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Cambodia

Country Name: Kingdom of Cambodia
Currency: Cambodian Riel (KHR), U.S. Dollar (USD) widely used
Primary Tax Authority: General Department of Taxation (GDT)
Key Legislation:

  • Law on Taxation (updated in 2020)
  • Law on Investment
  • Value Added Tax (VAT) Law
  • Customs Law

Fiscal Authority Allocation

Centralized Fiscal System:
Cambodia operates a centralized tax system. The General Department of Taxation (GDT), under the Ministry of Economy and Finance, is responsible for collecting taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and other indirect taxes.

Corporate Income Tax (CIT)

Standard Rate: 20%
Cambodia imposes a flat corporate income tax rate of 20% on the net taxable income of both resident and non-resident companies. Special rates apply to certain industries and small and medium-sized enterprises (SMEs).

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on Cambodia-sourced income.

Exemptions and Incentives:

  • Qualified Investment Projects (QIPs): QIPs benefit from various incentives, such as tax holidays of up to nine years, exemption from withholding taxes on dividends during the tax holiday period, and exemptions from import duties on equipment and raw materials.
  • Special Economic Zones (SEZs): Companies operating in SEZs benefit from tax incentives, including reduced or exempt CIT, VAT, and import duties on goods brought into the zones.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 10%
Cambodia imposes VAT at a standard rate of 10% on most goods and services supplied domestically and on imports. VAT registration is required for businesses exceeding the turnover threshold of KHR 250 million per year for services and KHR 500 million for goods.

Exemptions:
Certain essential goods and services, including healthcare, education, financial services, and certain agricultural products, are VAT-exempt. Exports are zero-rated, meaning businesses can reclaim VAT on inputs used to produce export goods.

Personal Income Tax (PIT)

Progressive Rates:
Cambodia applies a progressive personal income tax system for residents on their worldwide income. Non-residents are taxed at a flat rate of 20% on Cambodia-sourced income.

Resident Tax Rates for 2023 (Monthly Income):

  • Up to KHR 1,300,000 (approx. USD 320): 0%
  • KHR 1,300,001 to KHR 2,000,000 (USD 320 to USD 490): 5%
  • KHR 2,000,001 to KHR 8,500,000 (USD 490 to USD 2,070): 10%
  • KHR 8,500,001 to KHR 12,500,000 (USD 2,070 to USD 3,050): 15%
  • Above KHR 12,500,000 (over USD 3,050): 20%

Non-Resident Tax Rate:
A flat tax rate of 20% applies to non-residents’ income sourced in Cambodia.

Additional Mandatory Contributions

National Social Security Fund (NSSF):
Employers and employees must contribute to Cambodia’s National Social Security Fund (NSSF), which covers healthcare, pensions, and occupational risks.

  • Employer Contribution: 3.4% of gross salary (covering occupational risk, healthcare, and pension contributions).
  • Employee Contribution: 2% of gross salary (covers pension contributions).

Withholding Taxes

  • Dividends: 14% for non-residents.
  • Interest: 14% for non-residents.
  • Royalties: 15% for non-residents.
    Withholding tax rates may be reduced under Cambodia’s double taxation agreements (DTAs).

Transfer Pricing Rules

Cambodia has introduced transfer pricing regulations, which require related-party transactions to adhere to the arm’s-length principle. Transfer pricing documentation must be maintained to support pricing arrangements for cross-border transactions.

Special Tax Regimes

  • Qualified Investment Projects (QIPs): QIPs, designated under Cambodia’s Investment Law, benefit from CIT holidays, exemption from withholding taxes on profit distributions, and import duty exemptions. These incentives are granted to companies investing in key sectors such as manufacturing, agriculture, tourism, and infrastructure.
  • Special Economic Zones (SEZs): Businesses operating in SEZs benefit from reduced or exempt tax rates on CIT and VAT, customs duty exemptions, and streamlined regulatory processes aimed at promoting export-oriented industries.

Other Taxes

  • Customs Duties: Import duties vary by product, ranging from 0% to 35%. Essential goods such as food, medical supplies, and raw materials may qualify for reduced or zero import duties.
  • Excise Taxes: Cambodia levies excise taxes on goods such as alcohol, tobacco, and petroleum products.
  • Real Estate Transfer Tax: A 4% tax is imposed on the transfer of real estate based on the property’s transaction value.

Double Taxation Agreements (DTAs)

Cambodia has signed several double taxation agreements (DTAs) with countries such as China, South Korea, and Singapore. These DTAs help reduce withholding taxes on cross-border payments and prevent the double taxation of income earned in Cambodia and other jurisdictions.

Local Taxes

In addition to national taxes, local governments may impose business license fees and minor administrative fees. However, all major taxes are centrally administered by the General Department of Taxation (GDT).

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 31st of the following year. Personal income tax returns are generally due by the end of March. VAT returns are filed monthly or quarterly, depending on the business’s turnover.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. The GDT can impose a penalty of 2% per month on unpaid taxes, along with other fines for non-compliance.

Recent Developments

Improving Tax Administration:
The Cambodian government has introduced digital tax filing and payment systems to improve tax compliance and efficiency. These systems allow businesses to file tax returns and make payments online, streamlining the tax process and reducing administrative burdens.

Increasing Foreign Direct Investment (FDI):
Cambodia continues to focus on attracting foreign direct investment (FDI) by offering tax incentives through Qualified Investment Projects (QIPs) and Special Economic Zones (SEZs). The government has also been working on improving infrastructure and regulations to support foreign investors, especially in the manufacturing and export sectors.

Transfer Pricing and BEPS Compliance:
In line with global tax trends, Cambodia has strengthened its transfer pricing regulations, ensuring compliance with the OECD’s Base Erosion and Profit Shifting (BEPS) framework. These measures aim to combat tax avoidance and improve transparency for cross-border transactions.

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