Presentation given on Cambodian Tax at the Eurocham Cambodia "Tax Talk" Seminar

1. SIEM REAP
TAX TALK
December 14th, 2016
Anthony Galliano
Chairman, EuroCham Tax Committee
CEO, Cambodia Investment Management

2. TAX TALK SIEM REAP
TOPICS COVERED IN PRESENTATION
- The three steps to Company Incorporation
- What are the basic taxes for an Enterprise in Cambodia
- Recent changes in tax regulations materially impacting
taxpayers 2015/2016
- Law of Financial Management 2017, material new changes
for next year
- Initiatives from Eurocham Cambodia

3. TAX TALK SIEM REAP
ABOUT THE SPEAKER –ANTHONY GALLIANO
- CEO OF CAMBODIAN INVESTMENT MANAGEMENT, CHAIRMAN OF
PHNOM PENH BG SERVICES OFFICES, PREMIUM HUMAN RESOUCRES,
CAMBODIAN INVESTMENT MANAGEMENT INSURANCE AGENT,
DYNAMO DIGITAL AND JUMP DIGITAL
- CORPORATE AND INVESTMENT BANKER FOR 27 YEARS WITH CITIBANK
AND ANZ (N.Y., U.K., BELGIUM, H.K., THAILAND, INDONESIA,
CAMBODIA)
- DEGREE IN ACCOUNTING, DIPLOMA IN CAMBODIAN TAX, PASSED
NASD LICENSES FOR GENERAL SECURITIES REPRESENTATIVE, GENERAL
SECURITIES PRINCIPAL, UNIFORM STATE LAW, and REGISTERED
INVESTMENT ADVISER.

4. TAX TALK SIEM REAP
The three steps to Company Incorporation
- Ministry of Commerce
- General Department of Taxation
- Ministry of Labor and Vocation Training

5. TAX TALK SIEM REAP
Ministry of Commerce
Main Documents:
- Certificate of Incorporation
- Business License
- Articles of Association
Important Inputs:
- Company Name, Shareholder (%), Type of Co. (Limited Liability, Branch,
Subsidiary), Directors, Chairman/Country Representative. Passport copies
(signed) by each shareholder and Director as well as address, telephone
number, email, and photos
- Business Activity, Registered Address (Commercial Lease), Capital

6. TAX TALK SIEM REAP
General Department of Taxation
Main Documents:
- Tax Patent and VAT Certificate
- Tax Id Card
- Instruction to File
Important Inputs:
- MOC Documents, Bank Confirmation Letter, Residency Letter for Country
Representative/Chairman, Photos, same subsidiary docs for MOC and info
- Property Tax Receipt of Commercial Residence
- Take a picture at GDT and fingerprint for Country Rep Chairman
- Docs delivered to business address and picture of office may be taken

7. TAX TALK SIEM REAP
Basic Taxes in for Enterprise in Cambodia
- Withholding Tax
- Tax on Salary and Fringe Benefits
- Prepayment of Profit Tax (Minimum Tax)
- Value Added Tax
- Public Lighting and Accomodation Tax

8. TAX TALK SIEM REAP
Withholding Tax
Withholding tax (“WHT”) regulations require a self-assessed
taxpayer to withhold certain amounts from payments made
to resident and nonresident taxpayers.
The liability for WHT rests with the remitter or payer. The
tax authorities has no recourse to recover WHT from the
recipient of the payment.

9. TAX TALK SIEM REAP
Withholding Tax (Continued)
Payments, being subject to WHT, can either be made to
resident or non-resident taxpayers but the rates are
different.
Payments to a resident taxpayer with applicable WHT rate
of 15%
–For services to a physical person, including management,
consulting and other similar services.

10. TAX TALK SIEM REAP
Withholding Tax (Continued)
Payments to a resident taxpayer with applicable WHT
rateof10%:
-Income from rental of movable or immovable properties

11. TAX TALK SIEM REAP
Withholding Tax (Continued)
WHT is payable in either the month the payment is made, or the
month the expense is recorded in the books, whichever arrives first.
The amounts withheld are remitted to the tax authorities by the 15th
of the following month along with other monthly tax returns such as
prepayment of profit tax and tax on salary.

12. TAX TALK SIEM REAP
Withholding Tax (Continued)
Payments to a non-resident taxpayer with applicate WHT
rate of 14%
i.Interest
ii.Royalties, rent and other payments connected with use of
property
iii.Compensation for management or technicalservices
iv.Dividends

13. TAX TALK SIEM REAP
Tax on Salary
The tax on salary is a monthly tax imposed on salary that has been received within the framework of
fulfilling employment activities. A physical person resident in the Kingdom of Cambodia is liable to the
tax on salary for Cambodian source salary and foreign source salary
MONTHLY SALARY RIEL RATE
0 - 800,000 0%
800,001 - 1,250,000 5%
1,250,001 - 8,500,000 10%
8,500,001 - 12,500,000 15%
12,500,000 upwards 20%
For fringe benefits, every month, the employer shall withhold and pay tax at the rate of 20%
of the total value of fringe benefits given to all employees. The value of fringe benefits is the
fair market value inclusive of all taxes.

14. TAX TALK SIEM REAP
Pre-payment of Profit Tax
An enterprise liable to the tax on profit according to the real regime
sytem of taxation including a qualified investment project liable to the
tax on profit at the rate of 9 percent, has the obligation to pay a
monthly prepayment of tax on profit at the rate of 1 percent of
turnover inclusive of all taxes, except Value Added Tax, realized in the
previous month. The prepayment will be deducted from the tax on
profit at the annual liquidation of the tax.
If the Enterprise has an annual loss the prepayment
becomes a minimum tax.

15. TAX TALK SIEM REAP
VAT
Taxpayers who are making taxable supplies are obliged to register for
VAT, and collect VAT from the supplying of goods or services.
Taxable supply
- The term taxable supply means: The supply of goods or services by a
taxable person in the Kingdom of Cambodia.
- The appropriation of goods for his own use by a taxable person;
- The making of gift or supply at below cost of goods or services by a
taxable person;
The import of goods into the customs territory of the Kingdom of
Cambodia.

16. TAX TALK SIEM REAP
VAT (Continued)
Non-taxable supplies are as follows:
- Public postal service;
- Hospital, clinic, medical, and dental services and the sale of medical
and dental goods incidental to the performance of such services;
- The service of transport of passengers by wholly state owned public
transportation system;
- Insurance services;
- Primary financial services;
- The imports of articles for personal use that are exempted from
customs duties;

17. TAX TALK SIEM REAP
VAT (Continued)
Rates of tax
The rates of VAT are as follows:
0% This rate applies only to goods exported from the Kingdom of
Cambodia and services consumed outside Cambodia. Exports are
defined as including international transportation of passengers and
goods.
10% This standard rate applies to all supplies other than exports and
non-taxable supplies.

18. TAX TALK SIEM REAP
VAT (Continued)
Calculation of tax due
The VAT paid on import of goods or the VAT on locally purchase of
goods or services for the business is called “Input Tax”.
The VAT charged on supplying of goods or services to customers is
called “Output Tax”.
VAT due = Output Tax – Input Tax.

19. TAX TALK SIEM REAP
VAT (Continued)
Non-deductible input tax are the VAT paid on:
Entertainment, amusement and recreation expense unless the taxable
person carries on a business as a provider of entertainment, amusement or
recreation;
Purchases or imports of automobiles, unless the taxable person carries on
the business of dealing in, or hiring such automobiles; or
Purchases or imports of certain petroleum products, unless the taxable
person carries on the business as a supplier of such petroleum products.

20. TAX TALK SIEM REAP
Public Lighting and Accommodation Tax
The Public Lighting Tax is an indirect tax with the rate of 3% to be
imposed on all alcoholic drinks and cigarettes. The person who
supplies these products is responsible for the payment of this tax.
The Accommodation Tax is an indirect tax with the rate of 2% to be
imposed on accommodation in hotels and guest houses. The person
who supplies accommodation services is responsible for the payment
of this tax

21. TAX TALK SIEM REAP
A CHANGING ENVIRONMENT FOR TAXPAYERS
- Increased Regulation
- Procedural Changes
- More skilled and professional tax department
- Stricter enforcement and heightened supervision
- Expanding Tax Base

22. TAX TALK SIEM REAP
Recent Changes
2016 Law on Financial Management (LoFM)
(Promulgated on 17 December 2015) Prakas on
classification of taxpayers under Real Regime System
(Prakas no. 1819. MEF.Prk dated 25 December 2015)
Prakas on procedure for the management of patent tax
collection and Instruction on the declaration and
payment of the 2016 patent tax
(Prakas no. 1821.MEF.Prk dated 25 December 2015 and
notification no. 032.GDT dated 4 January 2016)

23. TAX TALK SIEM REAP
Recent Changes
WHAT WAS THE IMPACT
- Abolished the Simplified and Estimated regimes in
Cambodia, only the Real Regime remained
- Significantly expanded the Tax Base
- Eliminated the competitive advantage of
Estimated Regime Taxpayers
- Increased efficiency in the GDT/Tax Branches

24. TAX TALK SIEM REAP
Recent Changes
WHAT ARE THE MAIN POINTS
Categorization of Taxpayers by Size
- Small
- Medium
- Large

25. TAX TALK SIEM REAP
Recent Changes
Small taxpayers 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.

26. TAX TALK SIEM REAP
Recent Changes
Medium taxpayers include:
Enterprises that have annual turnover from KHR700
million (USD175k) to KHR2,000 million (USD500k);
A Registered legal entity with competent institution;
Sub-national government institutions, associations,
and non-governmental organizations.

27. TAX TALK SIEM REAP
Recent Changes
Large taxpayers include:
Enterprises that have annual turnover over KH2,000 million
(USD500k);
Branch of a foreign companies;
A Qualified Investment Project (“QIP”) as approved by the
Council for the Development of Cambodia;
Government Institutions, diplomatic missions and foreign
consulates, international organizations and other
Government Technical Cooperation Agency

28. TAX TALK SIEM REAP
Recent Changes
Type of Taxpayer
2016 Patent Tax Fee
Khmer Riel (KHR)
2016 Patent Tax Fe
United States Dollars (US)
Small Taxpayer KHR400,000 USD100
Medium Taxpayer KHR1,200,000 USD300
Large Taxpayer
KHR3,000,000
KHR5,000,000
USD750 or
USD1,250 (over 2,5m rev)

29. TAX TALK SIEM REAP
Recent Changes
Additional Patent Tax shall be paid:
- If an enterprise carries out different types of
businesses, a separate patent tax certificate is
required for each activity.
- If the enterprise carries out any branch,
warehouse or business in different cities or
provinces, a separate patent tax certificate for
each location is required.

30. TAX TALK SIEM REAP
Recent Changes
- Large Taxpayers are required to pay KHR3,000,000 (~USD750)
for each additional patent tax certificate, if the enterprise
carries out any branch, warehouse or business in different cities
or provinces.
- Taxpayers are obliged to display their valid patent tax
certificates on their business premises.
- Taxpayers who commence business within the first 6 months of
the year shall pay patent tax in full while those that commence
business in the last 6 months of the year shall pay half the
patent tax fee.

31. TAX TALK SIEM REAP
Recent Changes
Prakas no. 1820. MEF.Prk dated 25 December 2015
- Rules and procedures for the implementation of
the simplified accounting for small taxpayers.
- The objective of this Prakas is stated to provide
guidance on simplified accounting requirement in
order to facilitate the small and family businesses
operations.

32. TAX TALK SIEM REAP
Recent Changes
Small taxpayer is required to maintain only 3 simplified
accounting books:
- Purchase Day Book is to record daily purchases
- Sales Day Book is to record transactions on the
supply of goods or services.
- Inventory Book is to record the beginning stock,
purchase during the year, and ending stock for
enterprises who making supply of goods.

33. TAX TALK SIEM REAP
Recent Changes
SPECIAL INCENTIVES FOR SMALL TAXPAYERS
- 2% VAT payment rather than 10%
- Withholding Tax only on Rent
- Progressive Tax Tranches for Tax on Profit

34. TAX TALK SIEM REAP
Recent Changes
Instruction No. 1127 issued by the General Department of
Taxation (“GDT”) dated 26th of January 2016
- Instruction on invoicing requirements (including invoice
criteria) for self-declaration taxpayers (i.e. real regime).
- In addition to the existing criteria of a tax invoice as
stated in the Value Added Tax (VAT) regulations,
taxpayers are now required to use good quality ink and
paper for printing invoices to ensure that they can be
maintained in good condition for 10 years.

35. TAX TALK SIEM REAP
Recent Changes
- 4 invoice templates have been provided by the GDT, can be
modified as long as the invoice contains the criteria
- Buyers also have to sign on the invoices, however Customers
do not need to return signed invoices to the Supplier.
- Invoice must be issued either in the Khmer language or two
languages (i.e. Khmer with English language underneath).
- Any tax invoices not issued in accordance with the existing
and new criteria above won’t be accepted as valid invoices
to claim input VAT credit, nor to support the deductibility of
expenses

36. TAX TALK SIEM REAP
Recent Changes
VAT invoice requirements as set out in the Law on Taxation
- Name, address, and value-added tax identification number (VATTIN) of the
seller or supplier
- Clear invoice number in a chronological order and date of issuance of the
invoice. Invoice sequencing restarts at beginning of tax year.
- Name and address of the purchaser and value-added tax identification
number
- Description, quantity, and selling price of the goods or services
- Total prices excluding tax and separate tax amount

37. TAX TALK SIEM REAP
Recent Changes
Prakas on Tax Registration No. 496 MEF.P. (Prakas
496), April 6th, 2016.
Any company’s chairperson/owner of foreign
nationality who resides outside of Cambodia and is
unable to be physically present for their photo taken
and finger prints scanned can issue a written
authorization to a board representative to act on
their behalf by having their picture taken and fingers
scanned

38. TAX TALK SIEM REAP
Recent Changes
Circular No. 011 dated 06 October, 2016 from The Ministry of
Economy and Finance on “The Implementation of
Withholding Tax on Fringe Benefits” which supersedes
Circular 002 MEF, dated 20 January, 2015, on the obligations
of Withholding Taxes and Tax on Fringe Benefits.
The Circular details employee allowances and benefits,
whether in cash or in-kind, that are provided to all employees
and workers within the framework of fulfilling employment
activities, that shall be exempt of Tax on Salary (ToS) and Tax
on Fringe Benefit (ToFB).

39. TAX TALK SIEM REAP
Recent Changes
The exempt employee allowances and benefits are:
- Transportation allowance
- A housing allowance, or the provision of housing facilities inside the
factory or enterprise area, as provided for within the Labor Law
- Meals or meal allowance, if provided to all employees
- National Social Security Fund or Social Welfare Fund contribution within
the limit as stated in the law
- Health or life insurance premium if provided for all employees and
workers regardless of their duties and positions.
- Infant allowance or child-care center (nursery) expenses as specified in
the Labor Law.

40. TAX TALK SIEM REAP
Law of Financial Management 2017
Amendment of Article 24 of the Law on Taxation regarding the
imposition of the 1% Minimum Tax. In brief, for those
taxpayers who qualify – the 1% monthly Pre-payment of Tax on
Profit and Annual Minimum Tax obligations will no longer
apply.
The obligation to pay Minimum Tax shall be imposed on any
enterprise which does not keep a proper record of accounts.

41. TAX TALK SIEM REAP
Law of Financial Management 2017
The monthly Tax on Salary rates will have their ceilings raised. The salary of employees that is
currently taxed at 0% will have its ceiling raised from USD 200 to USD 250 and salary that is
taxed in the 5% tier will have its ceiling raised from the current threshold of USD 312 to USD
375.
Monthly tax on salary effective from 1 January 2017
Khmer Riel (KHR) Equivalent to US$* Progressive tax rate
From 0 to 1,000,000 0 to 250 0%
From 1,000,001 to 1,500,000 250 to 375 5%
From 1,500,001 to 8,500,000 375 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%

42. TAX TALK SIEM REAP
Law of Financial Management 2017
Dependent Allowance
Currently an allowance of KHR 75,000 (approx. USD 19) per
month may be deducted from a employees taxable salary base
for dependent family members (minor dependent child &
employee’s spouse whose only occupation is as a homemaker)
The allowance will be increased to KHR 150,000.

43. TAX TALK SIEM REAP
Eurocham Initiatives
What is the “White Book”
- EuroCham has developed an Advocacy pillar dedicated to
promoting dialogue with its Cambodian counterparts, both
within the Royal Government and the private sector.
- EuroCham relies on the works of its Sectorial Committees,
the Tax Committee is one of 9 committees

44. TAX TALK SIEM REAP
Eurocham Initiatives
- The committees contributed to the publication of
the “White Book”, a collective expression of the
views of EuroCham member companies on
specific aspects of the business environment in
Cambodia.
- In July, a delegation from Eurocham Cambodia
met with H.E. Kong Vibol and his deputy director
generals to discuss the tax recommendations
raised in the “White Book”.

45. RECENT TAX CHANGES/
WHITE BOOK RECOMMENDATIONS
Next Steps
Discussing MOU to continue dialogue and
collaborate on 2017 White Book
QUESTIONS
THANK YOU