CORPORATE TAXES
SIGNIFICANT DEVELOPMENTS
A value-added tax was implemented on January 1, 1999.
TAXES ON CORPORATE INCOME
Corporate tax/Corporate income is taxed according to a taxpayer's “regime.” Most activities associated with foreign investment will fall into the “real” regime. Unless otherwise noted, the following comments are restricted to real-regime taxpayers.
Cambodia's tax on profit seeks to tax business profits and "designated passive income." Business profits can include capital gains. Passive income includes interest, royalty and rental income.
The standard rate of tax on profit for companies and permanent establishments is 20%. A preferential rate of 9% may be granted pursuant to investment incentives given by the Council for the Development of Cambodia. Oil and gas and certain mineral exploitation activities are subject to tax at the rate of 30%. Insurance activities are taxable at the rate of 5% of the gross premium income.
Advance tax on dividends/The dividend-paying company is required to make an advance payment of tax on profit at the time of dividend distribution.
This advance payment is levied at the prevailing rate applicable to the dividend-paying company and on the gross dividend value. It is creditable (except for insurance companies) to the dividend-paying company (not the shareholder) against future liability to the tax on profit. A 20 share-holder is entitled to establish a special “dividend account,” from which the relevant dividend may be distributed without further obligation.
Dividends on which the advance tax on profit has been paid are exempt from tax on profit in the hands of the shareholder.
CORPORATE RESIDENCE
A company is resident in Cambodia if it is “organized and managed” or has its “principal place of business” in Cambodia. There is an internationally recognizable permanent-establishment definition, and draft regulations may quite considerably extend the circumstances under which the Cambodian tax authorities may consider a permanent establishment to exist.
OTHER TAXES
In addition to the tax on profit, the following taxes may affect certain investors.
Minimum tax/Real-regime taxpayers arc subject to a separate minimum tax, which is due irrespective of any exemption from tax on profit. The minimum tax is an annual tax with a liability equal to 1% of the turnover of the taxpayer for the year in question. The tax is due irrespective of the taxpayer's profit or loss position.
Value-added tax/VAT is applicable to real-regime entities and is charted at 10% on the price of supply of most goods and services. Most exports of good and most services rendered outside Cambodia are zero-rated. Some supplies are exempt, the main categories being public postal service, medical and dental services, transportation of passengers by wholly state-owned public transportation systems, insurance services, and primary
financial services.
Turnover tax/Turnover tax is applicable to non-real-regime entities at a flat rate of 2% (with effect from January 1, 1999) and is levied on revenue from the supply of goods and services, although most exports are exempt. Turnover tax is not VAT; it is a tax on gross turnover received, generally calculated by multiplying the total amount invoiced by the
applicable rate.
Specific tax on certain merchandise and services/The specific tax, with rates ranging from 2% to 30%, is a form of excise tax that applies to the importation or domestic production and supply of certain goods and services. Specific tax due on domestically produced goods is generally applied to the ex-factory selling price." For imported goods the tax is
due on the customs duly inclusive of CIF value, For air transport, hotel and telecommunications services the tax is generally payable on the invoice price, although for plane tickets this is limited to tickets issued in Cambodia.
Import and export duties/import duties are levied on a wide range of products at rates of 7%, 15%, 20%, 35%, or 50%, although exemptions may be available as an investment incentive. Following Cambodia's entry into ASEAN (possibly in 1999), the government will probably be required to issue a limited list of goods for which import duties will be reduced in accordance with the Common Effective Preferential Tariffs program. Export duties are levied on only a limited number of items, such as timber an
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