1. DFDL - The New Frontier: Cambodia
Cambodia Taxation Presentation - CCC
Non Governmental Organizations and Associations
27 September 2017 
Phnom Penh, 18 May 2015

2. Cambodian Taxation of Legal Entities
Outline
Cambodian Taxation of Legal Entities
Special Tax Rules for CSOs
Then and Now
Going Forward – Next Steps for your CSO
Required Documents for Tax Registration and Exemption
Phnom Penh, 18 May 2015

3. Regime Change Simplified/Estimated/Real Regime
The tax revenue generated from the estimated tax regime taxpayers accounted for less than 1% of the total tax revenue collected by the GDT in the first nine months of 2015; 
Historically, 60% of all GDT tax officials were utilized in the collection of estimated tax regime tax revenue.
There are a number of taxpayers who were sheltering the estimated tax regime but who should have actually been in the real regime of taxation
The need to use tax officials more efficiently to collect the most amount of tax revenue

4. Tax Revenue
We are now in a age where the tax revenue collected by the GDT is greater than the value of aid received by Cambodia from International Donor Partners.
Increasing the tax base and by default tax revenue is now considered as high importance to the RGC as Cambodia transitions from "Least Developed Nation" status in 2025."
Ref: See RGC "Rectangular Strategy Phase Three" which has Cambodia as an "Upper-middle income" country by 2030.

5. One Regime to rule them all….
With the elimination of the estimated regime of taxation what will remain is only one tax regime – the real regime of taxation. Taxpayers in the real regime of taxation will be divided as follows:
Enterprises that have annual turnover from KHR250 million (USD62,500) to KHR700 million (USD175,000);
Small taxpayers
Enterprises that have annual turnover from KHR700 million (USD175,000) to KHR2,000 million (USD500,000) or that have been registered as a legal person;
Medium taxpayers
Enterprises that have annual turnover over KH2,000 million (USD500,000) or that have registered as a Qualified Investment Project (QIP)
Large taxpayers

6. Self Assessed Regime - Small Taxpayer
Small Taxpayer - taxpayers that are Sole Proprietorships or Partnerships that:
Have annual taxable turnover from Khmer Riel (“KHR”) 250 million (USD62.5k) to KHR700 million (USD175k);
Have taxable turnover, in any period of three consecutive calendar months (within this tax year), exceeding 60 million KHR (USD15k);
Expected taxable turnover of 60 million KHR (USD15k) or more in the next three consecutive months;
Participate in any bidding, quotation or survey for the supply of goods and services including duties.

7. Self-Assessed Regime - Medium Taxpayer
Medium Taxpayers include:
Organisation's that have annual turnover from KHR700 million (USD175k) to KHR2,000 million (USD500k);
Organisations that have been incorporated as legal entities*;
Sub-national government institutions, associations, and non- governmental organisations.
 *Note: registration under LANGO automatically creates an organisation as an legal enterprise.

8. Self Assessed Regime - Large Taxpayer
 Large Taxpayers include:
Organisations that have annual turnover over KH2,000 million (USD500k);
Branch of a foreign company;
Organisations registered as a Qualified Investment Project as approved by the Council for the Development of Cambodia;
Government Institutions, foreign diplomatic and consular missions, international organizations and agencies.

9. Obligations of the Tax Registration
Tax regulations:
Article 101 of the Law of Taxation
Prakas No. 496 MEF dated 06 April 2016 Obligation of Tax Registration

10. Obligations of the Tax Registration (Cont.)
Obligations of Tax Registration:
A person must register with the tax administration within 15 working days:
After beginning economic activity or
After receiving notification letter of registration or letter of allowance issued by related ministries or institutions.

11. Obligations of the Tax Registration (Cont.)
Definition:
Economic Activity is a defined term which is expressed as “the regular, continuous or occasionally activity of a person, whether or not for profit, in the supply or intent to supply, goods, or services to another person for the purpose of obtaining a benefit.”
Legal Person refers to any enterprise or organization carrying on a business whether or not officially recognized by the competent institutions of the Royal Government. The term “Legal Person” includes any government institution, religious organization, charitable organization, non-profit organization. For non-resident person, the term “Legal Person” means any permanent establishment in the Kingdom of Cambodia. The term “Legal Person” does not include a pass-through or sole-proprietorship.

12. Phnom Penh, 6 January 2015
The Tax on Income
20% Tax On Income (TOI) is Cambodia‘s tax on income. It is applied to:
a resident taxpayer’s income from Cambodian and foreign sources.
a non-resident taxpayer’s (such as a branch) income on Cambodian sources only.
TOI is generally calculated by applying the applicable tax rate on taxable income, which includes capital gains and passive income such as interest, royalties and rent.
The TOI return must be filed and the appropriate tax paid to the tax authority within 3 months after the end of the tax year (i.e. by 31st March of the following year).
Note that Donations and Grants are considered as revenue and should be subject to TOI or the Minimum Tax

13. The Minimum Tax & the Prepayment of Income Tax
Phnom Penh, 6 January 2015
The Minimum Tax & the Prepayment of Income Tax
1% Minimum Tax is applied to annual turnover
Every month, a taxpayer pays 1% of its monthly turnover as a prepayment on the annual tax liability
At the end of the year, the taxpayer pays either the 1% MT or the 20% TOI, whichever is higher.
Exemption of MT – Proper Accounting Records

14. Value Added Tax Imposed on the supply of goods or services
Phnom Penh, 6 January 2015
Value Added Tax
Imposed on the supply of goods or services
10% rate for domestic supplies, 0% for exports
Exemptions:
Donations not subject to VAT
VAT is not imposed if the supplied are “not-for-profit and in the public interest” that have been recognised by MEF.
Custom duty free from the import of foreign diplomatic and consular missions and international organizations– Subject to the approval issued by related ministries that foreign diplomatic and consular missions and international organization involves with.

15. VAT What is a non-taxable supply? No Output Cannot claim input credit
Different to zero-rated VAT
List of activities in the LOT and VAT S/D include:
Non-profit activities in the public interest that have been recognized by the Ministry of Economy and Finance

16. Withholding Taxes (WHT)
Phnom Penh, 6 January 2015
Withholding Taxes (WHT)
Real Regime Taxpayers required to apply WHT on payments to both resident and non-residents
Resident WHT:
15% on Services (if not supported by VAT Invoice)
15% on interest
15% on royalties
10% on rent

17. Tax on Profit Repatriation
Phnom Penh, 6 January 2015
Tax on Profit Repatriation
Based on the Law on Financial management for the year 2017, distribution of profits (surplus) or revenue to non-residents (whether individuals or corporates) subject to the 14% withholding taxes on the income stipulated in article 33 of the Law on Taxation:
Interest
Dividends
Income from services performed in Cambodia
Compensation for management and technical fees
Rental and other incomes connected to use of movable and immovable property
Royalties

18. Tax on Profit Repatriation (Cont.)
Phnom Penh, 6 January 2015
Tax on Profit Repatriation (Cont.)
(Cont.) Distribution of profits (surplus) or revenue to non-residents (whether individuals or corporates) subject to the 14% withholding taxes on the income stipulated in article 33 of the Law on Taxation:
Gain from the sale of movable property which is part of the business property of a permanent establishment maintained by a non-resident
Income from business activities carried on by a non-resident through a permanent establishment in Cambodia.
This withholding tax shall not apply to reinsurance premium on property or other risks in the Kingdom of Cambodia.
Capital gains tax on non-residents: None
Cambodia has entered into DTA with Singapore/China/Brunei/Thailand

19. DTA – Withholding Taxes
Before
DTA
Royalties
14%
10%
Dividends
Interest
Technical Fees

20. Tax on Salary – New Rates in 2017
Changes in Tax on Salary Rates
Old Salary Bands up to 2016
New Salary Bands 2017*
Progressive Tax Rate
Khmer Riel (KHR)
Equivalent to USD*
From 0 to 800,000
0 to 200
From 0 to 1,000,000
0 to 250 0%
From 800,001
to 1,250,000
200 to 313
From 1,000,001
to 1,500,000
250 to 375 5%
From 1,250,001
to 8,500,000
313 to 2,125
From 1,500,001
375 to 2,125
10%
From 8,500,001
to 12,500,000
2,125 to 3,125
15%
Over 12,500,001
Over 3,125
20% !

21. Childcare Rebate Criteria Each minor dependent child
75,000 KHR (USD18.75) per dependent
Before
150,000 KHR (USD37.5) per dependent
NOW
Criteria
Each minor dependent child
An employee’s spouse whose only occupation is as a homemaker (i.e. they do not work outside the home)
In order to claim a deduction for a child, the child must be under 14, or under 25 and a full-time student at an accredited institution.
Each child may be used as a deduction once only. So if both parents work, only one of them may claim the deduction for the child.

22. Example: TOS Calculation
TOS Calculation for Resident
Ms. B, a resident of Cambodia, receives a monthly salary of USD 2,500 (equal to KHR 10,000,000*). She has 3 dependent children and her husband is working.
Her salary tax will be calculated as follows:
Rebate= KHR 150,000 x 3 = KHR 450,000
Taxable Salary = KHR 10,000,000 – KHR 450,000= KHR 9,550,000  TOS rate is 15%
Monthly salary = KHR 9,550,000 so subject to 15% TOS
So, the calculation will be:
TOS= (9,550,000 x 15%) - KHR 550,000 = KHR 882,500 (~USD )
*Assuming 1 USD= 4,000 KHR

23. Example – TOS Calculation
Or TOS Detailed calculation: Rebate = KHR 150,000 x 3= KHR 450,000 Taxable Salary = KHR 10,000,000- KHR 450,000= KHR 9,550,000 [(9,550, ,500,000) x 0.15] + [(8,500, ,500,000) x 0.10] [(1,500,000 – 1,000,000) x 0.05] = KHR 882,500 (~US$220.62)

24. Example: TOS Calculation
TOS Calculation for Non- Resident
Mr. A is a Canadian and is working a temporary contract in Cambodia for 5 months. He receives a monthly salary of USD 2,500 (equal to KHR 10,000,000*) and Mr. A has 2 children.
His salary tax will be calculated on the 20% straightforward as follows:
TOS= (10,000,000 x 20%) = KHR 2,000,000 (~USD 500)

25. Tax on Fringe Benefit: Circular 011
Transportation allowances covering travel from an employee’s resident to their workplace and from their workplace back to their residence. Also accommodation or housing provided within the workplace in accordance with the Labor Law.
Meal allowances provided to all employees and workers regardless of their position or function.
National Social Security Funds or social well-being funds within the limit as provided in the Law.
Health insurance or life insurance premiums which are provided to all workers and employees regardless of their positions or functions.
Infant allowance or expenses on infant day-care center as stipulated in the Labor Law.
Severance pay for employment termination or indemnity for layoff within the limit as provided in the Labor Law

26. Tax on Fringe Benefit– 011 additional points (Cont.)
Circular 002 referred to “factory” employees and workers whereas the new Circular 011 refers to employees and workers of “all factories and enterprises”. The benefits as underlined in Circular 011 will potentially apply to a much larger range of taxpayer than originally anticipated under Circular 002. Note: We should be aware that this circular should not apply to the foreign staff – based on a ruling letter issued in 2015 to the Garment Manufacturers Association of Cambodia stated that the FBT exemptions applied only to Cambodian staff. Documentary Requirements The new Circular contains a requirement for employers wanting to obtain the exemption from tax on salary or from fringe benefit tax to submit documents relating to the allowances to the GDT for each period.

27. Tax Filings Monthly Tax Filings (20th of each month)
Phnom Penh, 6 January 2015
Tax Filings
Monthly Tax Filings (20th of each month)
Prepayment of Profits Tax
Withholding Tax (both domestic and foreign withholding)
Tax on Salary and Tax on Fringe Benefits
Other Taxes such as the Specific Tax (Excise Tax), Accommodation Tax (for Hotels and similar operations), Public Lighting Tax (on alcoholic beverages and tobacco)
VAT
Annual Tax Filings (31st of the following year)
Tax on Profit or Minimum Tax
Patent Tax

28. Cambodian Taxation of Legal Entities
Outline
Cambodian Taxation of Legal Entities
Special Tax Rules for CSOs
Then and Now
Going Forward – Next Steps for your CSO
Required Documents for Tax Registration and Exemption
Phnom Penh, 18 May 2015

29. Special Tax Rules for CSOs – Profit Tax and VAT
Phnom Penh, 6 January 2015
Special Tax Rules for CSOs – Profit Tax and VAT
An organization operated exclusively for religious, charitable, scientific, literary, or educational purposes can be exempt from Tax on Income/ Minimum Tax and VAT if:
no part of the income or property is used for private interest; and
it receives recognition of tax-exempt status from the Ministry of Economy and Finance
The exemption only applies to income or the provision of services which are substantially related to the purpose or function which was declared to MEF in order to obtain the exemption.

30. Special Tax Rules for International Organization– TOS Exemption
Phnom Penh, 6 January 2015
Special Tax Rules for International Organization– TOS Exemption
The term International Organization (“IO”) refers to the inter- Governmental Organization (at least two governments).
Foreign representatives, officials and employees employed by IOs may be exempt from Tax on Salary or on Fringe Benefits if such exemption is in their MOU with the Royal Government and the MOFA. (Article 43 of the LOT)
The exemption is subject to obtain the approval for the MEF.

31. Cambodian Taxation of Legal Entities
Outline
Cambodian Taxation of Legal Entities
Special Tax Rules for CSOs
Then and Now
Going Forward – Next Steps for your CSO
Documents requirement for tax registration and Exemption
Phnom Penh, 18 May 2015

32. Then & Now Registration Non-registration was tolerated
Phnom Penh, 6 January 2015
Then & Now
ISSUE
THEN
NOW
Registration
Non-registration was tolerated
GDT specifically requires ALL ORGANIZATIONS to register
Tax Liabilities
Overlooked for CSOs
At the very least, CSOs must show that they are complying with WHT and TOS/TOFB rules
Expat TOS/TOFB
Required by GDT: Audit risk present
Exemption Certificates
Not Issued
GDT now processes requests for certificates on TOI and VAT exemptions – preparation for future TOP & VAT audits?

33. Phnom Penh, 6 January 2015
Then & Now (cont.)
Failure to file and pay taxes by the deadline required by the Law on Taxation exposes CSOs (any organisation) to the penalties for late submission and payment as follows.
Penalty for late payment ranging from 10% to 40% plus interest at the rate of 2% per month of the underpaid taxes, and/or
Penalty for late lodgment of the tax returns of KHR 2,000,000 (approx. US$500) per case.

34. Penalties
If the tax officer determines that the taxpayer has underpaid taxes, the level of violation is determined by the percentage of underpayment.
A taxpayer is deemed negligent if:
The amount of underpayment of tax is less than 10% of tax liabilities.
The taxpayer files the tax declaration after the due date
The taxpayer pays the tax after the due date
A taxpayer is deemed to be seriously negligent if the amount of underpayment of tax is more than 10% of tax liabilities.

35. Penalties
 The penalty on the underpayment of tax varies with the level of violation:
10% for negligence
25% for serious negligence
40% if it is a unilateral tax assessment
In addition to the penalty on the underpayment of tax, interest is charged at 2% per month of the underpaid amount.

36. Obstruction to implementation of the tax laws - KHR 2,000,000 (Approx
Obstruction to implementation of the tax laws - KHR 2,000,000 (Approx. USD 500)
Fails to maintain proper records of account and other documentation or fails to issue invoices on transactions; or
Fails to allow the tax administration access to records of account and other documents; or
Fails to register with the tax administration; or
Fails to notify the tax administration of any change in the registration as stated in the law; Makes or furnishes fraudulent records, documents, reports or other information; or
Conceals or deliberately destroys accounting papers, records, documents, reports or other information; or
Attempts to obstruct the assessment or the collection of taxes; or Fails to submit a nil tax declaration within 30 days of the date required by law

37. Time Bar – Tax Audits The GDT can conduct a Tax Audit:
Within three years after the date the tax declaration was submitted
Within 10 years after the date the tax declaration was required to be submitted if there is evidence of the obstruction of the implementation of tax provisions
At any time with the written consent of the taxpayer

38. Types of Tax Audits
In Cambodia, there are three main kinds of tax audits: 
Desk
Limited
Comprehensive
Points of note:
Combined Audit
VAT audit
Requesting a tax audit

39. Cambodian Taxation of Legal Entities
Outline
Cambodian Taxation of Legal Entities
Special Tax Rules for CSOs
Then and Now
Going Forward – Next Steps for your CSO
Required Documents for Tax Registration and Exemption
Phnom Penh, 18 May 2015

40. Next Steps Register for Tax.
Phnom Penh, 6 January 2015
Next Steps
Register for Tax.
Evaluate Exposure – especially for WHT, TOS & TOFB for both locals and expatriates
Obtain Tax Exemption Certificates for TOI and VAT
Make sure that all filings are current

41. Cambodian Taxation of Legal Entities
Outline
Cambodian Taxation of Legal Entities
Special Tax Rules for CSOs
Then and Now
Going Forward – Next Steps for your CSO
Required Documents for Tax Registration and Exemption
Phnom Penh, 18 May 2015

42. Phnom Penh, 6 January 2015
Register for Tax
Required documents and information for tax registration of the NGO
Registration documents from ministries or institutions:
Application form 101 for tax registration;
Authorization or registration certificates issued by the relevant ministries–institutions and/or;
Memorandum of understanding with the competent ministries– institutions and/or;
Bank account information such as bank confirmation, bank statement, or passbook issued by the Cambodian bank (for business associations or organizations only).
Location documents
Location ownership certificate or business location lease agreement;
Payment receipt for tax on property or property information (if any)

43. Register for Tax (Cont.)
Phnom Penh, 6 January 2015
Register for Tax (Cont.)
Required documents and information for tax registration of the NGO:
Identification documents of director or representative:
Valid identification card or passport;
Two current 35mm x 45mm photos taken within [the previous] three months. The photographs must (i) include the subject’s waist up; (ii) be in colour; and (iii) show both ears. The subject must not wear glasses.
The Director is required to write his/her name, sign and identify his/her position at the back of each photo of his/her photographs with the signature of the chairman/director who discloses his/her name on the tax registration documents.
Residency letter of the chairman/director who discloses his/her name on tax registration documents.
The official fee for tax registration for local and foreign NGO is KHR 400,000 (Approx. USD 100). But, the international organization does not required to pay this fee.

44. Required documents for tax exemption
Phnom Penh, 6 January 2015
Required documents for tax exemption
Based on the Prakas TOP, The application letter for tax exemption must be accompanied by the following documents:
Goals and objectives of the organization;
Names and addresses of resident persons, if any, who are the members of the board of directors of the organization;
Names and addresses of director or directors responsible for the operation of the organization in the Kingdom of Cambodia;
Source and use of all funds granted for the operation of the organization inside the Kingdom of Cambodia;
List of assets held in the Kingdom of Cambodia
Chart of accounts of the organization.
MOU with relevant ministries or governments, if any.

45. Thank you Clint O’Connell Borapyn Py
Director, Head of Cambodia Tax Practice Group
Borapyn Py
Tax Country Associate Director