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Income Tax in Cambodia



Personal Income Tax

Residence rules:

An individual is considered a tax resident, if:

·        the individual is domiciled in Cambodia
·        the individual has a principal place of abode in Cambodia or
·        the individual is present in Cambodia for more than 182 days during the 12-month period ending in the current tax year.

A non-resident is any person who is not a resident.

Tax Rate:

Income (KHR)
Tax Rate(%)
Up to 500,000
0
From 500,001 to 1,250,000
5
From 1,250,001 to 8,500,000
10
From  8,500,000 to 12,500,000
15
Above 12,500,000
20

Tax returns and compliance:

The salary tax return is due for lodgment by the 15th of the following month. Individuals are not required to submit annual personal income tax returns. Accordingly, the monthly salary tax deduction is considered to be a final tax for individuals.

Compliance Requirements For Tax Returns:

Residents:

Employers or the resident representative of foreign employers, and employees are jointly responsible for the payment of tax on salary in Cambodia, regardless of whether the salary is paid in Cambodia or abroad. 

A resident is subject to a monthly deduction of salary tax on salaries received from both Cambodian and foreign sources. The tax rate is on a sliding scale, with a top marginal rate of tax of 20 percent (refer to table). Salary tax is due to be paid by the 15th day of the month following the payment of salary. Currently, the tax law does not require a resident individual to submit an annual personal income tax return to the General Department of Taxation, and therefore, the monthly tax deducted is considered a final tax.

Non-residents:

Non-residents are subject to a monthly deduction of salary tax on salaries received from Cambodian sources only. Cambodian-sourced salary is taxed at a flat rate of 20 percent.

Tax-exempt income:

Employment-related payments received by a tax resident, which are not subject to salary tax, include:

·   reimbursement of business expenses by the employer, provided the costs were incurred in the course of employment, the amount is not excessive, and 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 costs of uniforms or special professional equipment used in the course of employment
·      flat allowances for mission and travel costs received in the course of employment. The amount of the allowance shall not be in excess of the actual expenditure incurred.

Taxation of investment income and capital gains:

Non-employment income sourced within Cambodia is not subject to salary withholding tax. However, profits tax may be payable.

Dividends, interest, and rental income:

Income from dividend, interest, and rental are not subject to salary tax; however, they may be subject to profit tax.

Gains from stock option exercises:

Currently, there is no provision on taxability of stock options.

Foreign exchange gains and losses:

Realized foreign exchange gains/losses are taxable/deductible for profit tax purpose.

Principal residence gains and losses:

Not applicable.

Capital losses:

Not applicable

Personal use items:

Certain items provided by the employer for employee’s personal use are subject to fringe benefits tax at the rate of 20 percent.

Gifts:

Gifts are not tax deductible for profit tax purpose.




Corporate Income Tax:

Resident Rules:

A resident taxpayer is primarily an enterprise that is organised and managed in Cambodia or its principal place of business is Cambodia.

A non-resident taxpayer is an enterprise that derives Cambodia sourced income, but does not have a place of management in Cambodia. A non-resident taxpayer will be deemed to be a Cambodian resident for tax purposes if it is found to have a permanent establishment in Cambodia.

A resident taxpayer is subject to CIT/ToP on income derived from both Cambodian and foreign sources, whereas, a nonresident taxpayer is subject to CIT/ ToP in respect of its Cambodian sourced income only.

Tax Rate:

The CIT/ToP tax rate is 20 percent, with the exception of:

·       30 percent for the profit realised under an oil or natural gas production sharing contract and the exploitation of natural resources including timber, ore, gold and precious stones.
·        0 percent for the profit of Qualified Investment Project (QIP) during the tax exemption period as determined by Council for the Development of Cambodia (CDC).
·     5 percent on gross premiums received in Cambodia for insurance companies engaged in the insurance or reinsurance of life, property or other risks and 20 percent on non-insurance income of such businesses.

International withholding tax rates:

Dividends, royalties (including rent and other payments connected with the use of property) and interest paid to a nonresident are subject to withholding tax of 14 percent.

Other non-resident payments include compensation for management or technical services, and are also subject to withholding tax of 14 percent.

Cambodia is not a party to any double tax agreements. Accordingly, no tax treaty relief from withholding tax is available.




Tax losses:

Losses can be carried forward for a maximum of five years. Tax losses may be forfeited upon a change in ownership of the business or if there is a change in the business activity. Tax losses will also be forfeited in the event a taxpayer is subject to a unilateral tax assessment.

There is no restriction on the amount of taxable income that can be offset by tax losses – all of the tax losses available can be used to offset against the taxable income of one year.

Losses cannot be carried back to prior periods.



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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.




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This blog is Created by CA Anil Kumar Jain.