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Asia Pacific Taxation

Cambodia 2010 Edition

Cambodia Asia Pacific Taxation 2010 Edition

Contents
1 2 General Taxation of Companies 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 3 4 5 6 Introduction Residence Taxable income Capital Gains Tax Dividends Exempt Income Deductions Losses Grouping / Consolidation Tax Depreciation / Capital Allowances Amortization of Expenditure Interest Expenses Tax Rates Tax Administration 2 3 3 3 3 3 3 4 4 5 5 5 5 5 6 6 8 10 11 12 12 12 13 14 14 14 14 15 15

Setting up Business Foreign Exchange Controls Tax Incentives International Tax 6.1 6.2 6.3 Double Tax Relief Withholding Taxes Double Tax Agreements Introduction Transfer Pricing Permanent Establishment Thin Capitalization Controlled Foreign Company (CFC) Provisions

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Anti-avoidance Rules 7.1 7.2 7.3 7.4 7.5

© 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

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9 9.8 Introduction Residence Employment Income / Employee Benefits Exempt income Deductions Personal Allowances and Rebates of Tax Tax Rates Tax Administration Social Security Tax Value Added Tax Customs Duty Excise Duty Stamp Duty (Registration Tax) Property Transfer Taxes Tax on Unused Land Tax on Immovable Property (TIP) Payroll Tax Inheritance Tax Gift Tax Other Taxes 16 16 16 16 16 17 17 17 17 18 18 18 19 19 19 19 19 20 20 20 20 20 22 23 9 Indirect and Other Taxes 9. KPMG International provides no client services.4 9.1 8.11 9. a Swiss entity.5 9.8 9.2 9.2 8.4 8.6 8.10 9. II .6 9.7 8.Cambodia Asia Pacific Taxation 2010 Edition 8 Taxation of Individuals 8.12 10 Glossary 11 Useful links © 2010 KPMG International Cooperative (“KPMG International”). Member firms of the KPMG network of independent firms are affiliated with KPMG International.3 8.3 9.1 9.7 9. All rights reserved.5 8.

00023 US Dollar (USD) Source: Notification no. B9.000 From 500.001 – 12. issued by the National Bank of Cambodia on July 30. © 2010 KPMG International Cooperative (“KPMG International”).250.000 From 8. 2010.001 – 8.250.000 From 1.000 Over 12.Cambodia Asia Pacific Taxation 2010 Edition Summary Data Corporate Tax Rates The profit tax rate is 20 percent with special rates for specific industries. a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Personal Tax Rates Residents The personal income tax rates are as follows: Taxable Income for the Month (KHR) Progressive Tax Rate (%) Up to 500. Currency 1 US Dollar = 4. There is a minimum tax of one percent on annual turnover.000 – 1.500. All rights reserved. KPMG International provides no client services.417 NT.500.500.500.241 Cambodian Riel (as at July 30.010.000 0 5 10 15 20 Non-residents Non-residents are taxed on the Cambodian source income at the flat rate of 20 percent. 2010) 1 Cambodian Riel (KHR) = 0. 1 .

Resident individuals are subject to progressive rates of tax. The Sub-decree on the Implementation of the LALoI was issued in September 2005. individual persons are not required to file an annual tax return and the tax on salary deducted during the year is a final tax. Tax on salary income is deducted at source from individual persons on a monthly basis. 2 . replacing the previous turnover tax. These incentives were initially provided under the LoI. The enterprises established in the Kingdom of Cambodia that have ordinary share capital of more than 51 percent owned by a foreign parent company can submit a request for a change of tax year to apply a date other than 31 December. Minimum tax of one percent on total annual turnover is payable regardless of the level of taxable income. The LALoI makes sweeping changes to the incentives available to QIPs. Business enterprises undertaking investment projects may obtain special tax incentives as approved by the CDC (see 5. a Swiss entity. Real regime taxpayers without investment incentives are subject to a flat profit tax rate of 20 percent. The LALoI was passed in March 2003. Other non-salary Cambodian source income such as interest is subject to withholding tax. The LALoT was signed into Law in March 2003. VAT is levied on a wide range of taxable goods and services supplied in Cambodia and also on the importation of goods.0).Cambodia Asia Pacific Taxation 2010 Edition 1 General The principal taxation law of Cambodia is the LoT adopted by the National Assembly in January 1997. © 2010 KPMG International Cooperative (“KPMG International”). Residents are subject to tax on worldwide income. and the revised Prakas on Tax on Profit was issued in December 2003. whereas non-residents are subject to tax only on Cambodian sourced income. Member firms of the KPMG network of independent firms are affiliated with KPMG International. All rights reserved. the Ministry of Economy and Finance issued a Prakas (regulation) on Tax on Profit to clarify certain tax provisions stipulated in the 1997 Law. In 2000. Non-resident individuals are subject to salary tax at a flat rate of 20 percent. KPMG International provides no client services. VAT was introduced in January 1999 at a rate of 10 percent. At present. with a highest marginal rate of 20 percent.

made by a legal person to a shareholder. A non-resident taxpayer is an enterprise that derives Cambodian source income. and the rules and procedures for the collection of tax due. but does not have a place of management in Cambodia.3 for PE definition). a Swiss entity. A distribution arising from a complete liquidation is specifically excluded from the definition of a dividend. or It has its principal place of business in Cambodia. interest. and royalty income as well as income and gains from financial or investment assets including immovable assets. 2. 2. A resident taxpayer is primarily an enterprise that has a place of management and carries on business in Cambodia. Cambodia does not impose a separate tax on capital gains.Cambodia Asia Pacific Taxation 2010 Edition 2 2. as defined below. Member firms of the KPMG network of independent firms are affiliated with KPMG International.5 Dividends A dividend is defined as a distribution of property or money. Gains arising from the disposal of real property and other assets are treated as ordinary income and are therefore subject to tax at the prevailing profit tax rate. A resident taxpayer is subject to Tax on Profit (ToP) or Corporate Income Tax (CIT) on income derived from both Cambodian and foreign sources income.2 Residence A company is resident in Cambodia if: ● ● It is organized or managed in Cambodia. a nonresident taxpayer is subject to ToP/CIT in respect of its Cambodian source income only.3 Taxable income Taxable income is the net profit obtained from all types of business operations including capital gains realized during the business operation or at the cessation of the business. KPMG International provides no client services. The determination of taxable income. are determined by Prakas (Regulation). whereas. 2.4 Capital Gains Tax All realized gains (including capital gains) are treated as income. 2.1 Taxation of Companies Introduction Corporate taxpayers in Cambodia are classified as either resident taxpayers. rental. All rights reserved. 3 . © 2010 KPMG International Cooperative (“KPMG International”). A non-resident taxpayer will be deemed to be Cambodian resident for tax purposes if it is found to have a Permanent Establishment (PE) in Cambodia (see 7. Taxable profit shall also include all capital gains realized from operations other than business operations on immovable financial or investment property. or nonresident taxpayers.

2. entertainment Personal expenses. A credit is allowed for tax paid overseas on foreign source income. There are also certain restrictions on the deductibility of interest. 4 . KPMG International provides no client services.Cambodia Asia Pacific Taxation 2010 Edition Dividends received from resident companies are not subject to income tax. ● ● ● ● ● ● © 2010 KPMG International Cooperative (“KPMG International”). with certain limitations. subject to certain conditions. between related parties Penalties. The deductibility of charitable contributions is limited to five percent of taxable profit of the taxpayer. directly or indirectly.6 2. additional tax and late payment interest imposed for violation of the LOT Non-deductible tax expenses Donations.5). Depreciation is allowed as a deduction in accordance with the rates determined by the tax provisions. Member firms of the KPMG network of independent firms are affiliated with KPMG International.7 Exempt Income Dividends received from resident companies are not subject to income tax (see 2. Deductions Allowable Deductions Allowable deductions include most expenses incurred in the course of carrying on a business. recreation. except for fringe benefits which are subject to fringe benefit tax Any loss on sale or exchange of property. a Swiss entity. All rights reserved. Non-deductible Expenses Non-deductible expenses include: ● ● Increase in provision Any expense on activities generally considered to be amusement. Dividends received from non-resident companies are subject to income tax in Cambodia. grants or subsidies Extravagant and/ or unrelated business expenses.

electronic information systems.8 Losses Losses can be carried forward for a maximum of five years. trademarks. Net noninterest profit is the gross income. computer software. and therefore profits and losses on disposals are not directly recognized for tax purposes. shall be capitalized and written-off in accordance with the depletion of the resource recorded as a percentage of the estimated total production from the resource. Losses cannot be carried back.10 Grouping / Consolidation There are no grouping provisions in Cambodia. and purchased goodwill can be amortized over the useful life of the property. © 2010 KPMG International Cooperative (“KPMG International”). All exploration and development costs of a natural resource. 2. trucks. Member firms of the KPMG network of independent firms are affiliated with KPMG International. less allowable non-interest expenses. copyrights. a tax depreciation rate of 10 percent based on the straight-line method is used. 5 . Tax losses will also be forfeited in the event a taxpayer is subject to a unilateral tax assessment. a Swiss entity. Tax losses may be forfeited upon a change in ownership of the business or if there is a change in business activity. and are depreciated at the following rates: ● ● Class 1: Buildings and structures – five percent straight line Class 2: Computers. R&D. other than interest income.12 Interest Expenses Interest expense allowable as a deduction is limited to an amount equal to the total interest income plus 50 percent of net non-interest profit earned for the year. office furniture and equipment – 25 percent diminishing value Class 4: All other tangible property – 20 percent diminishing value ● ● Assets in classes 2 to 4 are accounted for on a pooled basis. KPMG International provides no client services. If the life of the intangible assets cannot be determined.Cambodia Asia Pacific Taxation 2010 Edition 2. 2. software and data handling equipment – 50 percent diminishing value Class 3: Automobiles. including preliminary and formation expenses. Land is not a depreciable asset. Tax Depreciation / Capital Allowances Depreciation is deductible in accordance with specified rates if the assets are used in the course of carrying on a business. patents. All rights reserved. Additions are depreciated for a full year in the year of acquisition. 2.9 2. Depreciable assets are divided into the following classes.11 Amortization of Expenditure Intangible assets. including interest.

13 Tax Rates The Cambodian Tax Law provides corporate income tax or annual tax on profit (ToP) rates as follows:● ● 20 percent for the profit realized by a legal person 30 percent for the profit realized under an oil or natural gas production sharing contract and the exploration of natural resources including timber. ●   2. The tax year is generally a calendar year. All rights reserved. © 2010 KPMG International Cooperative (“KPMG International”). Payments of PTP are due by the 15th day of the following month. The return must be filed irrespective of whether the company is making a profit or loss.Cambodia Asia Pacific Taxation 2010 Edition The excess amount can be carried forward to future years. gold and precious stones 9 percent for profit of Qualified Investment Project (QIP) approved by the Council for Development of Cambodia to be expired by 2010 0 percent for the profit of QIP during the tax exemption period as determined by CDC 5 percent on gross premiums received in Cambodia for Insurance Companies engaged in the insurance or reinsurance of life. However. taxpayers are required to register with the GDT within 15 days after obtaining the Ministry of Commerce’s approval to conduct businesses. 2. a Swiss entity. As a matter of practice. property or other risks and 20 percent on non-insurance income. ore.14 Tax Administration Tax Identification Number Taxpayers are required to register with the GDT and obtain a Tax Identification Number (TIN) within 15 days after the commencement of business. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. Payment of Tax A company is subject to a monthly prepayment of profits tax (PTP) during the year. Tax Returns The annual tax return must be filed within three months following the tax balance date. insurance companies are required to declare and pay the monthly PTP at the rate of 5 percent on gross premiums from insurance or re-insurance income and at the rate of 1 percent on non-insurance related income. which is self-assessed at one percent on monthly turnover inclusive of all taxes except for VAT. 6 .

the amount of the penalty will be 40 percent of the unpaid tax. and is determined as follows: ● Where a taxpayer or withholding agent is considered negligent. subject to the taxpayer providing sufficient evidence to substantiate the foreign tax paid. The minimum tax is calculated at one percent on annual turnover inclusive of all taxes except for VAT. there are penalties imposed for late payment of taxes and late lodgment of returns. ● ● In addition.Cambodia Asia Pacific Taxation 2010 Edition The liquidation of the tax on profit is the balance of tax payable after deduction of all tax credits and PTP and must be paid upon the submission of the annual tax on profit return to the GDT by the 31st March in the year following the tax year. certain acts. The tax credit is calculated separately for each foreign country and is the lower of the foreign tax paid or Cambodian tax payable on foreign source income. and is payable by companies regardless of whether they are in a profit or loss situation. The level of penalty is dependent upon the nature of the violation. All rights reserved. and kept for a period of 10 years. however it should be totally liquidated by the monthly PTP Late payment penalties apply to all tax not paid by the due date. KPMG International provides no client services. the amount of penalty will be 10 percent of the unpaid tax Where a taxpayer or withholding agent is considered seriously negligent. Record Keeping All books of accounts. Member firms of the KPMG network of independent firms are affiliated with KPMG International. the minimum tax is not payable. The minimum tax is calculated at year-end. can lead to criminal proceedings being instigated against directors. The minimum tax 1 is a separate and distinct tax from the tax on profits. accounting records and other documents must be maintained in the Khmer language and in KHR. including tax evasion. if the tax on profit is greater than the minimum tax. © 2010 KPMG International Cooperative (“KPMG International”). 7 . the amount of penalty will be 25 percent of the unpaid tax Where the taxpayer or withholding agent receives a unilateral tax assessment. However. managers or shareholders of an enterprise. together with interest that is charged at two percent per month. Tax Credits Tax paid overseas on foreign source income is available as a tax credit. 1 The minimum tax is exempted for Qualified Investment Project. a Swiss entity. Penalties Regime Tax penalties are imposed for violations of the LoT and its regulations. Finally.

Private Limited Company A private limited company has a minimum of two and a maximum of 30 shareholders. The characteristics of each legal entity are as follows: Public Limited Company A public limited company is defined as “a limited company that is authorized by this Law to issue securities to the public”. Previously. a Swiss entity. The minimum issued and paid up capital is 1. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services.000 (KHR four million (approximately USD 1. There is no restriction on the appointment of directors. The capital must be in place before the company can be incorporated. 8 .Cambodia Asia Pacific Taxation 2010 Edition 3 Setting up Business The CEL was signed by the King of Cambodia in June 2005.000 shares at a par value per share of at least KHR 4. a local company has a right to own land. © 2010 KPMG International Cooperative (“KPMG International”). Under the Constitution of the Kingdom of Cambodia. Issued capital can be either in the form of fully paid in cash or with non-cash items. A private limited company with Cambodian nationality is referred to as a “local company”. A majority foreign-owned private limited liability company does not have a right to own land. banking or insurance activities. All rights reserved. The CEL sets out basic rules and obligations for the establishment and administration of commercial enterprises. A private limited company is considered to have Cambodian nationality if it has a registered office in Cambodia and more than 50 percent of its shares are owned by Cambodian nationals. A private limited company cannot carry out finance. However. The Chairman of the Board of Directors and the other directors of a local company can be Cambodian or foreigners. there was no company law in Cambodia. The types of business organization available under the CEL include: ● ● ● ● ● Public limited company Private limited company Branch office Commercial Representative office Partnership (both general and limited). and the establishment of enterprises was made in accordance with the Commercial Rules and Register.000). It is subject to the same requirements as a private limited company. one shareholder may form a company called a single member private limited company.

A CRO is not subject to tax on profit in Cambodia. A general partnership is formed between two or more persons (called general partners) who have joint and several liabilities for the obligations of the partnership. and one or more limited partners. and its management and control shall be under the control of directors appointed by the Head Office. who are bound to contribute to the capital of the partnership.Cambodia Asia Pacific Taxation 2010 Edition The name of a private limited liability company must reflect its limited liability status. however. but whose liability is limited to their capital contribution. Branch office of a Foreign Company A branch office is a commercial extension of an offshore Head Office. and such status must be printed on all company documents. Partnership A partnership can be formed as either a “General Partnership” or a “Limited Partnership”. Member firms of the KPMG network of independent firms are affiliated with KPMG International. © 2010 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services. 9 . Commercial Representative Office A CRO may be established by an eligible foreign investor to facilitate the sourcing of local goods and services and to collect information for its parent company. withholding tax and patent tax imposts will apply. A limited partnership is a contract between one or more general partners who are the sole persons authorized to administer and bind the partnership. The branch office can undertake commercial operations in Cambodia. A CRO is regarded as a cost centre and accordingly should derive no income from its activities. All rights reserved. a Swiss entity. It is not considered a separate legal entity from its parent company. salary and fringe benefit tax.

There are currently no restrictions on the repatriation of profits or capital from Cambodia. Member firms of the KPMG network of independent firms are affiliated with KPMG International. © 2010 KPMG International Cooperative (“KPMG International”). the Law states that there should be no restrictions on foreign exchange operations. 10 . the USD is in common circulation and the majority of commerce is denominated in USD.Cambodia Asia Pacific Taxation 2010 Edition 4 Foreign Exchange Controls All matters relating to the management of foreign exchange are carried out by the NBC. It should be noted that the Law does provide for the NBC to implement exchange controls in the event of a foreign exchange crisis. Although the KHR is the official currency of Cambodia. however. these operations can only be performed through an authorized financial institution. KPMG International provides no client services. a Swiss entity. All rights reserved. and the LALoI 2003 guarantees the rights of foreign investors to remit foreign currencies abroad for: ● ● ● ● The payment of imports and repayment of principal and interest on foreign loans The payment of royalties and management fees The remittance of profits The repatriation of invested capital on dissolution of an investment project. There are no restrictions on the establishment of foreign currency bank accounts in Cambodia for residents. In particular. The Foreign Exchange Law of 1997 provides for foreign currencies to be freely purchased via the banking system.

All rights reserved. Investors are required to submit an Investment Proposal to either the CDC or the PMIS to apply for a Qualified Investment Project (QIP) status depending on capital level and location of the investment project in question. On an annual basis. plus a Priority Period that will be determined on an annual basis in the Finance Law. 11 . 3 years automatic exemption. a Swiss entity. Instead of a list of eligible sectors being provided in the legislation. © 2010 KPMG International Cooperative (“KPMG International”). this is not available if the QIP elects to take the profit tax exemption in point 1) 3. Member firms of the KPMG network of independent firms are affiliated with KPMG International. The 2003 revisions have been implemented following the promulgation of the implementing Sub-Decree in September 2005. KPMG International provides no client services. Exemption from import duty on production equipment. In effect.Cambodia Asia Pacific Taxation 2010 Edition 5 Tax Incentives The CDC is the principal government agency responsible for providing incentives to stimulate investment in Cambodia. . the tax exemption period could be extend for a maximum of 9 years 2. The LALoI 2003 changed the way in which incentives are granted. to enable QIPs to continue to receive the investment incentives granted under the investment license. a “negative list” was established. Accelerated deprecation on manufacturing assets (however. Exemption from tax on profit imposed by the LoT The tax on profit exemption consists of a Trigger Period (of up to 3 years). The LoI was introduced in 1994 and substantially revised in 2003. the CDC requires all QIPs to apply for the Certificate of Compliance (CoC). raw materials and inputs to manufacture 4. This means investment incentives would be available to all sectors not included in the negative list. The investment incentives (generally) available to QIPs are: 1. The right to employ foreign labor.

Cambodia Asia Pacific Taxation 2010 Edition 6 6. Foreign tax credits in excess of the Cambodian tax liability are lost. i. Member firms of the KPMG network of independent firms are affiliated with KPMG International. they cannot be carried forward or back. Payment of withholding tax is due on the 15th day of the following month. and other similar services Payment of royalties for intangible assets and interests in minerals. including management. except for interest paid to a domestic bank or savings institution Income from rental of movable or immovable properties Interest payments on savings account made by a domestic bank or savings institution to a resident taxpayer Interest payments on a fixed deposit made by a domestic bank or savings institution to a resident taxpayer 15 15 15 10 4 6 Additional Profit Tax on Dividend Distribution Additional profit tax on dividend distribution (APTDD) is applicable on the distribution of retained earnings or annual profit after taxes that were subject to the following rates: ToP rate APTDD rate 0% 9% 20% or 30% 20% 12% (11/91) 0% © 2010 KPMG International Cooperative (“KPMG International”). All rights reserved. Resident Withholding Tax A resident taxpayer is required to withhold tax from the following payments of Cambodian source income to a resident entity: Payment Tax Rate (%) Payment for services to a physical person.2 Withholding Taxes Withholding taxes imposed in Cambodia comprise resident withholding tax and nonresident withholding tax.e. subject to certain conditions. KPMG International provides no client services. 12 . 6. oil or natural gas Interest payments made to a physical person or an enterprise.1 International Tax Double Tax Relief A foreign tax credit is available to a resident in respect of foreign taxes paid. consulting. a Swiss entity.

Bangladesh. Germany. Korea. whichever is first. India. United States of America. Malaysia. 13 . KPMG International provides no client services. a Swiss entity. 6. The WHT is payable at either the date the payment is made. Cambodia currently has no Double Tax Treaties (DTA) in place. after payment of the APTDD are exempt income in the hands of the Cambodian resident taxpayer. Brunei. Thailand. Accordingly. no DTA relief from WHT is available. Payment of APTDD to the GDT is due on the 15th day of the following month in which the distribution is paid. However. Philippines. Uganda. France. The GDT has no recourse to recover withholding tax from the recipient of the payment. Cambodia has made investment and trade agreements with a number of countries such as China. Indonesia. Member firms of the KPMG network of independent firms are affiliated with KPMG International. © 2010 KPMG International Cooperative (“KPMG International”). or the date the expense is recorded in the books. Singapore. Russia. rent and other payments connected with use of property Compensation for management or technical services Dividends 14 14 14 14 The liability for WHT rests with the remitter. Lao. Switzerland.Cambodia Asia Pacific Taxation 2010 Edition Dividend distributions to Cambodian resident taxpayers. Non-Resident Withholding Tax A resident taxpayer carrying on a business who makes any of the following payments to a non-resident is required to withhold the non-resident WHT: Payment Tax Rate (%) Interest Royalties. and Vietnam.3 Double Tax Agreements Cambodia has not entered into any Double Tax Agreements (DTA) with other countries. All rights reserved.

of natural resources A building site. The Cambodian tax law further states that a PE includes the following forms of business activity in Cambodia: ● ● ● ● ● ● ● ● A place of management A branch of a foreign enterprise An office of a foreign enterprise A warehouse A factory A workshop A mine. Transfer Pricing There is no specific transfer pricing legislation in Cambodia. Member firms of the KPMG network of independent firms are affiliated with KPMG International. whether or not for profit.Cambodia Asia Pacific Taxation 2010 Edition 7 7. or supervisory activities connected to such site or project where such site or project or activities continue for a period of more than six months © 2010 KPMG International Cooperative (“KPMG International”). of goods and services to other persons for the purpose of obtaining any benefit”. continuous or time to time activity of a person. The term economic activity is explained as the “regular.3 Permanent Establishment A PE is defined in Cambodia as having “a fixed place of business in the Kingdom of Cambodia. The term PE also includes any other association or connection through which a non-resident person engages in economic activity in the Kingdom of Cambodia”. A related party relationship is one where there is a 20 percent or more group shareholders relationship. 14 . a construction project or an assembly project.2 Anti-avoidance Rules Introduction There is no “general anti-avoidance” provision in the Cambodian tax law. The GDT may re determine related party transactions to impose pricing that the GDT considers “arm length” parties would have undertaken in the transactions. the related party provision of the 1997 LoT (Article 18) gives wide power to the GDT to re-determine related party transactions. KPMG International provides no client services.1 7. through which the non-resident person carries on their business. All rights reserved. in the supply of. a Swiss entity. or any other place of extraction. or the intent to supply. 7. However. the branch of a foreign company or an agent resident in the Kingdom of Cambodia.

7.Cambodia Asia Pacific Taxation 2010 Edition ● The furnishing of services including consultancy services by the employees or other personnel of a foreign enterprise where such activities continue within Cambodia for periods aggregating more than six months in any 12 month period. 15 . Member firms of the KPMG network of independent firms are affiliated with KPMG International.12). 7. the GDT will ultimately decide on a case-by-case basis whether an enterprise’s activities constitute a PE. the PE provisions under the DTAs are not subject to interpretation by the GDT. Notwithstanding all the aforementioned criteria for establishing a PE. © 2010 KPMG International Cooperative (“KPMG International”). All rights reserved. a Swiss entity. KPMG International provides no client services.4 Thin Capitalization There is no specific thin capitalization legislation but there are limitations on the deductibility of interest (see 2.5 Controlled Foreign Company (CFC) Provisions There are no CFC provisions in Cambodia. As Cambodia has not entered into any DTAs with other countries.

KPMG International provides no client services.4 Exempt income Employment related payments received by a tax resident that are not subject to income tax include: ● Reimbursement of business expenses by the employer. housing. wage.3 Employment Income / Employee Benefits Individuals receiving remuneration in the course of employment are subject to personal income tax known as tax on salary. Employers are required to withhold income tax from salaries and other benefits paid to employees. The tax credit is calculated separately for each foreign country and is the lower of the foreign tax paid or Cambodian tax payable on foreign source income. 8. a Swiss entity. The tax rate is currently 20 percent and it is payable monthly. ● ● ● ● © 2010 KPMG International Cooperative (“KPMG International”). overtime and other compensation. provided that the costs are incurred in the course of employment. A fringe benefit tax on employer-provided cars. The remuneration includes salary. and free.1 Taxation of Individuals Introduction Individual residents in Cambodia are liable to personal income tax/tax on salary on Cambodian and foreign source income. The actual cost of providing the benefit will normally be deductible for the employer except for the fringe benefit tax. 16 .2 Residence A person is resident in Cambodia if the person is “domiciled in” or has a “principal place of abode” in Cambodia.Cambodia Asia Pacific Taxation 2010 Edition 8 8. subsidized or discounted goods and services is levied on employers according to the taxable value of the fringe benefits provided to their employees. low-interest loans. the amounts are not excessive and they can be substantiated Indemnity for layoff within the limit as stated in the Labor Law Additional remuneration received with social characteristics as provided in the Labor Law Supply of free or subsidized uniforms or special professional equipment used in the course of employment Flat allowances for mission and travel received in the course of employment. whereas non-residents are subject to income tax on Cambodian source income only. 8. or the person is present in Cambodia for more than 182 days during any 12 month period. 8. A credit for foreign income tax paid is allowed against Cambodian income tax. Member firms of the KPMG network of independent firms are affiliated with KPMG International. All rights reserved. bonus.

All rights reserved.8 Tax Administration Returns and Assessments The salary and fringe benefit tax return and payment are due to be filed and paid to the GDT by the 15th day of the following month.250. a Swiss entity.5 Deductions Employees are not allowed any deductions against their salary income as employees are not required to submit annual tax return.000 8.500.000 – 1.000 Over 12.6 Personal Allowances and Rebates of Tax The following relief is provided to resident individuals: Relief KHR Child relief for each child per month (14 years old or 25 years old if still at school ) Dependent spouse (must be housewife) 75.000 Non-residents Non-residents are taxed on salary from Cambodian sources at the flat rate of 20 percent.000 75.Cambodia Asia Pacific Taxation 2010 Edition 8.001 – 12.000 From 8. Member firms of the KPMG network of independent firms are affiliated with KPMG International.500. KPMG International provides no client services.500. 8.001 – 8.000 0 5 10 15 20 From 1. 8. © 2010 KPMG International Cooperative (“KPMG International”). Currently the Cambodian Tax Law does not require a resident individual to submit an annual personal income tax return to the GDT. the monthly salary tax deduction is considered to be a final tax for individuals. 17 .7 Tax Rates Residents The personal income tax rates are as follows: Taxable Income for the Month (KHR) Progressive Tax Rate (%) Up to 500.500.250.000 From 500. Accordingly.

and dental services and the sale of medical and dental goods incidental to the performance of such services Passenger transportation services by a wholly state-owned public transportation system Insurance services Primary financial services Importation of articles for personal use that are exempt from customs duties Non-profit activities for public interest that have been recognized by the Ministry of Economy and Finance. Value Added Tax VAT is chargeable on a wide range of goods and services supplied in Cambodia and on the importation of goods. Zero rating applies to export of goods and services. ● ● 18 . so that the VAT eventually impacts the final consumer. exporters and investment companies Taxpayers with turnover in respect of goods sold exceeding KHR 125 million for the preceding three consecutive months or in the next three consecutive months Taxpayers with turnover in respect of services provided exceeding KHR 60 million for the preceding three consecutive months or in the next three consecutive months Taxpayers undertaking government contracts with a total taxable turnover exceeding KHR 30 million.2 Indirect and Other Taxes Social Security Tax There is no social security tax in Cambodia. Exempt supplies are not subject to VAT and include: ● ● Public postal service Hospital. ● ● ● ● ● Enterprises providing taxable supplies of goods and services are required to register for VAT if they meet the criteria specified below: ● ● Corporations. © 2010 KPMG International Cooperative (“KPMG International”). a Swiss entity.Cambodia Asia Pacific Taxation 2010 Edition 9 9. medical. KPMG International provides no client services. The basic principle of VAT is to charge tax at each stage of production. importers. All rights reserved. allowing each supplier credit for the tax paid.1 9. Member firms of the KPMG network of independent firms are affiliated with KPMG International. clinic. Taxable supplies attract VAT at either the standard rate of 10 percent or the zero rate. and certain charges in relation to international transport of people and goods.

a Swiss entity. VAT is payable at 10 percent on imports by reference to the value of the import. KPMG International provides no client services. © 2010 KPMG International Cooperative (“KPMG International”). 20 percent. rice seeds and agricultural tractors. This 4 percent tax is imposed on the transferred value and payable by the party acquiring the asset.000: ● ● ● ● Company formation Company merger Dissolution of a company An agreement to provide goods or services to public organizations. within 3 months from the date of the execution of the agreement to transfer the title. vehicles).6 Property Transfer Taxes There is a 4 percent tax on transfer of title in certain assets (such as land. Cambodia has implemented tax tariff reduction schedule under the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (CEPT for AFTA) since 1 January 2000. building. including any customs duty.7 Tax on Unused Land A tax is levied on unused land and the registered owner of the land is responsible for the payment of the tax. the duty rates are 7 percent. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Exemptions can also be obtained as part of the incentives offered by the CDC for investment project undertaken in Cambodia. 9.4 9. 9.3 Customs Duty Customs duty is levied on certain goods entering Cambodia. and 35 percent. Currently. insurance and freight charges. fertilizer. 9. Goods exempt from customs duty include school facilities. 15 percent.3.5 Excise Duty See 9. medicine. All rights reserved. Stamp Duty (Registration Tax) The following legal documents are subject to a stamp duty of KHR 100. 9. VAT returns and payment are due to be filed and paid to the GDT by the 20th day of the following month. As a member of ASEAN. The rates vary depending on the type of goods entering Cambodia. sport facilities.Cambodia Asia Pacific Taxation 2010 Edition VAT registration must be made at the commencement of business operations or within 30 days in which the taxpayer becomes a taxable person. 19 .

1 percent on the value of the immovable property that is more than the threshold of KHR100.9 9. Examples of the levy of STCMS are: Item Rate (%) Domestic and international telephone services Domestic and international air ticket Entertainment services Cigarettes Cigars Beers 3 10 10 10 25 25 2 Prior to 1 February 2010. All rights reserved. The value of the immovable property is assessed by the Assessment Committee. which was set up by the Ministry of Economy and Finance. KPMG International provides no client services. © 2010 KPMG International Cooperative (“KPMG International”). 2 20 . buildings and constructions that are built on the land. This TIP will be collected every year at the rate of 0. STCMS rate was temporarily maintained at 20 percent.8 Tax on Immovable Property (TIP) TIP was recently created in the 2010 Law on Financial Management (LFM) to be imposed on certain immovable. The Prakas on the collection of the TIP was subsequently issued on 19 July 2010 for implementation of the TIP. 9.Cambodia Asia Pacific Taxation 2010 Edition Tax on unused land is based on two percent of the market price per square meter as determined by the Committee for the Valuation Unused Land and is due to be paid annually by September 30. 9.12 Payroll Tax There is no payroll tax in Cambodia.000). Gift Tax There is no gift tax in Cambodia. Inheritance Tax There is no inheritance tax in Cambodia. The term “immovable property” is defined as land. Member firms of the KPMG network of independent firms are affiliated with KPMG International. The deadline for paying the TIP is 30 September each year. Other Taxes Special Tax on Certain Goods and Services (STCMS) Certain goods and services are subject to STCMS which is a form of excise tax that applies to importation or domestic production and supply of certain goods and services. a Swiss entity.11 9.000. but with effect from 1 February 2010.000 (approximately USD25.10 9. houses. it has been increased to 25 percent.

Payment of AT to the GDT is due on the 15th day of the following month.000 (approximately USD 285). The tax rate is three percent of the value of the taxable product inclusive of taxes but not the TPL nor VAT.Cambodia Asia Pacific Taxation 2010 Edition Patent Tax Patent tax is a yearly business registration tax in which all enterprises carrying on business activities in Cambodia are required to pay by March 31. both imported and domestically manufactured. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Tax on Public Lighting (TPL) TPL is a tax levied on the sale of tobacco and cigarette products. AT is levied at the rate of two percent on hotel accommodation services. A “patent tax certificate” will be issued by the GDT upon registration. The revenue from the collection of this tax shall be used to improve public lighting in cities and the provinces. a Swiss entity. 21 .140. KPMG International provides no client services. at each stage of supply. The tax is payable on a monthly basis. by the 15th day of the following month. Accommodation Tax (AT) AT is a tax on the provision of hotel accommodation services. inclusive of other services charges and all kinds of taxes but exclusive of the AT itself and VAT. The standard patent tax payment is KHR 1. © 2010 KPMG International Cooperative (“KPMG International”). All rights reserved.

a Swiss entity. All rights reserved. 22 . KPMG International provides no client services. Member firms of the KPMG network of independent firms are affiliated with KPMG International.Cambodia Asia Pacific Taxation 2010 Edition 10 Glossary APTDD AT CDC CEL CRO DTA GDT LALoI LALoT LoI LoT NBC QIP PE PMIS PSC R&D TIN TIP VAT Additional Profit Tax on Dividend Distributions Accommodation Tax Council for the Development of Cambodia Commercial Enterprise Law Commercial Representative Office Double Taxation Agreement General Department of Taxation Law on Amendment on the Law on Investment Law on Amendment on the Law on Taxation 1994 Law on Investment 1997 Law on Taxation National Bank of Cambodia Qualified Investment Projects Permanent Establishment Provincial/Municipality Investment Sub-Committees Production Sharing Contract Research and Development Tax Identification Number Tax on Immovable Property Value Added Tax © 2010 KPMG International Cooperative (“KPMG International”).

All rights reserved.Cambodia Asia Pacific Taxation 2010 Edition 11 Useful links Further to the information contained in the following sections.  KPMG Global Tax website: www. 23 . a Swiss entity. KPMG International provides no client services.kpmg. Member firms of the KPMG network of independent firms are affiliated with KPMG International. information and developments regarding tax laws in Cambodia can be obtained from the following websites.com/tax © 2010 KPMG International Cooperative (“KPMG International”).

. Member firms of the KPMG network of independent firms are affiliated with KPMG International.vn © 2010 KPMG International Cooperative (“KPMG International”).kh www. All rights reserved. Sunway Tower 115 Nguyen Hue Ho Chi Minh City Vietnam T +84 (8) 3821 9266 F +84 (8) 3821 9267 E warrickcleine@kpmg. a Swiss entity. KPMG International provides no client services.Contact us Michael Gordon Partner Tax & Corporate Services Department KPMG Cambodia Ltd 4th floor.kpmg. Although we endeavour to provide accurate and timely information. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties. Delano Center No. nor does KPMG International have any such authority to obligate or bind any member firm. a Swiss entity. Street 169 Sangkat Veal Vong Khan 7 Makara Phnom Penh Cambodia (Kingdom of) T +855 (23) 216 899 F +855 (23) 216 405 E mgordon@kpmg. 144.com Warrick Cleine Chief Executive/Managing Partner Tax & Corporate Services Department KPMG Limited 10th Floor. there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.com.com. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. The KPMG name.