CAMBODIATAX BOOKLET
2022 - 2023

Get to the point.

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Published by VDB LOI Limited
September 2022
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Contents
Quick Reference Tax Rate Tables................................................................... iTax on Income......................................................................................................................i
Withholding Tax ..................................................................................................................i
Tax on Salary ..................................................................................................................... ii
Value Added Tax ............................................................................................................... iii
Specific Tax on Certain Merchandise and Services (not an exhaustive list)....... iii
Registration Tax................................................................................................................ iii
Other Taxes........................................................................................................................ iv
Abbreviations................................................................................................ v
Overview........................................................................................................ 1
Tax service agents.............................................................................................................. 3
Tax Audits....................................................................................................... 4
Tax on Income................................................................................................ 5
Residency............................................................................................................................. 5
Rates of tax.......................................................................................................................... 5
Prepayment of Tax on Income........................................................................................ 6
Tax exemption period....................................................................................................... 6
Calculation of taxable income....................................................................................... 7
Deductible expenses......................................................................................................... 7
Depreciation....................................................................................................................... 9
Utilization of losses.........................................................................................................11
Minimum Tax...............................................................................................12
Withholding Tax...........................................................................................13
Overview............................................................................................................................13
Resident WHT...................................................................................................................13
Non-resident WHT...........................................................................................................13
Advance Tax on Dividend Distribution.......................................................................14
Withholding taxes on undistributed dividends........................................................15
Deductibility of withholding taxes..............................................................................15
Tax on Salary................................................................................................16
Overview............................................................................................................................16
Residency...........................................................................................................................16
Taxable salary...................................................................................................................16
Deductions........................................................................................................................16
Rates of tax........................................................................................................................16
Fringe Benefit Tax............................................................................................................17
National Social Security Fund......................................................................................17
Value Added Tax..........................................................................................18
Overview............................................................................................................................18

Scope of application.......................................................................................................18
Sale of land and buildings.............................................................................................18
Non-taxable goods and services.................................................................................18
Prohibited input VAT.......................................................................................................19
Registration.......................................................................................................................19
Rates of tax........................................................................................................................19
Basis of taxation..............................................................................................................20
Proper tax invoices..........................................................................................................20
VAT on e-commerce transactions................................................................................20
VAT on tangible fixed assets that are no longer in use...........................................21
Capital Gains Tax.........................................................................................22
Personal Income Tax....................................................................................23
Specific Tax on Certain Merchandise and Services...................................24
Overview............................................................................................................................24
Rates of tax........................................................................................................................24
Basis of taxation..............................................................................................................24
Customs Duty...............................................................................................25
Import duties....................................................................................................................25
Export duties.....................................................................................................................25
Other Taxes..................................................................................................26
Accommodation tax.......................................................................................................26
Fiscal stamp tax...............................................................................................................26
Patent tax..........................................................................................................................26
Property rental tax..........................................................................................................26
Property tax......................................................................................................................26
Public lighting tax...........................................................................................................26
Registration tax................................................................................................................27
Unused land tax...............................................................................................................28
Administration.............................................................................................29
Double Taxation Agreements.....................................................................31
ASEAN Economic Community.....................................................................33
Transfer Pricing............................................................................................34
Qualified Investment Projects....................................................................36
Penalties.......................................................................................................38

Quick Reference Tax Rate Tables
Tax on Income
TypeStandard
Oil or natural gas production sharing contract andthe 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 exemption period, such as for a QIP

TOI Rate
20%
30%

5%

0%

Withholding Tax
RESIDENT WITHHOLDING TAX
Type of payment

Rate

Service payments (except payments to those registered for tax thatare supported by a valid tax invoice, and for services of less than
KHR50,000)
Royalty payments
Interest payments
All interest payments other than the interest paid by a domestic bank.
Rental payments (except payments to those registered for tax thatare supported by a valid tax invoice)All rental payments made to residents that are not registered for tax.
Interest paid by a domestic bank on fixed-term deposits
Interest paid by a domestic bank on non-fixed-term deposits

15%

15%
15%
10%

6%
4%

Page

i

NON-RESIDENT WITHHOLDING TAX
Type of payment

Rate

All payments of Cambodian-sourced income:14%• Interest paid by a resident entity, resident partnership, orgovernmental instiuion of Cambodia• Dividends distributed by a resident entity• Income from services performed in Cambodia• Compensation for management and technical services• Rent and other income related to movable or immovable
property situated in Cambodia• Royalties or usage rights to intangible property• Gains made from the sale of, or the transfer of any interest in,immovable property located in Cambodia, or capital gains fromfinancial assets and investment assets in Cambodia, or capitalgains from the transfer of any or all of the equity in the capital ofan entity in Cambodia• Premiums from the insurance or reinsurance of risks in Cambodia• Gains from the sale of movable property that is part of thebusiness property of a PE maintained by a non-resident taxpayer
in Cambodia• Income from the business activities of a non-resident, conducted
through a PE in Cambodia

Tax on Salary
TAXABLE MONTHLY SALARY*
Khmer Riel (KHR)

Equivalent to US$**

From 0 - 1,500,000
0 - 375
From 1,500,001 - 2,000,000
375 - 500
From 2,000,001 - 8,500,000
500 - 2,125
From 8,500,001 - 12,500,000
2,125 - 3,125
Over 12,500,000
3,125*New rates effective starting on 1 January 2023.
**Using an exchange rate of KHR4,000:US$1.

Page ii

Progressive tax rate
0%
5%
10%
15%
20%

Value Added Tax
Type of supply

RateStandard rate10%
Zero-rated supplies, which include:0%• Exported goods• Exported services• The supply of international transportation services• Services in support of the supply of international transportation• Other specific sectors, including supporting industries that
supply the export-oriented garment, textile and footwear
industries; the supply of rice; and the import and supply ofcertain goods for agricultural purposes

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 or imported alcoholic beverages(excluding beer)
Locally produced or imported beer
Locally produced non-alcoholic beverages
Lubricant, brake oil, raw material for producing engine oil(imported)
Local and international telecommunications services
Locally produced cement

Rate
10%
10%
20%
35%
30%
10%
10%
3%
5%

Registration Tax
Applied on:

Registration
Tax rate

Transfer of ownership of all immovable property, including 4%
buildings and other structures, and land, which also
includes the contribution of immovable property as capitalin kind into a Cambodian company
Page iii

Registration
Tax rate

Applied on:
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 such as for mergers andliquidations

4%
0.1%
0.1%
KHR1,000,000

Other Taxes
Item
Accommodation Tax
Fringe Benefit Tax
Minimum Tax
Patent Tax
Property Rental Tax
Property Tax
Public Lighting Tax

Unused Land Tax

Page iv

Rate
2%

Tax base

Room charges and other related
services
20%
Value of the fringe benefit
1%
TurnoverFrom KHR400,000 – KHR5,000,000 per businessactivity
10%
Gross rental income
0.1%
Value of the property as per theProperty Evaluation Commission
3%• For
importers
andmanufacturers, it is 3% of thevalue of the taxable productexclusive of VAT and PLT itself.
• For resellers and distributors,
the tax rate is also 3%, but thebasis is now only 20% of theamount recorded on the invoice,exclusive of VAT and PLT itself.
2%
Value of the land as per the Unused
Land Valuation Commission

Abbreviations
Term

Definition

AEC
ASEAN
AT
ATDD
CA
CDC
CGT
DA
DTA
FBT
GDT

ASEAN Economic Community
Association of Southeast Asian Nations
Accommodation Tax
Advance Tax on Dividend Distribution
Comprehensive Audit
Council for the Development of Cambodia
Capital Gains Tax
Desk Audit
Double Taxation Agreement
Fringe Benefit Tax
General Department of Taxation

KHR
LA
LOT
MEF
MT
NBV
NSSF
PE
PIT
PLT
PTOI
QIP
ST
TIN
TOI
TOS
TSA
VAT
WHT

Khmer Riel
Limited Audit
Law on Taxation
Ministry of Economy and Finance
Minimum Tax
Net Book Value
National Social Security Fund
Permanent Establishment
Personal Income Tax
Public Lighting Tax
Prepayment of Tax on Income
Qualified Investment ProjectSpecific Tax on Certain Merchandise and Services
Tax Identification Number
Tax on Income
Tax on SalaryTax Service Agent
Value Added Tax
Withholding Tax
Page v

Overview
Cambodia has a single taxation regime, known as the “self-assessment
regime”, a formalized system of taxation and incentives, with taxpayers being
subject to audits.
The General Department of Taxation (“GDT”) classifies taxpayers into three
categories, as follows:
1. Small taxpayers are sole proprietorships or partnerships that:• Have annual turnover of from KHR250 million to KHR 1 billion (approx.
US$62,500 to US$250,000) or annual total assets of from KHR200 million
to KHR1 billion (approx. US$50,000 to US$250,000) for the agricultural,
service, and trading sectors; or• Have annual turnover of from KHR250 million to KHR1.6 billion (approx.
US$62,500 to US$400,000) or annual total assets of from KHR200 million
to KHR2 billion (approx. US$50,000 to US$500,000) for the industrial
sector; or• Have turnover for any three consecutive months of at least KHR60
million (US$15,000); or• Expect to have total turnover in the next three consecutive months of atleast KHR60 million (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:
• Entities that have annual turnover of:-- More than KHR1 billion to KHR4 billion (approx. US$250,000 to US$1
million) for the agricultural sector; or-- More than KHR1 billion to KHR6 billion (approx. US$250,000 to
US$1.5 million) for the service and trading sectors; or-- More than KHR1.6 billion to KHR8 billion (approx. US$400,000 to
US$2 million) for the industrial sector; or• Entities that have annual total assets of:-- More than KHR1 billion to KHR2 billion (approx. US$250,000 to
US$500,000) for the agricultural, service, and trading sectors; or-- More than KHR2 billion to KHR4 billion (approx. US$500,000 to US$1
million) for the industrial sector; orPage 1

• Entities 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:
• Entities that have annual turnover:-- Exceeding KHR4 billion (approx. US$1 million) for the agricultural
sector; or-- Exceeding KHR6 billion (approx. US$1.5 million) for the service andtrading sectors; or-- Exceeding KHR8 billion (approx. US$2 million) for the industrial
sector; or• Entities that have annual total assets:-- Exceeding KHR2 million (approx. US$500,000) for the agricultural,
service, and trading sectors; or-- Exceeding KHR4 billion (approx. US$1 million) for the industrial
sector; or• Branches of foreign companies or subsidiaries of multinational
companies; or• Entities 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 businessactivities or incorporation. 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.
A taxpayer’s classification will determine the amount of patent tax that mustbe paid. Additionally, small taxpayers have fewer requirements when it comesto recordkeeping. Small taxpayers are permitted to use a simplified accounting
system, whereas medium and large taxpayers are expected to keep properaccounting records and books in line with Cambodian Accounting Standards.

Page 2

Tax service agents
Anyone offering tax services for entities other than their own employer mustbe licensed as a tax service agent (“TSA”) with the GDT.
On 23 March 2022, the Ministry of Economy and Finance (“MEF”), following
up on previous legislation governing TSAs, issued Prakas 230 MEF.Prk tofurther clarify the requirements and obligations of TSAs or those who liaise
with the GDT to fulfill a taxpayer’s tax obligations in Cambodia.
Changes include the requirement that TSAs provide the GDT with a list of
staff who are providing tax services on a monthly basis (previously, it was
only annually). In addition, taxpayers or withholding agents can now submit
a protest to the GDT if a TSA is not fulfilling its obligations or providing tax
services with professionalism and integrity.

Page 3

Tax Audits
There are three types of tax audits, as follows:
1. Desk audit: A desk audit (“DA”) is defined as a re-examination of a tax
return, done at the GDT’s office to identify any irregularity or inconsistency
between the tax return and other information collected by the GDT that is
relatively straightforward to solve. A DA can only be carried out within 12
months after the submission of the tax return. If the irregularity or finding
is complex or considered high risk by the GDT, the DA will be terminatedand replaced with a limited audit (“LA”).
2. Limited audit: An LA is a more in-depth re-examination of a taxpayer’s
compliance with its monthly tax obligations (the annual Tax on Income(“TOI”) return can only be re-examined under a comprehensive audit(“CA”)). An LA may involve an on-site audit at the taxpayer’s businesspremises and inspection of the tax returns, actual business activities,
accounting records, and other relevant supporting documents. An LA
can be carried out for the current tax year (termed as year “N”) and theimmediately preceding tax year (N-1) only.
3. Comprehensive tax audit: A CA, as its name suggests, is a much
more thorough re-examination of a taxpayer’s compliance with its tax
obligations (including its annual TOI). A CA can be carried out for thecurrent tax year and the previous three tax years (N-3) only. If there is actual
evidence of tax evasion, or losses or tax credits brought forward fromprevious tax years that require the tax auditors to verify such information,a CA may be extended to include the previous five tax years (N-5). Where
there is actual evidence of tax evasion that requires further examination of
taxpayers’ records beyond the previous five years, a CA may be extended
to cover the statutory period of limitations (which is 10 years per the Law
on Taxation (“LOT”)), with prior approval from the Minister of the MEF.
In principle, taxpayers will only be subject to one type of tax audit for any one
tax year. If a taxpayer has obtained Gold compliance status, it will be subject
to only one CA every two years and it will not be subject to an LA or DA. ThisCA however will cover two tax years. A taxpayer that has Silver status will be
subject to only one CA every two years, an LA every year, and no DA. Goldtaxpayers thus benefit from having to deal with only one CA team every two
years.

Page 4

Tax on Income
Residency
TOI applies to both residents and non-residents, however non-residents
are taxed on income arising from Cambodian sources only, as opposed toresidents, who are taxed on their worldwide income.
Legal persons are considered residents of Cambodia for tax purposes if
their principal place of business is in Cambodia or if they are managed from
Cambodia; therefore, a company incorporated in Cambodia is taxed as aresident.
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 a case, the non-resident will be subject to tax
in Cambodia in respect of its Cambodian-sourced income only (which is an
exception to the above).
Income derived from Cambodian-based activities or assets located in
Cambodia is deemed to be from a Cambodian source, regardless of where thepayment originated.

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, andprecious stones
Gross premiums received in the tax year for the insurance orreinsurance of property or risk in Cambodia
Tax exemption 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 of savings component. Income from any other activities, including
the insurance or reinsurance of life that has a savings component, is taxed as
normal at the standard 20% TOI rate.

Page 5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 prepayment of either Minimum Tax (“MT”) or TOI. The payment is mademonthly and is offset against the MT or TOI, whichever is higher, due when theannual TOI return is filed at the year-end.
The term “turnover” is now defined and covers income from the main businessactivities and subsidiary income. Subsidiary income includes:• Income from rented immovable property, whether or not the property is
involved in the business activities.
• Immovable property given for use for free to a third party: It will be assumed
that the taxpayer received taxable income equal to the rental market pricefor the property.
• Immovable property given for an employee’s private use for free: It will beassumed that the taxpayer received taxable income equal to the rental
market price for the property except where the property is given for use by
all employees in accordance with the provisions of the Labor Law.
• Royalties: Income from the exploitation of various intangible assets, such as
patents, copyrights, models, franchises, brands, know-how, etc.
• Other subsidiary income, which includes mainly: income from the sale ofscrap and waste, rental of business equipment, income from consigned
packaging.

Tax exemption period
Foreign investors seeking to make significant investments into Cambodia
outside of the sectors restricted by law may apply to the Council for theDevelopment of Cambodia (“CDC”) for QIP status.
Most QIP companies benefit from a TOI exemption period (often referred toas a “TOI holiday”) during which investment activity income is exempt fromboth TOI and PTOI.
The tax exemption period can be from three years up to nine years dependingon the industry and level of investment, and the period starts from when
the first revenue is generated. Under the new Law on Investment dated 15
October 2021, after the TOI exemption period, the QIP is entitled to pay TOI at
reduced rates for the subsequent six years as follows: 25% of the normal rate
for the first two years, 50% for the next two years, and 75% of the normal rate
for the last two years.

Page 6

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

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
Personal expense
Donations and grants (not including
charitable contributions)
Tax payments, tax penalties, andinterest on penalties
Loss on sale of property between
related parties
Expense not related to the business,extravagant expense of little use to
the business
Amusement,
recreation,orentertainment expense
WHT, TOS, and FBT paid on behalf ofrecipients
Expense pertaining to previous orsubsequent periods
Provisions

Deductibility
Non-deductible
Non-deductible
Non-deductible
Non-deductible
Non-deductible

Non-deductible
Non-deductible
Non-deductible

Generally non-deductible, withsome exceptions
Depreciation
Deductible when calculated using
the method set out in the tax law
Unpaid expense due to unrelated Deductible if it is a genuine liability
parties
Page 7

Type of expense

Deductibility

Unpaid salary

Deductible if paid within 180 days
after the end of the tax year
Related party expense that is not Deductible if paid within 180 days
salaryafter the end of the tax year to a
related party who is under the selfassessment regime.
Deductible if paid to a related
party who is not under the selfassessment regime when the actual
payment is made.
Interest expense
Deduction is limited to an amountequal to 50% of adjusted income
without taking into account any
interest income or expense, plus
the interest income.
Non-deductible interest expense
can be carried forward for up to
five years after the year the interest
expense was incurred.
Charitable contribution
Deduction is limited to an amountequal to 5% of taxable income,before taking the charitable
contribution deduction.
Deductible interest expense on loans with related parties
There is a further limitation on the deduction of interest expenses with regard
to related parties. Loans from related parties are exempt from compliancewith the arm’s length principle if the entity has the following loan transaction
supporting documents from the related party:• Loan agreement that specifies the term of the loan and repayment plan;• Business plan or current and forecasted financial statements along with the
purpose of the borrowing and explanations; and• Board of Directors’ resolution (for an entity that is not a single member
private limited company).
When an entity borrows money from a related party, the loan interest ratecannot exceed the market interest rate at the time of the borrowing. The
market interest rate is issued annually by the GDT and is the average of theinterest rates of at least five local commercial banks.
Page 8

Deductible interest expense on loans with unrelated parties
For loan transactions with unrelated parties, the allowed tax-deductible
interest rate is up to 120% of the market interest rate.

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

Depreciation

Depreciation

rate

methodClass 1:

Tangible
property

Straight Linei. Concrete buildings, roads,
railways, and transport
ships
ii. Non-concrete buildings
Class 2: Computers, electronic
information systems, data
handling
Class
3:
Automobiles,
trucks, office furniture andequipment
Class 4: All other tangible
assetsproperty

10%
50%

Declining
Balance25%

Declining
Balance20%

Declining
Balance

Depreciation

Asset
Intangible

5%

Having no specific useful life
Having a specific useful life

Depreciation

rate

method10%Over theuseful life of
the property

Straight Line
Straight Line

Depreciation method
Naturalresources

The balance of the natural resource account multiplied by theratio of the quantity extracted during the taxable year to thetotal estimated extraction from the natural resources.
Page 9AssetDepreciation
rate

Rubber plantations

Long-term
agricultural
assetsDepreciation
methodStraight Line

Year 1 – 2

3%Year 3 – 4

4%Year 5 – 10

5%Year 11 – 12

7%Year 13 – 15

6%Year 16 – 19

5%Year 20

Remainingbalance
Over useful life* Straight Line
5%*

Agricultural plantations
other than rubber
plantations
Animal husbandry

Over useful life* Straight Line
10%*

*Depreciation is calculated using either the straight-line depreciation method
over the life of the harvest or a percentage per year (5% for agricultural
plantations other than rubber plantations and 10% for animal husbandry),whichever is shorter.
Instead of the tax exemption period, 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 the normal tax depreciation charge. This special depreciation rateapplies only to tangible assets used in “manufacturing and processing” andthe asset should be held for a minimum of four years, otherwise the QIP will
be required to add back a portion of the depreciation expense.
Tax depreciation commences in the tax year when the asset is put into service
or in the first year of production, and a full year of depreciation is taken (nomatter what point in the year this occurs). No tax depreciation is claimed in
the year of disposal.
Fixed assets in classes 2 to 4 are accounted for on a pooled basis, and therefore
capital gains or losses on the disposal of fixed assets are not calculated
individually but rather are calculated based on the result of the pooled asset
account.

Page 10

Utilization of losses
Tax losses can be carried forward for a maximum of five years (except for tax
losses from petroleum and mineral resource operations, which are covered byseparate rules). Losses cannot be carried back. If the following criteria are notmet, the taxpayer may have to forfeit its tax losses:• There has not been a change in business activity during the year; and• There has not been a unilateral tax reassessment in that particular year.

Page 11

Minimum Tax
MT is a separate and distinct tax from TOI, and is calculated at 1% of annual
turnover. See the discussion under the “Prepayment of Tax on Income” section
for what constitutes turnover.
A taxpayer will be subject to either TOI or MT, whichever is greater. Regardlessof whether a taxpayer is subject to MT, monthly PTOI payments are stillrequired to be made, which are similarly calculated at 1% of monthly turnover.
The monthly PTOI payments can be credited against the MT or annual TOI
liability, as applicable.
The GDT allows for an exemption from MT for all taxpayers maintaining properaccounting records, imposing MT only on taxpayers found to have “improperaccounting records”. Prakas 638 details what are considered improperaccounting records. In order to access the exemption, taxpayers must apply
to the GDT for an evaluation of their compliance and written confirmationthat they are maintaining proper accounting records.

Page 12

Withholding Tax
Overview
Certain payments are subject to a withholding tax (“WHT”) that must be
deducted by the payer at the time of payment. WHT is imposed at varying
rates depending on the transaction type and whether the payment recipient
is a resident or a non-resident.
WHT is a tax on the income recipient; however, the responsibility fordeduction 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 on a business in Cambodia, to a Cambodian resident taxpayer, aresubject to the following WHT:
Type of payment to a resident
Service payments (except payments to those registered for tax
that are supported by a valid tax invoice, and for services of lessthan KHR50,000)
Royalty payments
Interest payments
All interest payments other than the interest paid by a domesticbank.
Rental payments (except payments to those registered for tax
that are supported by a valid tax invoice)All rental payments made to residents that are not registered for tax.
Interest paid by a domestic bank on fixed-term deposits
Interest paid by a domestic bank on non-fixed-term deposits

Rate
15%

15%
15%

10%

6%
4%

Non-resident WHT
WHT at the rate of 14% must be deducted from payments of Cambodiansourced income made by a resident carrying on business (including a
PE of a non-resident taxpayer) to a non-resident. Per Article 33 of the LOT,
Cambodian-sourced income is any of the following:• Interest paid by a resident entity, resident partnership, or governmental
institution of Cambodia• Dividends distributed by a resident entity
Page 13• Income from services performed in Cambodia• Compensation for management or technical services paid by a Cambodian
resident person• Rent and other income related to movable or immovable property situatedin Cambodia• Royalties or usage rights to intangible property paid by a resident or paidby a non-resident through a PE they maintain in Cambodia• Gains made from the sale of, or the transfer of any interest in, immovable
property located in Cambodia, or capital gains from financial assets andinvestment assets in Cambodia, or capital gains from the transfer of any or
all of the equity in the capital of an entity in Cambodia• Premiums from the insurance or reinsurance of risks in Cambodia• Gains from the sale of movable property that is part of the businessproperty of a PE maintained by a non-resident taxpayer in Cambodia• Income from business activities of a non-resident, conducted through a PE
in Cambodia
If a double taxation agreement (“DTA”) is in force, reduced rates may beavailable. Please refer to the “Double Taxation Agreements” section for a list of
the DTA signatory countries at the time of printing.
The liability for WHT rests with the withholding agent (i.e. the Cambodian
payer). The GDT has no recourse to recover WHT from the recipient of theincome payment. The WHT is payable at either the date the payment is madeor the date the applicable transaction is recorded in the books, whichevercomes first.

Advance Tax on Dividend Distribution
Advance Tax on Dividend Distribution (“ATDD”) is a mechanism that was set
out under the LOT to ensure that dividend distributions made by a Cambodiancompany were subject to the appropriate TOI rate. Typically, most dividend
distributions made by a Cambodian company come from retained earnings
after TOI has been declared and paid; however, in some circumstances, the
ATDD mechanism is used to ensure that TOI is paid at the time of the dividend
distribution.
Note that the scope of a dividend distribution made by a Cambodian entity
for tax purposes was expanded to include retained earnings and year-to-dateearnings relating to a share transfer; this in turn has expanded the applicationof ATDD (see the next section on “Withholding taxes on undistributed
dividends”).

Page 14

Some items of note regarding ATDD are as follows:• Dividends distributed by QIP entities to their shareholders during their TOI
exemption period are not subject to ATDD.
• Remitted ATDD can be utilized as a tax credit in a taxpayer’s annual TOI
declaration for the tax year in which the ATDD was declared and paid.
• If the ATDD is higher than the annual TOI liability, the excess tax credit canbe carried forward until it is fully utilized.
• ATDD also applies to the repatriation of profits by a Cambodian branch ofan overseas principal if that distribution had not yet been subject to theapplicable TOI rate in Cambodia.
• The repatriation of taxable income by a Cambodian branch to its overseas
principal is considered as income from business activities carried out by
a non-resident through a PE under Article 33(10) of the LOT and as such,
would also be subject to WHT of 14%.

Withholding taxes on undistributed dividends
The main points regarding the expansion of the definition of what is
considered a dividend distribution and the tax treatment are summarized
below:• The conversion of part or all of an entity’s retained earnings into registeredshare capital is not considered to be a dividend distribution, and thus not
subject to 14% WHT.
• The sale by an existing shareholder of shares that were previously
converted from retained earnings is treated as a dividend distribution andsubject to 14% WHT. The amount treated as a dividend distribution will not
exceed the previously converted retained earnings.
• When a shareholder sells some or all of its shares, then the retained
earnings (even though undistributed) attributable to such shares is treatedas a dividend distribution and subject to 14% WHT.
• Any reduction in the registered share capital where such shares werepreviously converted from retained earnings is also considered to be adividend distribution and subject to 14% WHT.

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 15

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

Residency
An individual is considered as a resident for tax purposes if they fulfill any
one of the following criteria: (1) their residence is in Cambodia; or (2) theirprincipal place of abode is in Cambodia; or (3) they are present in Cambodia
for more than 182 days in 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”.
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 and equipment 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) applies for each minor dependent child under 14,
or under 25 and in full-time education, and a deduction for the same amountapplies for one non-working spouse.

Rates of tax
Non-residents are subject to TOS only on their Cambodian-sourced
employment income at a flat rate of 20%. Residents are taxed on theirworldwide employment income at the following progressive rates:

Page 16TAXABLE MONTHLY SALARY*
Khmer Riel (KHR)

Equivalent to US$**

From 0 - 1,500,000
0 - 375
From 1,500,001 - 2,000,000
375 - 500
From 2,000,001 - 8,500,000
500 - 2,125
From 8,500,001 - 12,500,000
2,125 - 3,125
Over 12,500,000
3,125*New rates effective starting on 1 January 2023.
**Using an exchange rate of KHR4,000:US$1.

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

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.
Certain benefits provided to all employees are exempt from FBT. These
include items such as meal allowances or transportation allowances. In order
to benefit from this tax exemption, the employer is required to provide a
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 contribution on a monthly
basis. The NSSF contribution is 0.8% of the employee’s 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 because
of injuries sustained at work, plus 2.6% of the employee’s average monthly
salary up to a maximum contribution of KHR31,200 (approximately US$7) for
healthcare.

Page 17

Value Added Tax
Overview
Value Added Tax (“VAT”) is applicable on the taxable supply of goods andservices. An entity registered under 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 saleor for use in producing taxable supplies. Taxpayers must charge and collect
VAT on taxable supplies. The supply of goods includes the transfer of therights to movable property—meaning all property except land or money.

Sale of land and buildings
For the 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, specifictaxable supplies have been exempted from VAT. The following is a list of nontaxable supplies under the LOT:
• Public postal services• Hospital, clinic, medical, and dental services, and the sale of medical anddental 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 recognized by
the MEF• 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
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 non- taxable and taxable supplies, it will be able to claim a portion of
input VAT based on the portion of taxable supplies.
Page 18

Prohibited input VAT
Under the LOT, VAT incurred on certain purchases may not be used as an input
VAT credit for offsetting against output VAT. These are:
• Entertainment, amusement, and recreation expenses unless the taxpayer
carries on a business as a provider of entertainment, amusement, or
recreation• Purchases or imports of automobiles, unless the taxpayer carries on abusiness dealing in, or hiring out such automobiles• Purchases or imports of certain petroleum products, unless the taxpayer
carries on a business as a supplier of such petroleum products• Mobile phone use (input VAT is allowed only for telephone charges madefrom office desk phones)

Registration
Compulsory VAT registration applies to any self-assessment taxpayer who
makes taxable supplies. Further, all companies, import/export businesses,
and QIPs must register for VAT. Other taxpayers are required to register as
VAT taxpayers if they meet certain turnover thresholds. Other businesses
not compelled to register by law may register voluntarily; however, it is notpossible for a non-resident to register voluntarily for VAT purposes, other thanfor VAT on e-commerce activities.
Taxpayers in Cambodia who are registered under the self-assessment regime
are assigned a VAT tax identification number (“TIN”). Generally, such VAT TIN is
used by the taxpayer in all of its tax filings in Cambodia.

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

RateStandard rate10%
Zero-rated supplies, which include:0%• Exported goods• Exported services• The supply of international transportation services• Services in support of the supply of international transportation• Other specific sectors, including supporting industries that
supply the export-oriented garment, textile and footwear
industries; the supply of rice; and the import and supply ofcertain goods for agricultural purposes
Page 19

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”).

Proper tax invoices
Taxpayers must issue valid tax invoices for all sales of taxable supplies. In order
for a tax invoice to be considered valid, it must be in Khmer, or in both Khmer
and English with the English written below the Khmer and must contain thefollowing details:
•
•
•
•
•

Entity name, address, and VAT TIN of the seller or supplierSequential invoice number
Date the invoice is issued
Name, address, and VAT TIN of the buyer
Description of the goods or services, and the quantities and selling pricesof the goods or services• The total price of each good or service, exclusive of VAT, and the total pricemust be in KHR• Each tax amount, if the goods or services are subject to ST, Public Lighting
Tax (“PLT”), or Accommodation Tax (“AT”), and the VAT amount• Signature and name of both the seller and the buyer (for buyers who are
self-assessment taxpayers)
The GDT will seek to deny expense deductions or input VAT claims if they are
not supported by valid tax invoices.

VAT on e-commerce transactions
Over the past few years, the GDT has issued several pieces of legislation to
begin taxing e-commerce activities carried out by non-residents, startingwith the E-Commerce Law in 2019. After several delays, the implementation
of VAT on e-commerce activities began in April 2022.
E-commerce activities refer to the online purchase, sale, rent, or exchangeof goods or services, including commercial activities. Examples include thesupply of software and other related services, online shopping or auctions,advertising, website hosting, data retrieval, and the consumption of digitalproducts and/or content via downloading, real-time streaming, subscription,or other means.

Page 20

For business to business e-commerce transactions, there is a reverse charge
mechanism for the payment of VAT on imported digital goods and services,whereby the resident business is responsible for remitting the tax to the GDT.
However, this mechanism does not work for business to end customer
e-commerce transactions. Thus, the GDT has introduced a simplified VAT
registration procedure for non-resident taxpayers, who are then expected todeclare and pay the VAT on such transactions to the GDT.

VAT on tangible fixed assets that are no longer in use
The GDT has specified rules for the application of VAT on the sale or disposalof tangible fixed assets that are no longer in use (defined as those that are still
being maintained but have not been used in the business operations for atleast one year).
• Sales of the assets (including as scrap) are subject to 10% VAT, regardless ofwhether an input VAT credit was claimed at the time of purchase.
• Disposals of assets that are destroyed, damaged, or have no sales value are
not subject to 10% VAT, provided that there is clear evidence of the disposal.
For assets with an accounting net book value (“NBV”) of KHR200,000
or more (approx. US$50), entities must provide the GDT with at least 10
working days’ advance notice so that a tax official can witness the disposal.
• Charitable contributions (as stated in Article 16 of the LOT) of the assets forwhich the taxpayer has already claimed an input VAT credit are not treatedas sales subject to 10% VAT and TOI if they are:-- Class 2 tangible fixed assets that have been used in the business forover three years with an accounting NBV of no more than KHR1 million(approx. US$250); or-- Class 3 or 4 tangible fixed assets that have been used in the businessfor over five years with an accounting NBV of no more than KHR2
million (approx. US$500).
• Class 1 tangible fixed assets (whether newly built or purchased) that have
not yet been put into use in the business and for which an input VAT credit
has been claimed are not treated as sales for VAT purposes. If a class 1
tangible fixed asset has been put into use in the business but has ceased
to be used for more than one year, the taxpayer must notify the GDT of theappropriate reason for no longer using the asset to be exempt from theobligation to pay 10% VAT.

Page 21

Capital Gains Tax
Cambodia introduced a capital gains tax (“CGT”) regime with the issuance of
Prakas No. 346 dated 1 April 2020, which imposes CGT at a rate of 20% on thecapital gains derived by resident physical persons and non-residents (bothlegal and physical). Implementation has been delayed several times and is
now slated to begin on 1 January 2024.
The term “capital” refers to immovable property, financial leases, investment
assets (including shares, bonds, and other securities), goodwill, intellectual
property, and foreign currency. A capital gain is the taxable income from thesale or transfer of capital less allowable expenses. It is considered as realized
at the time of:• The sale or transfer of ownership of the assets;• The registration of the transfer of ownership with the competent authority;or• A final verdict of a court on the transfer of property.
For immovable property, taxpayers can opt to deduct as an allowable
expense either 80% of the sales price or the actual cost. For other capitalgains transactions, only the actual cost can be deducted. Capital losses are
not allowed to be refunded and cannot be carried forward or used as an offset
against other capital gains.

Page 22

Personal Income Tax
Under the 2019 Financial law, Cambodia introduced a new personal incometax (“PIT”) law that requires physical persons with taxable income (i.e. total
income offset by expenses and other allowances) from their business andother activities, including from capital gains, interest, rental fees, royalties,
and financial or investment property, to pay PIT.
However, as of the time of printing, a PIT regime has not yet been implemented,
and there is no requirement or mechanism to submit a PIT return to the GDT.
Currently, individuals pay TOS and FBT on their employment income via
withholding by their employer (refer to the “Tax on Salary” section of thisbooklet for details).

Page 23

Specific Tax on Certain Merchandise and Services
Overview
ST is a form of excise tax imposed on the importation or domestic production
and supply 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 salefrom 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 thecalculation and collection of ST.

Rates of tax
The ST amount due is calculated by applying the applicable rate to theapplicable 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 (excluding
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
Locally produced cement

Rate
10%
10%
20%
35%
30%
10%
10%
3%
5%

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, PLT, and ST itself.
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 24

Customs Duty
Import duties
There are a number of goods on which import duty applies when they arebrought into Cambodia, with some exemptions, including goods temporarily
imported into Cambodia, goods for personal use, goods exempted byinternational treaty, humanitarian aid, and imports for use by a QIP.
Exemptions from import duty may also be granted by the CDC for specificindustries.
Customs duty is levied on goods entering Cambodia at rates of from 0% to35%. 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 from other ASEAN countries.
Accordingly, the customs duty rates in Cambodia have been reduced so thatnow many goods originating 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 25

Other Taxes
Accommodation tax
AT is an indirect tax imposed on the supply of accommodation services at
a rate of 2%, inclusive of other service charges and taxes except VAT and
AT itself. AT must be charged by hotels, hotel apartments, motels, lodges,
guesthouses, campgrounds and similar, but does not include the rental ofhouses or apartments.

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 numberof letters, and whether the lettering is in Khmer only or includes a foreign
language.

Patent tax
Patent tax is a registration tax that is paid by all business entities uponestablishment of a business and by 31 March on an annual basis thereafter.
Patent tax 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 separate business activity, and for each branch located in a different
province.

Property rental tax
House and land rental tax is set at 10% of gross rental income from the leaseof buildings and land, when the lessor is an individual.

Property tax
Property tax is a direct tax imposed on the value of immovable property,
including land and buildings, on property valued above KHR100 million(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 long-term lessees.

Public lighting tax
PLT is an indirect tax imposed on sales of alcohol and cigarettes at all stagesof supply, on both imports and domestically-produced goods. All types ofPage 26

cigarettes, including e-cigarettes, and alcohol, including beer, grape wine andspirits, with the exception of palm wine, are subject to PLT.
The PLT rate is 3% but the basis used to calculate the tax varies as follows:• Importers and manufacturers – The basis is the value of the product,
excluding VAT and PLT itself.
• Resellers and distributors – The basis is 20% of the selling price, excluding
VAT and PLT itself.

Registration tax
Also referred to as seal tax or stamp duty, registration tax is a tax imposed on
the transfer of ownership or possession of certain types of property.
It is payable by the person who receives the ownership and is applied to thetransfer 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, such as for mergers andliquidations

Registration
Tax rate
4%

4%
0.1%
0.1%
KHR1,000,000

Certificates of incorporation are no longer subject to registration tax.
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 MEF for all cities and provinces in Cambodia.

Page 27

Unused land tax
Land is determined to be unused if it does not have any structure on it orthere is a structure, but it is unused. Unused land tax is levied on an annual
basis at a rate of 2% on the market value per square meter, with the market
value determined by the Unused Land Valuation Commission. The unused
land tax is paid annually by the landowner. Since the introduction of property
tax, if property tax is paid on a piece of land, then unused land tax no longer
applies.

Page 28

Administration
Tax

Filing and payment dateAccommodation AT is declared in the PTOI return, due with payment
Tax
by the 25th of the month following the time of supply(e-filing).
Advance Tax
ATDD must be paid and declared on the PTOI return, by
on Dividend
the 25th of the month following the month the dividend
Distribution
was paid out (e-filing).
Customs Duty
Customs duty is collected by the customs administration
at the time of import.
Minimum Tax
MT must be paid at the same time the annual TOI returnis due, that is, 3 months after the end of the tax year.
Patent Tax
Patent tax is payable by 31 March each year.
Prepayment of
PTOI must be paid and filed by the 25th of the following
Tax on Income
month (e-filing)
Property Tax
Property tax is due on an annual basis by 30 September
each year.
Public Lighting
PLT is declared in the PTOI return, due with payment by
Tax
the 25th of the month following supply (e-filing).
Registration Tax Registration tax is due within 3 months of the transfer.
Specific Tax
ST on domestic sales must be paid and declared on the
on Certain
PTOI return, by the 25th of the month following the time
Merchandiseof supply. ST on imported goods is due at the time ofand Services
import, and is collected by the customs administration
along with VAT and customs duty (e-filing).
Tax on Income
TOI must be paid and filed within 3 months of the endof the tax year, which is normally 31 December unless anapplication to amend the tax year is approved.
Tax on Salary
TOS and FBT are deducted by the employer and remitted
to the GDT by the 25th of the month following themonth that the salary and fringe benefits were provided
to the employee (e-filing).
Unused Land Tax Unused land tax is due on an annual basis by 30
September each year.

Page 29

Tax

Filing and payment date

Value Added Tax VAT must be paid on the 25th 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 (e-filing).
Withholding Tax WHT must be paid to the GDT by the 25th of the monthfollowing the month in which the payment is made or
accrued (e-filing).

Page 30

Double Taxation Agreements
At present, Cambodia has double taxation agreements with 11 countries, nineof which are currently in effect, as shown in the table below.
These developments represent a major milestone in Cambodia’s ongoing tax
evolution, and in practical terms, include the reduction of withholding taxes
on certain cross-border transactions.
Parties to the DTA

Date of EffectRepublic of Singapore
Kingdom of Thailand
Brunei Darussalam
People’s Republic of China
Socialist Republic of Vietnam
Hong Kong
Republic of Indonesia

1 January 2018
1 January 2018
1 January 2019
1 January 2019
1 January 2019
1 January 2020
1 January 2021

Malaysia
South Korea
The Macau Special Administrative Region of thePeople’s Republic of China
Turkey1 January 2021
1 January 2022
To be determined
To be determined

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 nine DTAs in effect at the time of printing.
Brunei

China

Withholding tax rates on:
Dividends 10%
10%
Royalties 10%
10%Interest
10%
10%
Technical 14%
10%
servicefees

Hong Kong,
Singapore
and Thailand

Indonesia

10%
10%
10%*
10%

10%
10%
10%
10%

and

Vietnam

Malaysia

South
Korea

10%
10%
10%
10%

10%
10%
10%
10%

Page 31

Brunei

China

Hong Kong,
Singapore
and Thailand

Indonesia
andVietnam

Permanent establishment time test:
Building
183
9
6 mos.
183 days
site
days
mos.
Project
183
183 days
183 days
servicesdays*For Thailand, if the recipient is a financial institution.

Malaysia

South
Korea

9 mos.

9 mos.

183 days

6 mos.

The significant differences between the DTAs are highlighted below:• Technical service fees: The Brunei DTA provides for technical service fees tobe taxed at 14%, in contrast to the lower rate of 10% in the other DTAs.
• Article 3 Beneficial ownership issue: In the Singapore DTA, a trust is deemed
to be the beneficial owner provided the trustee of the trust is liable for tax inSingapore in respect of the income, which is quite unusual, in that normallyreduced rates of WHT under a DTA are available only to a beneficial ownereligible for treaty relief (i.e. a resident in the other Contracting State), toavoid “treaty shopping”.
• Article 5 Permanent establishment issue: The time period for determining
whether there is a PE for building sites differs, with nine months in the China,
Malaysia, and South Korea DTAs, as opposed to six months/183 days in theother DTAs. In addition, in the other DTAs, as in most DTAs, the furnishingof services for more than 183 days creates a PE, but the China DTA does notcontain such a service PE provision. Thus, the furnishing of services by aChinese company through employees or others in Cambodia will not createa PE, provided the activities are not wholly or partly performed through afixed place of business. For example, a Chinese consulting company could
send employees to work at a client’s office in Phnom Penh for unlimited
periods of time, and this would not create a PE. (Note however that the fees
received from the client would be subject to 10% WHT, and the individual
employees may, depending on their circumstances, be subject to tax on
their earnings.)

Page 32

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 all participating countries by allowing the free flow of humanresources, goods, services, and investment between countries.
From a tax perspective, the AEC will work towards establishing moreagreements on the avoidance of double taxation by ASEAN countries and will
aim to enhance the withholding tax structure by removing withholding taxes
that may apply on interest, royalty, dividend, and service fee payments.

Page 33

Transfer Pricing
Starting in 2018, Cambodia began implementing transfer pricing regulations
concerning the allocation of income and expense between related parties,
which are consistent with OECD guidelines, and require that transactions
between related parties be at arm’s length values, as determined under oneof five acceptable methods:
•
•
•
•
•

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

Taxpayers having related party transactions are also required to have atransfer pricing report with the following content:
Corporate Background – including a description of the company, thecorporate and ownership structure, the nature of the business, and summary
financial information.
Business Analysis – including the competitive environment, the market andits trends, added value, and unique selling points.
Overview of Related Party Transactions – describing the nature and volume
of such transactions and the pricing method used.
Functional Analysis – describing the activities performed by each party to
the related party transactions.
Economic Analysis – including a discussion and justification of theappropriate transfer pricing method, and an analysis of comparable prices forthe related party transactions.
Conclusion – including an identification of the acceptable range of arm’s
length prices.
As discussed under deductible expenses in the “Tax on Income” section,
the interest rate on a loan from a related party is exempt from compliancewith the arm’s length principle if the entity has the requisite loan transaction
supporting documents—loan agreements, business plan or current andforecasted financial statements along with the purpose of the borrowing andexplanations, and Board of Directors’ resolution. Therefore, a transfer pricing
report may not be required.

Page 34

A cash advance transaction that an entity has with a related party that has amaturity of less than one year is not considered to be a loan transaction andthus the interest rate will be exempt from compliance with the arm’s lengthprinciple.

Page 35

Qualified Investment Projects
Some types of investments may be eligible to be approved as a QIP by
the CDC. QIP companies are entitled to choose between two basic sets of
incentives:
Option 1: Exemption from TOI
The QIP is entitled to an exemption from TOI for from three to nine years,
depending on the industry and level of investment, from the time of earning
its first income.
After the TOI exemption period, the QIP is entitled to pay TOI at reduced rates
for the subsequent six years as follows: 25% of the normal rate for the firsttwo years, 50% for the next two years, and 75% of the normal rate for the last
two years.
This option also includes:• PTOI exemption during the TOI exemption period;• MT exemption provided that an independent audit report has been carriedout; and• Import tax exemption, unless otherwise provided in other laws andregulations.
Option 2: Special Depreciation• Deduction of capital expenditure through special depreciation as stated in
the tax regulations in force, which, at the time of writing, is 40% in the firstyear of use of an asset in addition to the normal tax depreciation charge(see further details under “Depreciation” in the “Tax on Income” section);• Eligibility to deduct up to 200% of specific expenses incurred for up to nine
years, depending on the industry and level of investment;• PTOI exemption for a specific period of time based on the industry andlevel of investment;• MT exemption provided that an independent audit report has been carriedout; and• Import tax exemption, unless otherwise provided in other laws andregulations.

Page 36

In addition to the incentives of both options:
Export QIPs and supporting industry QIPs are entitled to customs duty, ST,
and VAT exemptions on importations of construction materials, construction
equipment, production equipment, and production inputs.
Domestic-oriented QIPs are entitled to customs duty, ST, and VAT exemption
on importations of construction materials, construction equipment, andproduction equipment. Incentives for production inputs will be determinedin the Law on Financial Management and/or by Sub-Decree.
QIP companies that operate more than one QIP activity (that have different
tax exemption periods) are required to register each activity for a separate
VAT TIN, file separate tax returns, and have separate books of accounts andrecords for each of the activities.

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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 thatis charged at 1.5% 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 operationsof 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 the business, and potentially,
criminal sanctions according to the nature and severity of the offense. Repeat
offenses generally garner more severe penalties.

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NotesBANGLADESH
VIETNAMLAOS
MYANMARCAMBODIAINDONESIA

We are a network of leading law and tax advisory firms with offices in Bangladesh, Cambodia,
Indonesia, Laos, Myanmar and Vietnam.
Our general areas of practice are corporate, finance and disputes.
Our principal specialized areas of practice are energy and infrastructure, real estate, telecomand taxation.
There are three things you need to know about our approach:
1. We deliver the ultimate in ground connectivity.
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