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Our Key Services in Taxation 

• Annual Income Tax Return Filing
• Monthly Tax Return Filing
• Tax Health Check
• Tax Audit Assistance

Tax compliance is a critical and mandatory obligation for all companies. In Cambodia’s rapidly evolving tax landscape, staying updated with changes in laws, Prakas, notifications, and other guidance from the General Department of Taxation (GDT) can be a significant challenge.

To remain compliant, businesses need the support of experienced tax professionals. At VSD, we understand the complexities that companies face and take the time to listen to your needs. We provide tailored solutions, offering timely and practical advice based on a clear understanding of the regulations impacting your business, tax obligations, and financial goals.

Overview of Tax Obligations in Cambodia

Tax compliance is a critical aspect of doing business in Cambodia. Governed by the Law on Taxation and administered by the General Department of Taxation (GDT) under the Ministry of Economy and Finance, Cambodia’s tax regime has undergone significant modernization in recent years.

Businesses are required to comply with various tax obligations depending on their classification, size, and nature of operations.

Taxpayer Classification

Enterprises operating in Cambodia are classified into three categories based on their annual turnover and nature of business:

• Small Taxpayer: Annual turnover from KHR 250 million to KHR 700 million
• Medium Taxpayer: Annual turnover from KHR 700 million to KHR 2 billion
• Large Taxpayer: Annual turnover exceeding KHR 2 billion, or companies under specific regulatory conditions (e.g., branches of foreign companies, QIPs)

Key Types of Taxes

Tax on Income (“TOI”)

The standard TOI rate is 20% on net taxable profit. However, special rates apply to certain industries:

• Oil and gas operations and mineral resource exploitation: 30%
• Insurance companies: 5% on gross premium income (unless subject to the 20% rate under specific conditions)

    Filing and Payment Obligations

• Annual Tax Return:
  • Due by March 31 of the following year.
  • Must be filed with audited financial statements (if applicable).
• Monthly Prepayment Profit Tax 1% (“PPT”)
  • 1% of monthly turnover (excluding VAT), unless exempted.
  • Acts as an advance payment toward the annual TOI liability.
  • Due by the 25th of the following month (if using e-filing).

Taxable profit is calculated as:

Revenue – Allowable Deductions + Non-deductible Expenses + Adjustments

Allowable deductions include normal business expenses, while non-deductible items include:

• Fines and penalties
• Personal expenses
• Unrealized foreign exchange losses

 Minimum Tax

• 1% minimum tax on annual turnover applies to taxpayers who:
  • Do not maintain proper accounting records, or
  • Are not audited (if required)
• QIPs (Qualified Investment Projects) that comply with recordkeeping and audit requirements are exempt from minimum tax.

TOI Incentives

Eligible businesses may benefit from:

• Tax holidays (via QIP status)
• Accelerated depreciation
• Loss carry forward: Up to 5 years for most businesses

However, tax losses cannot be carried forward during a tax holiday period or transferred to another entity.

Value Added Tax (“VAT”)

• Standard rate: 10% on taxable supplies and imports.
• Applicable to most goods and services, except exempt supplies (e.g., education, healthcare).
• Monthly VAT returns are required by the 25th of the following month.

Tax on Salary (“TOS”)

• A progressive rate tax on resident employee salaries ranging from 0% to 20% based on monthly income.
• Employers are responsible for monthly withholding and remittance.
• Fringe benefits provided to employees may also be subject to Tax on Fringe Benefits at 20%.
• It required to fill and paid by the 25th of the following month.

Note: These rates apply to resident employees. Non-residents are taxed at a flat rate of 20% on gross salary.

Dependent Allowances

• Deduction Amount: KHR 150,000 per dependent (spouse or child).
• Eligibility Criteria for Children:
  • Age: Under 14 years old.
  • Education: Under 25 years old and pursuing full-time education.​

Withholding Tax (“WHT”)

Applies to payments to resident and non-resident entities for certain services.

Common rates include:

• • 15% for services provided by non-residents
  • 10% for interest, royalties, and certain fees paid to residents
  • 14% for management and technical services paid to non-residents

Minimum Tax

• 1% of annual turnover (including VAT-exempt revenue), applicable to companies not under real regime or those without adequate bookkeeping.
• Can be waived if proper accounting records are maintained and audited financial statements are submitted as required.

Compliance and Filing

• Monthly tax returns must be filed by the 25th of the following month, covering VAT, salary tax, withholding tax, and others.
• Tax on Income (“TOI”) due by March 31.
• E-filing and online payment systems are increasingly adopted by GDT.
• Non-compliance may result in penalties, interest, and suspension of tax certificates.

Tax Incentives for QIPs:

The following are the main tax incentives provided to Qualified Investment Projects (“QIP”) in Cambodia:

a. Tax on Income (“TOI”) Exemption:

• Up to 9 years of TOI exemption for QIPs, depending on the nature and location of the project.
• Typically, the first 3 years of a QIP are fully exempt from corporate income tax, followed by a 50% reduction for the next 2 years, and then a 25% reduction for the next 4 years. However, the exact duration of the exemption can vary depending on the project.
• In some cases, additional exemptions may apply based on the project’s contribution to national economic priorities (e.g., export-oriented businesses, high-tech manufacturing).

b. Tax on Income:

• After the exemption period, a reduced corporate tax rate of 20% is applied to the profits of the QIP, which is lower than the standard corporate tax rate of 20%. This may vary depending on the project’s location and the sector.

c. Exemption from Minimum Tax:

• QIPs may be exempt from the minimum tax for the first 3 to 5 years of operation, depending on the specific terms of the project approval.
• The minimum tax in Cambodia is 1% of annual turnover, but this incentive ensures that QIPs are not required to pay this tax during their initial years of operation.

d. Customs Duties Exemption:

• QIPs enjoy exemption from customs duties on the importation of raw materials, machinery, and equipment necessary for the production process.
• This exemption helps reduce the initial capital investment required for setting up manufacturing and production facilities, especially for export-oriented industries.

e. Exemption from Value Added Tax (VAT):

• Some QIPs are granted VAT exemptions on imports of goods that are directly used in production or manufacturing.
• This includes machinery, raw materials, and capital goods, provided they meet the criteria set by the tax authorities.

f. Double Deduction on R&D Expenditures:

• Qualified investment projects in research and development (R&D) are eligible for double deductions on R&D expenditures.
• This encourages innovation and technology development in Cambodia by allowing companies to claim a larger tax deduction on R&D-related costs.

g. Exemption on Export Tax:

• Certain QIPs involved in export activities are exempt from export taxes, which encourages businesses to focus on international markets.
• This exemption applies to goods that are produced and exported abroad, ensuring that businesses remain competitive in the global market.

h. Investment Allowances:

• QIPs can also benefit from investment allowances, such as a tax credit or tax rebate for reinvestment into the project.
• This allows businesses to recover some of their investment costs, further enhancing the attractiveness of investing in Cambodia.

i. Land and Property Taxes:

• Some QIPs are granted exemptions or reductions on land taxes, which can be significant for projects requiring substantial land for manufacturing or development.
• This can be particularly beneficial in reducing the overall cost of setting up large-scale infrastructure or industrial projects.

j. Special Investment Zones and Other Incentives:

• Projects located in Special Economic Zones (SEZs) may benefit from additional incentives, including reduced rates for land use, electricity, and water.
• Companies operating in these zones may also enjoy further tax exemptions and faster processing of permits and licenses.

Additional Benefits:

• Training Incentives: Companies involved in QIPs may receive support in training employees to meet industry standards and improve productivity.
• Capital Gains Tax Exemption: Some QIPs may also benefit from exemptions or reductions in capital gains taxes on the sale or transfer of shares or assets related to the investment.