In recent years, the Cambodian government has undertaken various reforms to improve tax collection and revenue administration, conducting business audits and rolling out an online collection platform.
This, along with continued economic growth, has successfully raised tax revenues. In 2017, its tax department saw a 30 per cent jump in tax revenues collected, compared to 2016, the Phnom Penh Post reported.
At the same time, taxes remain instrumental as a lever not only to attract foreign investors but also to boost the performance the micro, small and medium local enterprises.
For instance, the government announced in May 2018 new incentives to get companies to register formally - including a two year tax exemption, a Khmer Times report said. It is also considering tax breaks for businesses that employ large numbers of people, purchase large quantities of raw materials, or digitalise their accounting systems.
Here are the key tax rates:
Corporate Tax: 20% standard rate
Cambodia levies a tax on corporate income, at a standard rate of 20 per cent.
Taxable income includes capital gains and passive income, such as interest, royalties and rent. The tax is imposed on the worldwide income of resident taxpayers (companies that are organised, managed or have a principal place of business in Cambodia). Companies that are not resident tax-payers need only pay tax on income from Cambodian sources.
For businesses classified as medium or large taxpayers, the corporate income tax is 20 per cent. Those classified as small taxpayers face a progressive range of rates from 0 per cent to 20 per cent.
Entities engaged in oil or natural gas production, or the exploitation of natural resources such as timber, ore, gold and precious stones are taxed at a higher rate of 30 per cent.
Insurance companies providing insurance or reinsurance products for property or other risks are levied a lower tax rate of 5 per cent, while those providing life insurance or reinsurance in the form of savings products are taxed at the standard 20 per cent rate.
There is a separate annual tax of 1 per cent of annual turnover, inclusive of all taxes except the value-added tax.
If the tax paying company is already paying a tax on income that exceeds the amount of the minimum tax, they need to pay the minimum tax. Enterprises that do not maintain proper accounting records, including those that incur losses, are subject to this minimum tax on turnover.
Qualified Investment Projects, however, are not subject to any minimum tax.
Incentives for investment
Tax incentives are used to attract foreign investors. A qualified investment project (QIP) that has been registered and approved by the Council for the Development of Cambodia may receive incentives such as:
An exemption from minimum tax
Profits tax holiday of up to six years
Special depreciation at a 40 per cent rate in the first year that property is placed in service
Exemptions from import duty
For 100 per cent export-oriented companies located in special economic zones, there is also a VAT exemption on the import of raw materials.
Indirect Tax: 10% VAT
Cambodia levies a value-added tax of 10 per cent on the supply of goods and services, and goods imported into Cambodia.
Certain supplies, such as that of exported goods and services, are zero-rated. And other activities are exempt from VAT, including public postal services, medical and dental services, state-owned public transportation services, insurance services, educational services, and non-profit activities.
All taxpayers supplying taxable goods and services must register for VAT - smaller companies are not exempted.
Personal Tax: 20% top marginal rate
This is a monthly salary tax on income that individuals derive from employment, rather than income tax per se. Salary is broadly defined to include wages, remuneration, bonuses, overtime pay, compensation, and fringe benefits in cash or kind, such as the use of a car, provision of meals or accommodation, pension fund contributions that make up more than 10 per cent of salary, and so on.
Cambodian residents are taxed on their worldwide salary income, based on a progressive tax rate schedule that has a top marginal rate of 20 per cent, applied to monthly cash salary above 12.5 million Cambodian riel. Individuals based in, or residing in Cambodia for at least 182 days in the calendar year are deemed tax residents.
Non-residents are taxed only on their Cambodian-sourced salary income, at a flat rate of 20 per cent.
Need more information?
Official: General Department of Taxation
Deloitte: Cambodia Tax Highlights 2018
KPMG: Cambodia Tax Profile (Updated June 2015)
PwC: Cambodia Tax Summary