A “permanent establishment” is defined as a fixed place of business in the Kingdom of Cambodia, the branch of a foreign company or an agent resident in the Kingdom of Cambodia, through which the non-resident person carries on their business. The term “permanent establishment” also includes any other association or connection through which a non-resident person engages in economic activities in Cambodia.
A permanent establishment also includes the furnishing of services including consultancy services by the employees or other personnel of a foreign enterprise where such activities continue within the Kingdom of Cambodia for periods aggregating more than six (6) months in any 12-month period.
The Cambodian tax system can tax income derived in Cambodia by non-residents, either via withholding tax on interest, dividends, royalties, rent and most services, however, not from the sale of goods, or via net profit taxation on the non-resident’s business income.
In practice, the GDT may prefer to tax non-residents via withholding tax instead since:
- Gross income is easier to calculate than net income; and
- It is simpler from an administrative perspective.
Per Prakas No. 1059,
- A permanent establishment includes mainly:
- a place of management;
- a branch of a foreign enterprise, an agency;
- an office of a foreign enterprise;
- a warehouse;
- a factory;
- a workshop;
- a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
- a farm or plantation.
- A permanent establishment includes also:
- a building site, a construction project or an assembly project, 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;
- the furnishing of services including consultancy services by the employees or other personnel of a foreign enterprise where such activities continue within the Kingdom of Cambodia for periods aggregating more than six months in any 12-month period.
- In addition to the provisions of sub-paragraphs (a) and (b) of this paragraph, a person shall be considered a permanent establishment in the Kingdom of Cambodia if such person satisfies one or more of the three conditions as follows:
- has and regularly exercises the authority to conclude contracts in the Kingdom of Cambodia on behalf of a foreign enterprise;
- regularly maintains in the Kingdom of Cambodia a stock of goods or merchandise from which he regularly delivers or supplies such goods or merchandise on behalf of a foreign enterprise;
- collects insurance premiums or insures risks, except the reinsurance of risks, situated in the Kingdom of Cambodia, on behalf of a foreign enterprise.
- In actual implementation, the tax administration shall decide for each particular case whether there is permanent establishment or not, on the basis of factual circumstances in that case except in the case of the implementation of the clauses of an international agreement.