Taxation in Cambodia
Cambodia’s taxation framework is a complex system that is fundamental to the country’s economic strategy, aligning revenue generation with incentives for growth and investment. This framework includes various taxes, each regulated by an intricate set of rules and rates. For businesses, investors, and individuals, having a thorough comprehension of this environment is crucial for effective financial management and ensuring compliance.
Taxation system
Cambodia’s taxation system is structured to conform to both local fiscal policies and global commitments, providing a flexible yet organized method of taxation. It likely includes a mix of flat rates, progressive tiers, and specific exemptions that represent the nation’s economic goals and social aims. Grasping the complexities of these tax mechanisms is essential for maximizing financial results, maintaining compliance, and taking advantage of opportunities within the legal framework.
Capital gains tax
In Cambodia, a distinct capital gains tax (CGT) is imposed on profits at a flat rate of 20%. This tax is applicable to gains from the sale or transfer of certain capital assets, including real estate, financial assets, intellectual property, leases, goodwill, and foreign currency. Although the CGT was initially planned for introduction in 2020, its implementation has faced several delays and is now expected to begin in January 2024.
Corporate taxation
The corporate income tax (CIT) in Cambodia is typically set at a standard rate of 20%. This tax is applied to taxable profits, which are determined by subtracting allowable expenses from total revenue, encompassing capital gains and passive income. Companies in specific sectors, like oil and natural gas production, face a higher tax rate of 30%. Entities that fall under Qualified Investment Projects (QIPs) can enjoy a 0% tax rate during their tax exemption phase. Insurance firms are taxed at different rates, which vary according to their specific business activities.
Personal income taxation
Cambodia applies a personal income tax, known as Tax on Salary or TOS, to both residents and non-residents. Residents are taxed on their total global income, whereas non-residents are only taxed on income sourced from Cambodia. The tax rates for residents are progressive, varying from 0% to 20% based on their income level. In contrast, non-residents face a fixed tax rate of 20%. TOS applies to salaries, which encompass wages, bonuses, and fringe benefits.
Dividend taxation
Dividends distributed to resident shareholders do not incur withholding tax. In contrast, dividends paid to non-residents are subject to a withholding tax of 14%. Furthermore, the Advance Tax on Dividend Distributions (ATDD) is applicable when dividends are issued from pretax income. This is determined by increasing the dividend amount and applying the corporate income tax rate of 20%.
Property tax
Cambodia charges a property tax of 0.1% annually on real estate valued above KHR 100 million. Moreover, there is a 10% tax on rentals for houses and land. The property tax is estimated according to the market value assessed by the authorities, while the rental tax applies to the income earned from leasing properties.
Inheritance taxation
Cambodia lacks a designated inheritance tax. Nonetheless, property transfers via inheritance might incur stamp duty or registration tax based on the type of assets involved. The tax framework mainly emphasizes the registration of legal documents related to property transfers, such as shares or land.
International taxation
Cambodia imposes a standard corporate income tax rate of 20% within its international tax framework. Certain sectors, including oil and natural gas production as well as the extraction of natural resources, face an elevated rate of 30%. Residents are taxed on their global income, whereas non-residents are taxed solely on income derived from Cambodia.
Cryptocurrency taxation
Cambodia presently lacks a defined tax system for cryptocurrency. The government does not acknowledge cryptocurrency transactions as legal, which implies that profits generated from cryptocurrency may not be liable for regular taxation. Nonetheless, participating in cryptocurrency activities without the necessary licenses is deemed unlawful. This absence of clear regulations creates ambiguity for individuals and organizations involved with cryptocurrency.
VAT system
Cambodia applies VAT to the sale of goods, services, and fixed assets. The general VAT rate is 10%, although some transactions, like exports, might be eligible for a 0% rate. VAT is relevant for both goods and services offered domestically and those imported into Cambodia. Additionally, nonresidents offering services in Cambodia may be liable for VAT through the reverse charge mechanism.
Our taxation solutions
In a tax landscape that is continually changing, expert advice is essential. Our firm provides a range of specialized tax solutions that cater to the varied needs of individuals, businesses, and investors in Cambodia. Our offerings are aimed at addressing the intricacies of the tax code, reducing liabilities, and guaranteeing complete adherence to regulations.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
In the intricate realm of taxation, obtaining professional guidance can greatly impact your situation. Reach out to us today to arrange a consultation with our team of tax specialists. We will collaborate with you to create a customized tax strategy that meets your goals and guarantees complete adherence to the regulatory framework in Cambodia.
Disclaimer
Tax laws and regulations are continually evolving and can differ depending on personal situations. The information offered here serves as general guidance and may not represent the latest updates. It is strongly advised to seek the expertise of a qualified tax professional for tailored and current advice relevant to your circumstances.