Foreign investors in Cambodia must pay taxes on income earned in the country, including profits. Cambodian residents including foreigners present in the country one hundred eighty-three (183) days or more a year and companies organized, managed or having their principal place of business in-country must pay taxes on income and profits earned worldwide. Residents earning foreign-sourced income are entitled to receive credit for foreign taxes paid. There is at the moment no capital gains tax. Investors generally come under the real regime taxation system. Real regime taxpayers include most large, incorporated taxpayers and all commercial enterprises, except sole proprietorships.
- As a foreign investor, what taxes will I have to pay on my business?
Most foreign investments and foreign investors will be affected by the Tax on Profit, the Minimum Tax, the Value Added Tax, various withholding taxes, Customs duties and the Salary Tax on Cambodian and foreign employees.
Other taxes that can affect foreign investors include a Specific Tax on certain Merchandise and Services and other minor taxes. According to the Law on Taxation, companies must register with the Tax Department of the Ministry of Economy and Finance within fifteen (15) working days of business registration or commencement of economic activities.
- What kinds of tax returns must be filed? When are they due?
Every month four (4) separate tax return forms must be filed. Due on the 15th of each month are forms for the Salary Tax, a Return for Withholding Tax, a Return for Prepayment of Tax on Profit, Specific Tax on Certain Merchandise and Services, Tax on Accommodation, Tax for Public Lighting, and other taxes. On the 20th of each month a Return for VAT is due.
The forms must be filed even if returns are nil. There are hefty fines for non-compliance.
The annual Tax on Profit returns must be filed on or before 31 March. That is, three (3) months after the end of the government’s fiscal year, which spans the calendar year from 1 January to 31 December. A company with a different fiscal year can obtain special approval to use their fiscal year for Cambodian tax purposes.
An annual Patent Tax return must also be made by all business enterprises on or before 31 March.
- What taxes will I owe on profits from my investment?
The general rate of the Tax on Profit is 20% (twenty percent), but the Law on Taxation has exceptions and exemptions. An investment company with a tax holiday enjoys a 0% (zero percent)rate. Insurance activities are taxed at a rate of 5% (five percent) of gross premium income. Profits of a company investing in oil and gas are taxed at 30%.
Most commercial enterprises are subject to a monthly Prepayment of Tax on Profit at the rate of 1% (one percent) of monthly turnover inclusive of all taxes except VAT. The Prepayment can be offset against the annual Tax on Profit liability and the Minimum Tax.
The Minimum Tax is a separate tax calculated at 1% (one percent) of annual turnover inclusive of all taxes, except VAT. It is payable at the time of the annual liquidation of the Tax on Profit.
- How are capital gains taxed?
There is no separate capital gains tax in Cambodia. All earned income from capital gains is taxed the same as regular income. Under a new law passed in 2007, capital gains from sales of immovable property by individuals will now be taxable at the rate of 20% (twenty percent). As of the start of 2013, however, this has not yet been implemented by the Government.
- Does Cambodia have a branch profit tax?
Cambodia does not tax branch profits to be remitted abroad separately from the taxable profit of the company. However, certain payments made by a resident taxpayer to a non-resident taxpayer are subject to a withholding tax of 14% (fourteen percent), including payments of interest income, dividends, royalties, rent, other property income, and compensation for management and technical services.
- Will I be required to pay personal taxes in Cambodia?
If you are a Cambodian resident, your personal income is subject to the Tax on Salary up to 20% (twenty percent). A resident is someone present in the country 183 (one hundred eighty-three) days a year or more.
- Will I be required to withhold and pay salary or income taxes for my employees? Does that include foreign employees? What about consultants and others on contract? What about foreign employees who work for short periods?
Both the employer and the employee are jointly liable for the payment of the Tax on Salary regardless of whether the salary is paid in Cambodia or overseas. However, the employer is the first responsible party. Employers must withhold and pay taxes for both local and foreign employees. If the employer does not pay the Tax on Salary, the employee must pay.
A Withholding Tax on Salary is calculated according to a schedule of earnings which ranges between 0% (zero percent) and 20% (twenty percent). As of January 1, 2015, the tax is 0% (zero percent) for those earning less than 800,000 Cambodian Riel per month (about US$200 per month) and 20% if the earnings are more than 12,500,000 Cambodian Riel per month (approximately US$ 3,125 a month at the current exchange rate). This tax is applied monthly. There is no annual return.
Consultants and other contract workers (non-employees) also must pay taxes, with rates varying depending on whether they are residents or non-residents and what kind of work they do. A resident contractor doing consulting, management and some other services is taxed at 15% (fifteen percent), while non-residents are taxed at 14% (fourteen percent). The withholding tax in these instances is considered as the final tax.
Foreign employees who work in Cambodia only for short periods will be taxed as non-resident taxpayers on their Cambodian sourced income at the flat rate of 20%.
- Will my business be required to pay value-added tax (VAT)?
Yes, most probably. A 10% (ten percent) VAT is applicable on supplies of most goods and services, with the exception of public postal services, hospital and medical services, public transportation, insurance, certain financial services, importation of certain articles for personal use, recognized non-profit public interest activities, and electricity.
Taxpayers subject to VAT must register, usually at the time of incorporation, and are thereafter required to file VAT returns and payment of the tax on a monthly basis.
- What kind of customs duties apply in Cambodia?
Import duties are variable depending on the goods to be imported, but generally range between 0% (zero percent) and 35% (thirty-five percent). Taxes on luxury items such as automobiles can be considerably higher. There are exceptions for goods for personal use and goods exempted by international treaties, and for international and local NGOs. There is a duty exemption for equipment, construction and raw materials if the company gains qualified investment project (QIP) status with the CDC.
Export duties are levied on only a limited number of items, such as rubber, unprocessed precious stones, timber, certain live animals and animal products (including fish and most seafood), and minerals and oil and gas.
- Does Cambodia have any double taxation treaties?
No. Cambodia does not currently have any double taxation treaty with any country.
- What accounting requirements are there for foreign businesses?
The Law on Corporate Accounts, Audit and Accounting requires that a company’s accounting records shall be prepared in Khmer and expressed in Cambodian Riel. Enterprises carrying out business with foreign countries or subsidiaries of foreign companies may be authorized to prepare accounting records in English and in a currency other than Riel in addition to the accounting records in Khmer and Cambodian Riel. However, the company’s financial statements must be prepared in Khmer and in Cambodian Riel.
Accounting records, financial statements, ledgers and documentary evidence must be kept for ten (10) years from the end of the financial year to which the records relate. Such ledgers include a general journal, accounting ledger and inventory book.
- Are there any other taxes in Cambodia?
Yes, fiscal taxes are payable on certain transactions such as filing of applications with government entities and other documents.
Companies are also required to pay an annual Patent Tax.
Registration tax is payable on the transfer of registration of immoveable property, company shares and vehicles and other means of transportation.
Annual immovable property tax is payable on certain properties, usually in urban areas and over 100 million Cambodian Riel (approximately US$ 25,000 at the current exchange rate) in value.
Unused land tax is payable on undeveloped land that is not subject to annual immovable property tax.