Taxation in Phnom Penh, Cambodia
What are the tax rates in Phnom Penh, Cambodia? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Phnom Penh, Cambodia.
Personal taxation in Phnom Penh
Effective personal income tax rate
| Annual income | $25,000 | $40,000 | $80,000 | $125,000 | $200,000 |
|---|---|---|---|---|---|
| Rate | 19% | 19% | 20% | 20% | 20% |
Teleport city rankings for personal income tax
Personal taxation puts Phnom Penh in position 37 of all Teleport Cities.
Basis
A resident employee is subject to tax on salary (TOS) on worldwide sources of income, irrespective of the place of payment; nonresidents are taxed only on Cambodian-source income.
Residence
A resident is defined as an individual who is domiciled or who has a principal place of abode in Cambodia, or who is present in Cambodia for more than 182 days in any 12-month period ending in the current tax year.
Filing status
Employers are responsible for withholding and remitting the TOS to the GDT each month. Employees are not required to file tax returns.
Rates
For employment income, progressive rates from 0% to 20% apply to residents, while nonresidents are subject to a flat rate of 20%. The rate for the tax on fringe benefits is 20%.
Deductions and allowances
The allowance for each dependent is KHR 75,000, subject to specified conditions. Certain income is exempt from TOS, such as actual reimbursements of professional expenses, limited indemnity for a layoff, remuneration provided under the labor law and limited flat allowances for mission and travel expenses.
Taxable income
The TOS is imposed on salaries received as compensation for employment activities in Cambodia. The term “salary” is defined broadly to include wages, remuneration, bonuses, overtime, compensation and fringe benefits. Fringe benefits (either in cash or in kind) include the private use of motor vehicles, the provision of meals and/or accommodations, pension fund contributions that are more than 10% of salary, etc.
Other taxes on individuals
Real property tax
This tax is applicable to individual owners in the same way as it is to companies. See under “Other taxes on corporations.”
Social security
There is no employee contribution to social security.
Stamp duty
Similar to the rules that apply for corporations, registration tax is applicable to individual owners on the sale of shares, the sale of property and inheritances. See under “Other taxes on corporations.”
Compliance for individuals
Penalties
Penalties do not apply to individual employees, but are levied on the employer. The penalty and interest rates are the same as those for corporate tax noncompliance. See under “Compliance for corporations.”
Filing and payment
TOS is deducted from employee salaries, but employers are responsible for withholding and remitting it each month. Employees are not required to pay TOS directly to the tax authorities.
Corporate taxation in Phnom Penh
Teleport city rankings for corporate income tax
Corporate taxation puts Phnom Penh in position 10 of all Teleport Cities.
Basis
Resident taxpayers are subject to tax on worldwide income, while nonresidents are taxed only on Cambodian-source income.
Taxation of dividends
Dividends paid to Cambodian shareholders are not taxable.
Residence
Residents include companies that are organized, managed or have their principal place of business in Cambodia.
Losses
Tax losses may be carried forward to offset taxable income for up to five years after the year in which the losses are incurred, subject to certain conditions (e.g. no changes in ownership or business activity, and subject to unilateral tax reassessment). Tax losses may not be carried back.
Incentives
Investment incentives for QIPs primarily consist of an exemption from minimum tax; either a profits tax holiday of up to six years or special depreciation at a 40% rate in the first year property is placed in service; and exemptions from import duty. A VAT exemption on the importation of raw materials is available for 100% export- oriented enterprises located in assigned special economic zones.
Rate
The tax on profits rate ranges from 0% to 30%, based on the business activity. The standard rate is 20%.
Alternative minimum tax
All enterprises, including those that incur losses, generally are subject to minimum tax at a rate of 1% of total annual turnover inclusive of all taxes, except value added tax (VAT). QIPs are not subject to minimum tax.
Foreign tax credit
Cambodian companies may claim a foreign tax credit to offset the corporate income tax payable, limited to the amount of Cambodian tax payable on the foreign income. Supporting documents are required.
Taxable income
The tax on profits is calculated on taxable profit. For resident taxpayers, taxable profit is calculated as the difference between total revenue (including capital gains and passive income, such as interest, rental and royalty income and insurance compensation) and allowable expenses paid or incurred to carry on the business.
Capital gains
There is no separate capital gains tax. Any gain on
Other taxes on corporations
Real property tax
Property tax is levied at 0.1% per year on immovable property with value exceeding KHR 100 million. A tax on house and land rentals is levied at 10% of the rental fees. A tax also applies on unused land, at a rate of 2% of the market value of the land per square meter, as determined by the Commission for Evaluation of Unused Land.
Social security
Employers with eight or more employees must register and make monthly contributions at a rate of 0.8% of the monthly salary, capped at USD 2 per employee.
Other
The tax on means of transportation imposes a number of statutory fees on the registration of certain transportation vehicles, including trucks, buses, motor vehicles and ships. Real-regime taxpayers are required to remit the taxes no later than 30 September each year.
Stamp duty
Certain legal documents relating to establishing, dissolving or merging a business enterprise are subject to registration tax (i.e. stamp tax) of KHR 1 million. Some documents relating to the transfer of title in certain assets (such as land and vehicles) are subject to stamp tax at a rate of 4% of the value transferred. A transfer of a company’s shares, in part or in full, is subject to a 0.1% stamp tax on the market value of the shares at the transaction date. A 0.1% stamp tax also is levied on contractual amounts for the provision of goods or services using the national budget. Registration tax is imposed on the buyer.
Compliance for corporations
Consolidated returns
Consolidated returns are not permitted, and no tax relief is available between independent entities in a group.
Penalties
Penalties apply for failure to file, late filing or the filing of a fraudulent return. Taxpayers are subject to penalties at 10%, 25% or 40% and interest of 2% per month on late and underpaid taxes.
Rulings
A taxpayer can request a tax ruling to clarify its specific tax concerns; however, obtaining a response on the ruling request is rare.
Tax year
The default tax year is a calendar year. An approval letter from the GDT is required if the taxpayer wishes to use a different tax year.
Filing requirements
A taxpayer must file and pay annual corporate income tax within three months after the year end. Monthly tax returns must be filed by the 15th day of the following month.
Other taxation in Phnom Penh
Value added tax
Filing and payment
Monthly filing is required and VAT must be paid by the 20th day of the following month.
Rates
The standard rate is 10%, and certain supplies are zero- rated or exempt.
Registration
All real-regime taxpayers making supplies of taxable goods and services in Cambodia must register for VAT before making taxable supplies.
Anti-avoidance rules
Transfer pricing
There are no comprehensive transfer pricing regulations in Cambodia, although the General Department of Taxation (GDT) has broad powers to re-allocate income and deductions between related parties under common ownership to prevent the avoidance or evasion of taxes. Common ownership exists where a person holds 20% or more of an enterprise.
Investment basics
Foreign exchange control
Payments for commercial transactions may be made freely between residents and nonresidents, provided they are made through an authorized bank. Funds transfers exceeding USD 10,000 must be declared to the National Bank of Cambodia before the transfer.
Accounting principles/financial statements
Publicly accountable entities are required to use full Cambodian International Financial Reporting Standards (CIFRS), whereas those subject to audit but not publicly accountable may use either CIFRS for small and medium- sized entities or full CIFRS.
Principal business entities
These are the sole proprietorship, partnership, limited liability company, branch of a foreign corporation and representative office.
Withholding tax
Dividends
Dividends paid by a resident company to a nonresident shareholder are subject to a 14% withholding tax, on top of the additional profit tax on dividend distributions applicable. No withholding tax is imposed on dividends paid to a resident shareholder.
Other
Rent is subject to a 10% withholding tax, regardless of whether it is paid to resident individuals or “real-regime” taxpayers (i.e. entities taxable under the self-assessment system). A 14% withholding tax applies for rental payments to a nonresident.
Technical service fees
Technical and management service fees paid to a nonresident are subject to a 14% withholding tax. There is no definition of technical or management services for this purpose, but the tax authorities’ informal interpretation is that the term captures all service fees. Service fees paid to a resident individual are subject to a 15% withholding tax, although certain exemptions apply.
Royalties
Royalties paid to a nonresident are subject to a 14% withholding tax, whereas payments made to a resident taxpayer are subject to a 15% withholding tax.
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