Webinar

Tax on Income (ToI)

4 March 2022

Vearak Run Kimchhiek Li

Tax Director Tax Manager
Tel: +855 92 55 88 55 Tel: +855 10 88 89 55
Email: Vearak.run@3E-Fii.com Email: Kimchhiek.li@3e-fii.com

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Objectives

By the end of the sharing, you will be able:

 To determine taxable and non-taxable income

 To determine deductible and non-deductible expenses
 To understand ToI calculation

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What is ToI?

Taxable income x rate (20%)

ToI
Taxable
income?

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 Accounting VS taxable profit

Accounting profit Taxable profit (taxable

income)
 Incomes xx
 (Less) expenses xx  Incomes xx
 Profit xx  (Less) expenses xx
 Adjustment outside
accounting book xx/(xx)
 Profit xx

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 ToI calculation flow

Step 1 Accounting profit before tax/(loss) XX/(XX)

Step 2 Add Non-deductible expenses/taxable income XX
Adjustment
Step 3 Less Deductible expenses/non-taxable income (XX) outside
Step 4 Add Disallowed charitable contribution XX accounting
book
Step 5 Add Disallowed interest expenses XX
Adjusted profit/(loss) XX/(XX)
Step 6 Less Tax loss carried forward (XX)
Taxable profit/tax loss XX/(XX)
Step 7 ToI @20% XX
Step 8 Minimum Tax (MT) @ 1% on annual income XX
ToI/MT payable XX
Step 9 Less Tax credit (XX)
Tax payable/tax credit XX/(XX)
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Taxable income

Main business  Article 21 of the ToI Prakas No. 098 MEF.PrK

income

Subsidiary  Article 22 of the ToI Prakas No. 098 MEF.PrK

income

 Article 23 of the ToI Prakas No. 098 MEF.PrK

Other income  Exempt from MT and Prepayment of ToI

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 Non-taxable income

Specific  Royal Government

 Non-profit organization
entities/  Non-profit association
payments  Dividend already subject to ToI

Taxpayers  Income from the project with the government

 Accounting gain on disposal of fixed assets
in general  Unrealized exchange gain

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 Expense deduction rules

1 2 3
General non-deductible
expenses

Special deduction rules

Deduction criteria

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 General non-deductible expenses

Loss in
Expenses from
Entertainment transactions Accounting
abnormal
between related depreciation
management
parties

Accounting loss Shareholders’ Penalty on

regulations Donation and
on disposal of personal
incompliance subsidy
fixed asset expenses

Unrealized Tax on Salary, Tax Expenses to self-

on Fringe Benefits Prepayment of
exchange gain declaration without
and Withholding ToI and MT
tax invoice
Tax

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Special rules

Salary payable/accrued salary

 Salary payable/accrued salary is deductible if it’s settled in 180
days after the year end.

Payable to related parties

 Payable related parties is deductible if it’s settled within 180 days
after the year end.
 Not applicable to purchase of stock and depreciable assets.

Tax depreciation
 Intangible assets: 10% or depreciate over the useful life (straight
line basis).
 Tangible assets: Class 1-5%/10% (straight line), class 2-50%,
class 3-25%, class 4-20% (reducing balance).

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Special rules

Provision
 Deductible expenses: increase in provision – add back; decrease in provision – less
 Not applicable to non-deductible expenses, e.g. notice of tax reassessment in tax
audit process

Charitable contribution
 Donation to charitable organization recognized by the Ministry of Economy and
Finance
 Maximum deduction: 5% of adjusted profit, excluding charitable contribution
 The amount above maximum deduction is permanent non-deductible.

Interest expenses
 Maximum deduction: 50% of taxable profit excluding interest (A) plus interest
income (B)
 The amount above maximum deduction is non-deductible in the current year, but
allowed for carrying forward for maximum period of 5 years.

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 Tax depreciation - tangible assets

Class Assets Rate Method

(*)5% Straight
1 Building, building structure, road, railway, and vessel
/10% line
Computer, information technology system, electronic Reducing
2 50%
equipment and data storage equipment balance
Automobiles, truck, office, furniture and office Reducing
3 25%
equipment balance
Reducing
4 Other tangible assets besides Class 1, 2 and 3 20%
balance
(*) 10% for non-concrete building

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Tax depreciation - intangible assets

Intangible assets Rate Method

Unknown useful life 10% Straight line

Known useful life Cost/useful life Straight line

Intangible assets include preliminary expenses, research

and development costs, patent, trade marks, license,
concessions, computer software, goodwill, franchise...

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Deduction criteria

1 2 3
Evidence: Results of Properly
invoices, custom economic recorded in
declaration, activities: for accounting
business letters, business record in the
loan agreements, purposes tax year
etc.

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 Tax loss

Taxable profit Tax loss

No. Conditions Description

 Declared in the ToI returns
 Not subject to unilateral tax reassessment
1. Proof of loss
 Proved by supporting documents, accounting records under
accounting standards and adjustments under tax regulations
 Tax loss of an enterprise can be used by that enterprise only
Identity of the (transfer of tax loss from one enterprise to another isn’t
2.
enterprise allowed)
 No change in business activity
 Allowed to carry forward for 5 years
Tax year to bring  If the tax loss isn’t wholly or partly utilized in the year, the
3.
forward tax loss unutilized amount isn’t allowed for carrying forward to
following periods
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MT

 MT => annual tax imposed at 1% on total annual

income (except non-taxable income and other income
in Article 23 of the ToI Prakas)
 ToI > MT => pay ToI
 ToI < MT => pay MT

Proper accounting record (written confirmation

from GDT) => MT exemption

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Tax credit

1 2
PToI paid in the year
and brought forward

WHT credit

 Tax credit > ToI/MT => tax credit carried forward

 Tax credit < ToI/MT => ToI/MT payable

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Our contacts:
For any inquiry on Tax, please kindly contact us at:

Viren Hak Chanthol Sorn

Managing Partner, Tax and Accounting Tax Director
Tel: +855 85 837 778 Tel: +855 17 382 779
Email: Viren.Hak@3E-Fii.com Email: chanthol.sorn@3e-fii.com

Vearak Run
Tax Director
Tel: +855 92 558 855
Emai: vearak.run@3E-Fii.com

3E-Fii Group
3E:Fii Building, Street Vimean Ahha, Kien Klaing Village, Sangkat Chroy Changva, Khan Chrouy
Changvar, Phnom Penh, Cambodia | www.3E-Fii.com
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Our contacts:
For any inquiry on Audit, Accounting and Banking Solution, please kindly contact us at:

Seida Heng Chanthan Seng

CEO, Managing Partner Partner, Assurance
Tel: +855 12 965 712 Tel: +855 12 78 69 69/093 66 78 79
Email: Seida.Heng@3E-Fii.com Email: Chanthan.seng@3E-Fii.com

Mara Chhun Kimhin Sun

Director, Assurance Managing Partner, Technical Accounts
Tel: +855 12 333 704/086 994 209 Tel: +855 78 818 555
Email: Mara.chhun@3E-Fii.com Email: Kimhin.Sun@3E-Fii.com

3E-Fii Group
3E:Fii Building, Street Vimean Ahha, Kien Klaing Village, Sangkat Chroy Changva, Khan Chrouy
Changvar, Phnom Penh, Cambodia | www.3E-Fii.com
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Thanks for your attention!

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