Corporate tax in Cambodia

Summary

Tax on Profit Rate (%) 20
Capital Gains Tax Rate (%) 20
Withholding Tax (%) (a)
Dividends 14
Interest 14
Royalties 14
Net Operating Losses (Years)
Carryback 0
Carryforward 5 (b)

a) The listed withholding tax rates apply to payments to nonresident taxpayers. For a listing of withholding taxes applicable to payments to resident taxpayers and further details regarding withholding taxes applicable to nonresident taxpayers, see Section B.

b) See Section C.

Taxes on corporate income and gains

Tax on profit. Tax on Profit (ToP) is calculated on taxable income inclusive of capital gains and passive income, such as interest, royalties and rent.

The ToP is imposed on the worldwide income of resident taxpay­ers. It is imposed on the Cambodian-source income of nonresi­dent taxpayers. For companies, resident taxpayers are enterprises organiz ed, managed or having a principal place of business in Cambodia. A company that is not a resident taxpayer and that receives income from a Cambodian source is considered to be a nonresident taxpayer.

ToP rates. The standard rate of ToP for legal persons is 20%.

A tax rate of 30% applies to income derived from oil or natural gas production sharing contracts and from the exploitation of natu­ral resources including timber, ore, gold and precious stones.

A tax rate of 5% is imposed on the gross premium income of insurance companies engaged in the providing of insurance or reinsurance for life, property or other risks.

Minimum tax. Minimum tax is a separate annual tax imposed at a rate of 1% of annual turnover inclusive of all taxes, except value-added tax (VAT). If the ToP liability exceeds the amount of the minimum tax, the taxpayer is not liable for the minimum tax.

Additional Profit Tax on Dividend Distribution. Additional Profit Tax on Dividend Distribution (APTDD) is imposed on the distri­bution of retained earnings to local and overseas shareholders. APTDD is payable by the distributing company. The APTDD rate varies according to the rate of ToP that was imposed on the retained earnings. The following are the rates of APTDD.

Rate of ToP (%) Amount of APTDD
0 Dividend x 20/100
20 0
30 0

Investment incentives. A Qualified Investment Project (QIP) registered and approved by the Council for the Development of Cambodia is entitled to the incentives described below.

An exemption from minimum tax and an exemption from the ToP apply for a period that consists of the Trigger Period plus three years plus the Priority Period. The maximum Trigger Period is the first year of profit or the third year after the QIP earns its first revenue, whichever is earlier. The Priority Period, which is speci­fied in the Finance Law and varies by project, may have a dura­tion of up to three years.

QIPs are also eligible for import duty exemption with respect to the importation of production equipment, construction materials, raw materials, intermediate goods and accessories that serve production.

Capital gains. All realized gains (including capital gains) are con­sidered to be income. Tax on capital gains is not separately im posed in Cambodia. Capital gains derived from the disposal of fixed assets are treated as ordinary income and generally taxed at the standard ToP rate of 20%.

Administration. Resident taxpayers must file annual ToP or mini­mum tax returns within three months after the end of the tax year.

Resident taxpayers must make monthly prepayments of ToP, which are each equal to 1% of monthly turnover inclusive of all taxes, except VAT. The prepayments must be made by the 15th day of the month following the month in which the tax liability arose. The tax payment can be used to offset the annual ToP or mini­mum tax liability. Prepayments of ToP are not required during the period of exemption from the ToP.

Dividends. Dividends paid to nonresident taxpayers are subject to withhold ing tax at a rate of 14%.

Withholding taxes

Payments to resident taxpayers. Resident taxpayers carrying on business in Cambodia must withhold tax from payments made to other resident taxpayers at the following rates.

Payment Rate (%)
Interest paid to recipients other than
domestic banks and saving institutions
15
Interest paid on non-fixed term
saving accounts by domestic banks
or saving institutions
4
Interest paid on fixed-term saving accounts
by domestic banks or saving institutions
6
Royalties 15
Rent paid for movable and immovable property 10
Payments to individuals for services, including management, consulting and similar services 15

Payments to nonresident taxpayers. Resident taxpayers must with­hold tax at a rate of 14% on the following payments to nonresi­dent taxpayers:

  • Interest
  • Dividends
  • Royalties, rent and other income connected with the use of property
  • Compensation for management or technical services (not defined)

Deemed interest. Interest expense is not deemed by the tax authorities with respect to loans recorded in the enterprise’s bal­ance sheet for withholding tax purposes, regardless of whether a record of interest expense appears in the income statement of the enterprise.

In general, the above withholding taxes are considered to be final taxes. However, the withholding tax on rent paid to registered res­ident taxpayers may be offset against the ToP liability.

If withholding tax is not withheld from the recipient, it is borne by the payer. Accordingly, the withholding tax is not deductible for purposes of the ToP.

Withholding tax returns and payments. Resident taxpayers must submit withholding tax returns and remit withholding taxes to the tax authorities by the 15th day of the following month.

Foreign tax relief. Cambodia allows a credit against the ToP for foreign taxes paid on foreign-source income if supporting docu­mentation exists.

Determination of trading income

General. Taxable profit equals the difference between total in come and allowed expenses that are incurred to carry on the business.

Allowable deductions include most expenses incurred in the course of carrying on a business enterprise with certain limitations. These limitations include the following:

  • The deduction of charitable contributions to specified organiza­tions is limited to 5% of taxable profit before deducting the amount of the charitable contributions.
  • Depreciation is allowed as a deduction in accordance with rates and methods set forth in the tax regulations.
  • Deductions for interest are limited to interest income plus 50% of taxable profit excluding interest income and expenses. The disallowed interest may be carried forward to subsequent years and deducted subject to the same limitations (also, see Special rules for loans).

Nondeductible expenses include the following:

  • Expenses incurred on activities generally considered to be amusement, recreation, entertainment or on the use of any means with respect to such activities
  • Losses on direct or indirect sales or exchanges of property between related parties
  • Penalties, additional tax and late payment interest imposed for violation of the tax regulations
  • Donations, grants or subsidies made to other than specified organizations

Special rules for loans. Loans that are interest-free or that have below-market interest rates are allowed. In assessing the taxable income of an enterprise, the tax authorities do not deem a subsidy with respect to a loan without interest or with interest below the market rate.

For above-market-interest loans, limitations are imposed on de­ductible interest expenses claimed by Cambodian taxpayers. The following are the applicable rules:

  • For third-party loans, the interest rate may not exceed 120% of the market rate at the time of borrowing.
  • For related-party loans, the interest rate may not exceed the market interest rate at the time of borrowing.

For purposes of the above rules, the market interest rate is the annual market interest rate issued by the General Department of Taxation (GDT), which is based on the average interest rate of at least five major commercial banks. On 5 February 2015, the GDT determined that the market interest rate for loans for the 2014 tax year was 10.15% per year. In addition, on 26 February 2015, the GDT determined that the market interest rate for loans denominated in riel for the 2014 tax year was 13.52% per year. Interest expense that is higher than the above is adjusted and the excess amount is excluded from the deductible interest expense for tax purposes.

In addition, the annual deductible interest expense is capped at the sum of 50% of the taxpayer’s non-interest income and 100% of its interest income for a tax year.

An enterprise is required to notify the GDT no later than 30 days after a loan transaction occurs, and all loan agreements or docu­mentation certifying the loan transaction must be attached to the notification. If the enterprise fails to notify the GDT about a loan transaction or no proper documentation is provided, the loan is considered a loan without supporting documents, and the loan proceeds are included in taxable income subject to the 20% ToP.

Provisions. Provisions for losses or expenses that have not oc­curred are not allowed for tax purposes even if the incurrence of such losses or expenses is probable. However, domestic banks or savings institutions may establish provisions for bad debts.

Tax depreciation and amortization. The tax regulations divide fixed assets into four classes for purposes of depreciation and specify the depreciation methods and rates for the classes. The following are the classes.

Classes Assets Method Rate (%)
1 Building and structures Straight-line 5
2 Computers, electronic information systems, software and data handling equipment Declining-balance 50
3 Automobiles, trucks, and office furniture and equipment Declining-balance 25
4 Other tangible property Declining-balance 20

A QIP (see Section B) may apply a special depreciation rate of 40% in the year of purchase or in the first year the tangible assets are placed into operation, if later. If the enterprise elects to use the exemption period for the ToP, the special depreciation rate does not apply.

Intangible assets with a limited useful life, such as patents, copy­rights, drawings, models, and franchises, can be amortized over their useful life on a straight-line basis. If the life of intangible assets cannot be determined, the assets are amortized using the straight-line method at a rate of 10%.

Relief for losses. Losses can be carried forward to offset future taxable profit for the following five years. The carryback of losses is not allowed.

The carryforward of losses is subject to restrictions including con­tinuity of ownership and conducting the same business activities.

Groups of companies. Cambodia does not allow consolidated tax filing or provide other group tax relief.

Other significant taxes

Value-added tax. Resident taxpayers providing taxable supplies must register for value-added tax (VAT). Taxable supplies include supplies of goods or services by taxable persons in Cambodia.

The standard rate of VAT is 10%. A 0% rate of VAT applies to exports of goods and services including international transporta­tion of passengers and goods and services with respect to such transportation. It also applies to enterprises in supporting indus­tries and subcontractors that supply certain goods and services to exporters.

The tax law specifies certain non-taxable supplies.

A resident taxpayer must complete the registration for VAT with­in 30 days after the date on which it becomes a taxable person. The filing of the VAT returns and payment of VAT must be made by the 20th day of the following month.

Other taxes. Cambodia imposed various other taxes, including the following:

  • Specific Tax on Certain Merchandises and Service
  • Tax for Public Lighting
  • Accommodation Tax
  • Patent Tax
  • Registration Tax (property transfer tax)
  • Fiscal Stamp Tax
  • Tax on Immovable Property
  • Tax on Unused Land
  • Tax on Means of Transportation

Foreign-exchange controls

The Cambodian currency is the Khmer riel (KHR).

Cambodia does not impose any restrictions on the purchase of foreign currencies through authorized financial institutions.

Tax treaties

Cambodia has not entered into any double tax treaties.