Last updated: 18 May 2012
Taxation
Foreign investors and investments will generally be affected by the following taxes:
A Value Added Tax (VAT) of 10 per cent was introduced in Cambodia in January 1999. The VAT is applied to the 'taxable value' of the goods or services and applies to all stages of production. Corporations, importers, exporters and investment enterprises are required to register for VAT when starting up their business.
Taxpayers will be required to file VAT returns and make VAT declarations and payments on a monthly basis, ie. By the 20th day of the succeeding month. For imports, VAT will be payable to customs at the time of import.
Several categories of imported goods are subject to excise taxes (10 per cent to 30 per cent). Those include:
- some types of cars
- car spare parts
- buses
- trucks
- motorcycles
- beverages
- cigarettes
- gasoline
- oil
The standard rate of profit tax for companies is 20 per cent. Oil and gas and a number of mineral exploitation activities are subject to a 30 per cent rate. At present, a preferential rate of nine per cent is available for investments which meet certain criteria required by the Council for the Development of Cambodia (CDC). The CDC might also grant tax holidays to certain projects for up to eight years depending on their satisfaction of these criteria. Profit tax returns are to be filed annually within three months of the end of the calendar year. In addition, a tax on profit prepayment equal to one per cent of turnover, is required to be paid on a monthly basis by the 15th day of the succeeding month.
The minimum tax is equivalent to a tax floor or minimum threshold which real regime taxpayers are required to pay. Its effect is that Cambodian taxpayers are liable to pay one per cent of annual revenue as tax to the government. Minimum tax is separate and distinct from the profit tax and is due whether or not the taxpayer has made a profit or loss. In the event that a taxpayer’s profit tax liability is greater than the minimum tax, then the minimum tax will be credited against the total profit tax liability of the taxpayer.
A flat rate of 15 per cent withholding tax applies to payment of 'Cambodia source income' to non-residents, whether overseas or within Cambodia. The rate of 15 per cent must be withheld from payments of income, such as income received from services provided in Cambodia, interest on debt obligations issued by a resident or by the government, dividends received from a resident enterprise, capital gains on property sale, rents paid on property in Cambodia, and insurance premiums.
Withholding taxes also arise from local transactions between residents, including a 15 per cent tax on payment made to individuals for services such as consulting and management fees, 15 per cent on royalties for oil, gas and minerals, 10 per cent on rental payments and 5 per cent on interest paid by local banks to resident individuals with a non-fixed term account.
A two per cent turnover tax applies to those tax-payers not within the real regime (large and/or incorporated) taxpayers. Turnover includes revenue from the supply of goods and services. Taxpayers must make monthly turnover declarations and payments.
Resident and non-resident individuals who derive assessable income from sources in Cambodia, irrespective of the place of payment, are subject to personal income tax at progressive tax rates ranging from five per cent to 20 per cent of net assessable income. For non-residents, only the Cambodian sourced salary will be subject to the salary tax. Cash salary includes remuneration, wages, bonuses, overtime, compensations and employer provided loans and advances.
There are a range of other minor taxes which might affect foreign businesses, including house and land rent tax, patent tax, fiscal stamp tax (eg. advertising postings and signages), unused land tax, and specific taxes on certain merchandise and services. To date, Cambodia has not negotiated any double taxation agreements.
Investors in Cambodia are required to prepare annual income statements and balance sheets primarily to assess profit tax liability. Accounts must be received by the Tax Department within three months after the end of the calendar year, ie. 31 March. Current law stipulates that all accounting books and records must be denominated in riel, although in practice it appears that financial statements denominated in US dollars are also acceptable.