cambodian tax system

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TAX System in Cambodia

I. General concepts of taxes

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a - What are Taxes ?- What are types of tax used by government?- Why do governments impose taxes?

Taxes are compulsory contributions imposed by government onindividuals, corporations or institutions without any service renderedto the taxpayer in return. People are taxed on what they earn(income tax), on what they spend (consumption tax), and on whatthey own (property and real estate tax). Taxes may be classified invarious ways.

Tax is a sum of money that a government take from people‘sincome, company profit, the sale of goods to be used for publicexpending.

I. General concepts of taxes (continue/cont.)

b - Why tax ?- Develop country (government need

money/revenue)- Salary for government employees- Security, defense- Infrastructure (road, bridge, medical,

education, …)- Park (gardens, Car parks,…)

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I. General concepts of taxes (cont.)c- Who pay tax ? (art.2,3 of LOT)- People or person (legal person and physical

person)- Resident person - worldwide income- Non-resident person - Cambodian source

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I. General concepts of taxes (cont.)

d - Sin tax for higher rate to:- Cigarettes- Alcohol- Gambling

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e- Domestic luxury taxes, imposed tax on luxury goods such as:

- Luxury cars ( Land cruiser, Mercedes, Lexus,…)

- Luxury wines (Hennessy, XO, …)- Luxury perfume, shampoo,...

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f - Policy tool :- Take money from the rich people to help

poor people (progressive or higher tax rate)

- Make influence people, equality

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g - Policy tool : import tax , joint Asean , AFTA, reduce tax rate

- Promote domestic productions- Protect domestic companies/ employees

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h- Smuggling lead to losses on :- Government revenue- Domestic factories- Employees (unemployment)

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Salary tax1- Who pay tax ?- employees- government officials- private workers (BOD, officers, managers,

technical workers, sewing/cutting…)- NGO workers (BOD, officers, managers,

technical guys, office workers, drivers…)- public companies

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Salary tax cont.2. Who exemption:- Diplomatic staffs = no tax

(diplomatic do work=not diplomatic= tax, local staffs= not diplomatic= tax)

- International organizations ( non-profit, charity…)

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Salary tax cont.3- How to pay tax?- Government need money, employees

must be to pay according to the tax law- Withholding of tax by the company (in

advance and pay to the tax department)

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Salary tax cont.

4- When- every month by before 15th day of the

following month- For annual profit tax by before March

31th day of the following year.- For VAT by before 20th day of the

following month

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What is salary ?• As stated in article 42 the term “salary” in this

Law means salary, remunerations, wages, bonuses, and overtime, compensations and fringe benefits which are paid to an employee, or which are paid for the direct or indirect advantage of the employee for the fulfillment of employment activities

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Salary is not :• Expenses (reimbursed, spend for

employer,…)• Per diem (normal, for work travel,…)• Limit (government $10+15.000r/ day, abroad

$20/day, UN $100/ day) • Severance (separate) exempt up to limit

required by Labor law• Social Characteristics (pension, medical,…)• Uniforms• Dividend (USA no dividend)

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Deductions• Advance• Child 0r Kids (14 years = yes, 25 years

= yes if still study• Spouse yes if stay at home• Sangsah = no (kids if dependent)

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Computing Salary Tax(Salary – Deduction) x Tax Rate = Salary Tax

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0%

20%

10%

5%

15%

500,000R 8,500,000R1,250,000R 15,000,000R12,500,000R

1,250, 000

-500, 000

750,000 x 5%

= 35,500R

8,500,000

-1,250, 000

7, 250,000

x 10%

= 725,000R

12,500,000

-8,500,000

4,000,000

x 15 %

= 600,000R

15,000,000

-12,500,000

2,500,000

x 20%

= 500,000R

Main provisions for tax management and collection

• Constitution of the Kingdom of Cambodia article 57 stated” tax collection shall be in accordance with the law ”.

• Law on taxation of the kingdom of Cambodia.

• Financial act. 1994,1995….2007.• Other tax provisions (Sub-decree, Prakas,

Circular, Direction and Notification).

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II. Summarize Cambodia Tax system

• The Tax Department in Cambodia operates underthree regimes (article 4) :

- (1)- real regime- (2)- estimated regime- (3)- simplified regime but not operative.

The real regime is carrying out the large enterprise administration, and it collected over 80% of total tax revenues, while estimated regime is applied on small taxpayer. The number of tax officials is about 1,442. The organization chart of the Tax Department is shown in Chart 1.

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(1). The real regimeAn enterprise is taxable under the real

regime (self assessment system), it has three conditions:

a- Legal form of the enterprise: these enterprises are mainly state own enterprises, joint venture companies, private companies, communities, or private organizations doing activities for profit of received income from their assets.

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(1).The real regime (cont.)

b- Level of turnover:The enterprises who had annual taxable turnover

(included all taxes) is upper the amount:- 500 million Riels in case of supply of goods; - 250 million Riels in case of supply of services;- 125 million Riels has any contracts with the

government.

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(1).The real regime (cont.)c- Type of business activity:

a sole proprietorship which is an importer or exporter or a qualified investment project.

For new enterprise: if the estimated level of turnover, or if the type of business activity (based on information recorded in the application for permission to start business) meets the conditions for real regime taxation as stated in points b and c above.

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• There are two types of tax units under the Large and Medium Taxpayer Bureau (LMTB):

1- The Large Taxpayer Unit (LTU) The enterprise is paying tax under the LMTB and achieved

the annual turnover upper 1,000 million Riels is subjected to pay tax at the LTU.

Taxpayers under this unit have duties as follow:- Self-assessment of taxes and submit tax return at tax

office- Tax officer verifies on the tax return- Pay tax amount at the National Bank of Cambodia

(NBC)- Keep accounting record and other statements- Keep the documents upon to ten years

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(1).The real regime (cont.)

(1).The real regime (cont.)2- The Medium Taxpayer Unit (MTU) The enterprise is paying tax under the LMTB and

achieved the annual turnover lower than 1,000 million Riels is the subjected to pay tax at the MTU.

Taxpayers under this unit have duties as follow:- Self-assessment of taxes and submit tax

return at tax office- Tax officer verifies on the tax return- Pay tax amount at NBC- Keep accounting record and other

statements- Keep the documents upon to ten years

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(2)- The Estimated RegimeCollection System: Applied for the small businesses,

their annual turnover lower than the above level, that determined by the tax administration. Estimated regime system taxpayers have the obligations(article30):

1- The taxpayer subject to estimated regime system of taxation must submit the tax declaration to the tax administration every year by October 31, in the form provided by the tax administration.

2- The amount of estimated profit is determined by the tax administration after verification and consultation with the businessman or his representative.

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(2)- The Estimated Regime (cont.)

This estimated profit is calculated according to the profit rate with consideration to the type and activities of the business which shall be determined by Prakas of the Ministry of Economy and Finance.

3- This tax level on estimated profit shall be kept constant for a period of 3 months, 6 months or 1 year.

4- The taxpayer subject to the tax on profit under estimated regime system of taxation shall pay this tax every month at the time fixed by the tax administration.

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(3) Resident and Non residbbent1- For a physical person, the term resident

taxpayer refers to any physical person who has a residence, a principal place of abode, or who is present in the Kingdom of Cambodia for more than 182 days in any period of 12 months ending in the current tax year

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(3) Resident and Non resident

2- A physical person is referred to as a non-resident taxpayer, if he is not a resident taxpayer but receives income from a Cambodian source.

3-For a legal person, the term resident taxpayer refers to an entity (a legal person), which is organised or managed in, or has a principal place of business in the Kingdom of Cambodia;

4-An entity, which is not a resident entity, that maintains a permanent establishment in the Kingdom of Cambodia is referred to as a non-resident taxpayer.

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III. Outline of type of taxes

Tax on salary (Personnel Income Tax)-art.40-51

(1). All salary incomes from employment activities are liable to the monthly Tax On Salary ( TOS ). Paragraph 1 of article 52 of the Law on Taxation clearly states that the tax is the debt of the physical person receiving the salary. This tax shall be collected through withholding by the employer at the time of salary payment.

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III. Outline of type of taxes(2)- As provided in paragraph 8 of article 42 of

the Law on Taxation salary is broadly defined to include all remunerations, wages, bonuses, overtimes, compensations, and other payments in cash or in kind which are paid to the employee or paid for the direct or indirect benefit of the employee for employment services rendered by the employee except for those payments

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1. Tax on salary (Personnel Income Tax) cont.

• Exemption and deduction:• Diplomatic and consular; international organization

and agencies of technical cooperation.• Members of national assembly and senate• Indemnity for the layoff additional remuneration with

social characteristics; flat allowance for mission and travel expenses. CR 75.000 is deducted from the tax base for each minor dependent children and housewife.

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1. Tax on salary /Personnel Income Tax (cont.)

• Rates:• The progressive tax rate applied:• from CR 0 - CR 500,000 0%• from CR 500,001 - CR 1,250,000 5%• from CR 1,250,001 - CR 8,500,000 10%• from CR 8,500,001 - CR12,500,000 15%• greater than - CR 12,500,000 20%

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2. Tax on Profit (corporate income tax)

I. The taxable Profit is the net profit obtained from all the results of all type of operation realized by the enterprise including capital gains from the sale of various parts of the asset during the operation or at the close of the business, as well as income from financial of investment operation and interest, rental, and royalties' income. (art.7,8,20…)

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2. Tax on Profit (article2)

II. Tax BaseTax on Profit (TOP) is the debt of a resident person on income from Cambodian sources and income from foreign sources, and the debt of a non-resident person on income from Cambodian sources.

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2. Tax on Profit /corporate income tax (cont.)

III. Exemption (art.9)Incomes of Government institutes; organization of religious, charitable, science, literary, or education purpose; labor organization, or any chamber of commerce, industry, or agriculture; the profit from the sale of agricultural produce, interest expenses that the taxpayer had paid or incurred the tax year to carry on business.

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2. Tax on Profit /corporate income tax (cont.Art.20)

IV. Tax Rates:- 20% for the profit realized by a legal person.- 30% for the profit realized under an oil or natural gas

production sharing contract and exploitation of natural resource including timber, ore, gold, and precious stones.

- 9% for the profit of an incentive 5 years transitional period to qualified investment project (QIP) after the period of tax exemption,

- 0% for the profit of QIP during the period of tax exemption.

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2. Tax on Profit /corporate income tax (cont.Art.20)

- Physical person (individual) is applied progressive tax rate:from CR 0 to CR 6,000,000 0%from CR 6,000,001 to CR 15,000,000 5%from CR 15,000,001 to CR 102,000,000 10%from CR 102,000,001to CR 150,000,000 15%

greater than CR 150,000,000 20%

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2. Tax on Profit (cont.)V. Allowable Deductions (art. 11)

Allowable deductions shall be as follows:1- Except as provided in articles 12 through 18 of this

law, expenses that are allowed as a deduction include expenses that the taxpayer has paid or incurred during the tax year to carry on a business.

2- Any rent, interest, compensation, payments, or fees paid to an officer or director of an enterprise, a partner, a member of a pass-through, a member of the taxpayer’s family or other related person where there is proof that the payment is for services actually performed and to the extent that such payment is reasonable.

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2. Tax on Profit (cont.)3- Amounts paid on new buildings and

other tangible assets, permanent improvements or betterments including any construction or acquisition period interest and taxes. These amounts are to be recorded in the relevant asset account and shall be deductible as depreciation as provided in article 13 of this law.

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2. Tax on Profit (cont.)VI. DepreciationVI. 1. Definition of Depreciation

Depreciation is the recording of the definitive decrease in value of an asset as a result of use, passing time, technical change, or other cause. This is done by spreading the cost of the asset over the planned duration of its use (useful life) in accordance with a schedule of depreciation.

VI. 2. For the purposes of TOP, to be deductible, the depreciation must meet 5 conditions as follows:

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2. Tax on Profit (cont.)a- it must be made only on a fixed asset recorded in the

balance sheet of the enterprise;b- it must be made only on a fixed asset subject to

depreciation;c- it must be made on the basis and within the scope of

the cost price;d- it must be calculated with the straight-line method of

depreciation for class 1 assets or the declining balance method of depreciation for class 2, 3 and 4 assets;

e- it must be made actually by the enterprise..

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2. Tax on Profit (cont.)VI.3. Depreciation of tangible property:VI.3.1. Normal DepreciationAll tangible property shall be divided into the following classes of

depreciations :Class 1: Buildings and structures including their basic

components. Rate of depreciation 5 percent StraightLine method.

Class 2: Computers, electronic information systems, softwareand data handling equipment. Rate of Depreciation 50percent Declining Balance method.

Class 3: Automobiles, Truck, and Office Furniture andEquipment. Rate of Depreciation 25 percent DecliningBalance method.

Class 4: All Other Tangible Property. Rate of Depreciation 20percent Declining Balance method.

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2. Tax on Profit (cont.)VI.4. Depreciation of Intangible Property

For intangible property including patents,copyrights, drawings, models, and franchises,having a limited life the depreciation rate oneach property shall be calculated on the lifeof that property according to the straight linemethod of depreciation. If the life of theintangible cannot be determined the annualdepreciation deduction shall be at the rate of10 percent of the value of the intangibleproperty.

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2. Tax on Profit (cont.)VI.5. Depletion of natural resources shall be determined as

follows:The allowance for the depletion of any natural resource,including any oil and gas, shall be determined as follows.

a. All exploration and development costs, including interestattributable to these costs, shall be added to the assetaccount of the resource.

b. The amount of the depletion for each natural resourcedeductible for the tax year shall be determined bymultiplying the balance of the account for the naturalresource with the ratio of the quantity produced from thenatural resource during the year to the estimated totalproduction from the natural resources.

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2. Tax on Profit (cont.)VII. Not Allowed as Deductions1- Any expense on activities generally considered to be

amusement, recreation, or entertainment or the use of anymeans in connection with such an activity.

2- Personal living or family expenses except for fringe benefits incash or in kind subject to withholding tax according to theprovisions for the Tax on Salary,

3- Any tax imposed by the provisions for the Tax on Profit orwithholding tax imposed by the provisions for the Tax on Salary.

4- For the loss on any sale or exchange of property, directly orindirectly, between related persons.

5- For any expense except for expenses already incurred and forwhich the taxpayer can establish the amount of the expense,and the business purpose of the expense in a manner as above(allowed deductions).

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2. Tax on Profit (cont.)VIII. Tax on Insurance Companies (art. 16)The tax on an insurance company shall be determined as follows:1- For an enterprise having principal activity in the insurance or

reinsurance of life, property, or other risks, the tax on profit shall be determined as follows:a. 5 percent of the gross premiums received in the tax

year for the insurance or reinsurance of risk in the Kingdom of Cambodia,

b. according to the rates in article 20(New) of this law for other of activities that are not insurance of reinsurance.

2- The rules and procedures for the payment of the tax on profit for an insurance company shall be determined by Prakas of the Ministry of Economy and Finance.

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3. Withholding Tax (art.25-27)

• Any resident payer making any payment in cash or in kind to a resident person shall withhold, and pay as tax, an amount according to the below mentioned rates which are applied to the amount paid before withholding the tax.

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3. Withholding Tax (Cont.)1. The rate of 15% on:- income received by a physical person from the

performance of services including management, consulting and similar services.

- royalties for intangible properties and interest in minerals.- interest of company paid to physical person or an

enterprise. 2. The rate of 10% on the income from the rental of movable

or immovable property.3. The rate of 6% on interest paid to resident taxpayer having

a fixed term deposit account.4. The rate of 4% on interest paid to resident physical person

having a non-fixed term saving account.5. The rate of 14% on any payment of Cambodian source

income to non-resident.

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4. Prepayment of the profit tax (art.28):

• real regime taxpayers including qualified investment project (QIP) has obligation to pay monthly prepayment at the rate of 1% of turnover. This prepayment will deducted from the tax on profit at annual liquidation of the tax.

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5. Value Added Tax (VAT)(art.55-84)

• From January 01, 1998 value added tax (VAT) was implemented and replace turnover tax. Taxpayer in self assessment system has obligation to pay VAT when making supply of goods and services to consumer.

• The term “good” means tangible property other than land or money; and the term “service” means the provisions of something of value other than goods, land, or money.

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5. Value Added Tax (cont)• Exemption and Deduction:• Exemption are applied to public postal service;

hospital service; state own transportation, insurance; primary financial services, the importation of articles for personal use; non profit activities in the public interest, foreign diplomatic international organization.

• Rates: • Single rate, 10% and 0% rate for export.

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6. Turnover Tax (art. 86)

• This tax is applied to those subject in the estimated regime (those are not subject to VAT). Turnover tax has to pay monthly at 2% rate and may be fix in advance for period of 3, 6,12 months.

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7. Excise Tax (art. 85)

• Excise tax is applied to the implementation of domestic production that apply to the specific tax certain goods and services.

• Rate:• 30% for automobiles of more than 2000 cc, and

their spare parts;• 20% for petroleum productions and automobiles

of up to 2000 cc, and their spare parts;• 10% for all type of beverages, tobacco, wines,

beers, and other establishment services, and all type of motor vehicles (125cc).

• 3% for international telecommunication service.• 2% for air tickets.

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8. Property Transfer Tax

• Property Transfer Tax is applied to all property transfer such as constructions, lands, houses, all kind of cars, all kind of motorbikes, boards, ships ...etc when transfer and at the rate of 4% of the transfer value.

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9. Minimum Tax (art. 24)• This tax is payable by a taxpayers

subject to the real regime system, except the QIP has been granted the status of an incentives. This tax is imposed at the rate of 1% of the annual turnover (loss or profit) inclusive of all taxes except VAT.

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10- Tax on capital gain• Tax on capital gain will apply to

each physical persons with progressive rate ( as profit tax for physical persons article 20 of LOT) of total profit when selling immovable property as stated in article 7 new of LOT.

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10. Local Taxes:(1)-Paten tax is levies with reference to

prior year turnover or estimated turnover.

(2)-slaughter tax, rate 3% (3)-transportation tax, (4)-public lighting tax (3% on supply wine

and cigarettes which are imported foreign products),

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10. Local Taxes: cont.

(5)-Unused land tax is 2% rate on market value of the land per m2.

(6)- Stamp Tax is to paid on certain official document

(7)- Accommodation tax will implement in Jan. 1st,2007 with rate 2% on hotels and quest houses.

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11. Sources of income

1. interest paid by a resident enterprise or resident pass-through, or a governmental institution of the Kingdom of Cambodia;

2- dividends distributed by a resident enterprise;

3- income from services performed in the Kingdom of Cambodia;

4- compensation for management and technical services paid by a resident person;

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11. Sources of income (cont.)5- income from movable or immovable property, if

such property is situated in the Kingdom ofCambodia;

6- royalties from the use, or right to use intangibleproperty paid by a resident, or paid by a non-resident through a permanent establishmentthat he maintains in the Kingdom of Cambodia;

7- gain from the sale of immovable property located inthe Kingdom of Cambodia or from the transfer ofany interest in immovable property situated in theKingdom of Cambodia;

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11. Sources of income (cont.)8- premiums from the insurance or reinsurance of risks

in the Kingdom of Cambodia.9- gain from the sale of movable property which is part

of the business property of a permanent establishment maintained by a non-resident taxpayer in the Kingdom of Cambodia.

10- income from business activities carried on by a non-resident through a permanent establishment in the Kingdom of Cambodia; All income that is not Cambodian source of income istreated as foreign source of income.

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12. Foreign Tax Credit (art.36)• A resident taxpayer who has received income from

foreign sources and who has paid taxes according toforeign tax law shall receive a tax credit for deductionfrom the tax on profit to be paid in the Kingdom ofCambodia under the condition that there ispresentation of documents confirming this taxpayment abroad.

• In order to calculate the tax to be paid in the Kingdomof Cambodia before deduction of this tax credit, thetotal amount of income received from Cambodiansources and foreign sources shall be taken intoaccount.

• The tax credit is determined separately for the taxpaid by a Cambodian resident in each foreigncountry.

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13. Requirement to Register

A person must register with the tax administration within 15 days after the person begins economic activity.

For the application for registration, it must be attached with the following documents:

1- For a legal person enterprise:- business certificate issued by competent authorities

of which the stamp tax has been paid;- letter of authorisation issued by the CDC (for QIP);- articles of incorporation of the enterprise;- identity card of the leadership (with photos);- business address certificate and eventually contract

for the leasing of the enterprise compound.

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13. Requirement to Register

2- For a sole proprietorship:- business certificate issued by competent authorities;- identity card of the owner (with photos);- domicile certificate;- family certificate;- headquarters address certificate and eventually

contract for the leasing of the enterprise compound.A person shall inform the tax administration within 15

days of any change in the address, form, name, or object of the business, the transfer or cessation of the business, the leadership or the person in charge of tax matters of the enterprise

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III. Rights and Obligations of the Taxpayer

The rights and obligations of the taxpayer shall be as follows:

1- The taxpayer has the rights as follows:a. to be considered as confidential and used only for the

purposes specified in ax provisions all information related to his activities which are provided to he tax administration as stated in article 94 of this law;

b. to regularly receive information concerning the process of tax system and procedure in tax assessment as stated in articles 96 and 118 of this law;

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III. Rights and Obligations of the Taxpayer (cont.)

c. to receive information about one's own rights including the rights to appeals stated in articles 118 and 122 of this law;

d. to appeal as stated in this law to every decision made by the tax administration as stated in

articles 118 and 122 of this law;e. to pay no more tax than what is required by tax

provisions as stated in article 107 of this law.

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2- The taxpayer has the obligations as follows:a. register with the tax administration as stated in article

101 of the law;b. to submit the tax declaration and provide information as

required by tax provisions as stated articles 98 and 104 of this law;

c. to pay taxes according to the schedule as stated in tax provisions;

d. to maintain books of account, supporting documents, and other documents and to show them to the tax administration as stated in tax provisions and article 98 of this law;

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e. to present oneself to the tax administration according to the date as stated in he letter of notification of the tax administration as stated in article 99 of this law;

f. to pay various taxes, additional taxes, and interest as determined by the tax administration according to the date as stated in the tax provisions or as notified by the tax administration in writing as stated in tax provisions and articles 107, 130, 131, and 132 of this law.

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IV. Powers and Obligations of the Tax Administration

I. The power of the tax administration includes the following:

1-to assess the tax base of the taxpayer or the withholding agent as stated in articles 116 and 117 of this law;

2-to request the presence of the taxpayer or the withholding agent as stated in article 99 of this law;

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IV. Powers and Obligations of the Tax Administration (cont.)

3- to determine the necessary books, documents, and supporting documents that the taxpayer or the withholding agent must maintain and provide to the tax administration as stated in articles 98 and 100 of this law;

4- to require the taxpayer or third person to provide information related to the taxpayer or withholding agent as stated in article 99 of this law;

5- to enter the residence or the business establishment of the taxpayer, the withholding agent, or a third person to obtain information related to the taxpayer or the withholding agent as stated in article 100 of this law;

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6-to receive from state institutions information concerning or related to the taxpayer or the withholding agent as stated in article 116 of this law;

7-to apply recovery measures to the taxpayer or the withholding agent when the person fails to pay various taxes, additional taxes, and interest as required by this law as stated in articles 109 through 115 of this law;

8-to redetermine transactions between related taxpayers as stated in tax provisions.

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II. The tax administration has the obligations as follows:

1- to collect taxes, additional taxes and interest as stated in article 93 of this law;

2- to maintain confidentiality of information that the taxpayer or a third person has provided and communicate this information only to the person as determined by tax provisions as stated in articles 94, 128 and 138 of this law;

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3- to provide information to the taxpayer or to the withholding agent to ensure proper implementation of tax provisions as stated in article 96 of this law;

4- to refund or credit overpaid taxes as stated in tax provisions;

5- to provide a letter of notification for tax assessment to the taxpayer or to the withholding agent as stated in articles 116 through 118 of this law;

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V. Tax Declarations

1- The taxpayer or withholding agent must submit a tax declaration to the tax administration according to the form, the time and the place determined by the tax administration.

2- The tax declaration must be signed by the taxpayer or his legal representative.

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V. Tax Declarations (cont.)

3- All investors shall file a monthly tax return for each month and an annual tax return for that tax year, and pay all taxes payable as required by each tax provisions.

4- All investors shall attach a CDC Certificate of Compliance to the annual tax return for that tax year.

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V. Time of Tax DeclarationsI. Monthly tax return:

1. For (1)- Salary tax, (2)- prepayment tax, (3)-excise tax (4)-withholding tax (5)-accommodation tax and (6)- Public lighting tax shall be filled tax return and pay tax by before 15th day of the following month.

2. For VAT shall be filled tax return and pay tax by before 20th day of the following month.

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V. Time of Tax Declarations (cont.)

• Annual tax return:1. For patent tax and stamp tax shall be filled

tax return and pay tax by before 31th

March of the current tax year.2. Profit tax shall be filled tax return and pay

tax by before 31th March of the following tax year.

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VI- Additional tax and PenaltyA- Obstructing the implementation of tax provisions

includes:1- In the case where the person:

a. fails to maintain proper records of account and other documentation or fails to issue invoices on transactions;

b. fails to allow the tax administration access to records of account and other documents;

c. fails to register with the tax administration;d. fails to notify the tax administration of any change in

the registration as stated in this law; e. makes or furnishes fraudulent records, documents,

reports, or other information;f. conceals or deliberately destroys accounting papers,

records, documents, reports or other information;

Siem Reap Tax Branch 79

VI- Additional tax and Penalty (cont.)g. attempts to obstruct the assessment or the

collection of taxes;h. fails to submit a nil tax declaration within 30

days of the date required by law;I. willfully supports any of the above acts.

2- In the case where an tax official of the government:a. discloses confidential information without

authorization;b. attempts to obstruct the assessment and the

collection of taxes;c. willfully supports any of the above acts.


VI- Additional tax and Penalty (cont.)B- Additional tax:a. For the obstruction:- two million Riels for a person or a taxpayer or a

withholding agent under the real regime system of taxation or a government official;

- five-hundred thousand Riels for a taxpayer or a withholding agent under the estimated regime system of taxation.

b. For underpayment of Tax:- ≥ 10% → additional tax 10% + interest 2%/month- < 10% → additional tax 25% + interest 2%/month- Unilateral → additional tax 40% + interest 2%/month


VI- Additional tax and Penalty (cont.)c. For late tax payment:- Fails to pay tax by the due date

→ additional tax 10% + interest 2%/month

- Fails to pay tax within 15 days after receiving a reminder letter

→ additional tax 25% + interest 2%/month

- Unilateral → additional tax 40% + interest 2%/month.- Tax on transportation and Means → additional tax 100%


VI- Additional tax and Penalty (cont.)

d. Penalty = criminal violation for:- Tax evasion:

→ fine 10 000 000 – 20 000 000Riels→ imprisonment 1 – 5 years or both.

- obstruction:→ fine 5 000 000 – 10 000 000Riels→ imprisonment 1month – 1 years or both.


Cambodia Tax Revenue in Percent of GDP 1997-2004

Type of taxes 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Direct Taxes 0.5 0.5 0.7 1.0 0.9 0.8 0.9 0.8

1- Profit 0.4 0.4 0.5 0.6 0.82- Salary 0.06 0.08 0.09 0.123- Rental tax

Indirect tax 2.3 2.4 3.8 4.2 4.9 4.1 3.7 4.6

1. Excise tax 0.7 0.8 0.7 1.0 1.8

- Domestic 0.1 0.2 0.1 0.2 0.2- Import 0.7 0.6 0.7 0.8 1.6

2. VAT 207 3.1 3.0- Domestic 0.4 0.6 0.6- Import 2.5 2.7 2.4

3. Trade tax 3.8 3.6 3.8 3.3 2.7 2.6 2.3 2.7

Total tax revenue

6.5 6.5 8.4 8.6 8.7 7.8 7.0 7.7 7.6 8.0

84

Current Cambodian tax system reform

1- TCAP (2002-03)• Law on Investment• Law on Taxation 18 articles• Prakas the tax on profit• Prakas the tax on salary…• IT system in Large & Medium taxpayer

Bureau

85

Current Cambodian tax system reform Cont.

2- PFM (Public Finance Management)- Reduce threshold for increase number of

taxpayer in self assessment system- Expanding tax base (salary tax in private

institutions, Accommodation tax, Property tax …)- Double taxation Agreement- Audit circulars- Taxpayer services- Improve IT system

86

87

ORGANIZATION CHART OF THE TAX DEPARMENT

Personnel & Training Bureau

Taxpayer Service Bureau

Enforcement Collection

Bureau

Audit Program Management Bureau

Collection &Data Processing Bureau

Large and Medium Taxpayer Bureau

MTU LTU

Tax payerService

Return Processing (Verifying)

Field Audit

Collection Tax Arrears

TaxpayerService

Field Audit

Collection Tax Arrears

Inquiry & Cross- Checking Bureau (Investigation)

Enterprise Tax Audit Bureau

Sel-assessment tax collection Division

Provincial & Cities Tax Branches

Tax Accounting

Districts tax Division

Administration-Finance Bureau

Secretary Assisted by 5 deputy directors(Power Delegating)

Return Processing (Verifying)

IT Bureau

DIRECTOR

Litigation Bureau

Tax Policy & Legislation

Bureau

Operational Level

Central Level

Personnel & admin/ finance Division

Litigation Division

Registration Division

Customs and Excise

I. Mission:- Monitoring and collect taxes and other fees

on goods when make import and export.- Prevention and enforcement on smuggling- Making convenient to international trade

- Prevention economic and trade advantage

88

Customs and Excise Cont.II. Obligation:- collect taxes and other fees on goods when

make import and export as follow:- 1. Customs duty- 2. Value added tax- 3. Specific tax or Excise tax- 4. other fees

89

Customs and Excise Cont.

III. Powers:-1. Check up and temporary stop-2. Check up in residency-3. special rights to check on document-4. Check up on telecom list-5. Righting to compromise and adjust a

penalty before sending to the court.

90

Customs and Excise Cont.• Establish for taxes evaluation and

collection during import and export.• Objective to inspect on goods

(transportation, stock, smuggling) and to implement on international trade policy.

• Import and export taxes rate as stated in customs tariff.

91

ExampleT and D rate in %

Description of GoodsUnit

Imp.

Exp.

Ref.

CD ST VAT ET

Wheeled toys designed to be ridden by children (for example, tricycles, scooters, pedal cars); dolls' carriages.

- Tricycles value 7 0 10 0

- Other wheeled toys value 7 0 10 0

- Dolls' carriages value 7 0 10 0

- Parts :

- - Spokes, for subheading 9501.00.10 value 7 0 10 0

- - Nipples, for subheading 9501.00.10 value 7 0 10 0

- - Other, for subheading 9501.00.10 value 7 0 10 0 92

Customs and Excise Cont.

• No import:1. Drugs such as heroin

morphine…(Singapore is death)2. Some goods that effected to: Security,

discipline, environment, art and ancient. in order to Concession on arts and ancient such as Angkor…

93