting State), to avoid “treaty shopping”. This provision isabsent from the DTAs with Brunei, China, and Thailand.
Article 5 Permanent Establishment issue: The time period for
determining whether there is a PE for building sites differs, with ninemonths in the China DTA, as opposed to the earlier six months/183
days in the other three DTAs. In addition, in the Brunei, Singapore,
and Thailand DTAs, as in most DTAs, the furnishing of services forPage 24

more than 183 days creates a PE, but the China DTA does not containthis provision. Thus, the furnishing of services by a Chinese company
through employees or others in Cambodia will not create a PE,
provided the activities do not take place in a “fixed base” operated
by the Chinese company. For example, a Chinese consulting company
could send employees to work at a client’s office in Phnom Penhfor unlimited periods of time, and this would not create a PE. (Notehowever that the fees received from the client would be subject to
10% WHT, and the individual employees may, depending on theircircumstances, be subject to tax on their earnings.)

Page 25

ASEAN Economic Community
The aim of the ASEAN Economic Community (“AEC”) is to provide regional
economic integration by creating a single market across ASEAN countries, similar
to the European Union. The purpose of this is to encourage economic growth in allparticipating countries by allowing a free flow of human resources, goods, services
and investment between countries.
From a tax perspective, the AEC will work towards establishing more agreementson the avoidance of double taxation by ASEAN countries and will aim to enhance
the withholding tax structure by removing withholding taxes that may apply oninterest, royalty, dividend and service fee payments.

Page 26

Transfer Pricing
In October 2017 the Royal Government issued Prakas 986 concerning the allocationof income and expense between related parties. This Prakas (the “TP Prakas”) is
consistent with OECD guidelines, and requires that transactions between relatedparties should be at arm’s length values, as determined under one of the fiveacceptable methods listed in the TP Prakas. The five acceptable methods are:
•
•
•
•
•

Comparable Uncontrolled Price
Resale Price Method
Cost Plus Method
Transactional Net Margin Method
Profit Split Method

The TP Prakas also requires that taxpayers having related party transactions have atransfer pricing report with the following content:
Corporate Background – including a description of the company, the corporate
and ownership structure, the nature of the business, and summary financial
information.
Business Analysis – including the competitive environment, the market and its
trends, added value, and unique selling points.
Overview of Related Party Transactions – describing the nature and volume ofsuch transactions and the pricing method used.
Functional Analysis – describing the activities performed by each party to therelated party transactions.
Economic Analysis – including a discussion and justification of the appropriate
transfer pricing method, and an analysis of comparable prices for the related party
transactions.
Conclusion – including an identification of the acceptable range of “arm’s length”
prices.
Although not stated in the TP Prakas, the GDT has confirmed that the transfer
pricing report must be available at the time the 2018 TOI return is filed.

Page 27

Qualified Investment Projects
Some types of investment may be eligible to be approved as a QIP by the CDC. QIP
companies benefit from:••••

TOI deferral period, which could be three or more years, during which
they are also exempt from PTOI
MT exemption
Special depreciation rate of 40% in the first year on manufacturing
and processing equipment. This is only available if the TOI deferral is
not taken
Import duty exemption on the import of construction materials andequipment

Under Prakas No. 1127 (11 October 2016), QIP companies that operate morethan one QIP activity are required to register each activity for a separate VAT
tax identification number, file separate tax returns, and have separate books ofaccounts and records for each of the activities.

Page 28

Penalties
Tax penalties are imposed for violations of the LOT and its regulations, ranging from
10% to 40% of the tax amount due, together with interest that is charged at 2%
per month.
Generally, ordinary negligence is subject to a penalty of 10% of the unpaid taxes,
while serious negligence is subject to 25%. Obstructing the operations of the tax
administration, fraud or other criminal acts carry more substantial penalties of 40%of the unpaid taxes.
Other penalties may include fines, closure of business, and potentially, criminal
sanctions, according to the nature and severity of the offense. Repeat offenses
generally garner more severe penalties.

Page 29

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