RECENT TAX CHANGES

and

WHITE BOOK

RECOMMENDATIONS

FOLLOW-UP

Anthony GallianoChairman, EuroCham Tax Committee

CEO, Cambodia Investment Management

ANTHONY GALLIANO

Anthony is CEO of Cambodian Investment

Management, Chairman of Premium Human

Resources, Cambodian Investment Management

Insurance Agent, Dynamo Digital, Jump Digital

(Cambodia) and Phnom Penh BG Serviced Offices.

A career corporate banker with 27 years

international experience, he began his career in

the US, has been stationed in London, Brussels,

Hong Kong and Bangkok with Citibank as well as

Indonesia and Cambodia with ANZ. Anthony holds

a degree in Accounting, and has a Diploma in

Cambodian Tax.

Group CEO, Cambodia Investment Management; Chairman, EuroCham Tax Committee

TOPICS COVERED

1. Recent changes in tax regulations materially

impacting taxpayers 2015/2016

2. EuroCham White Book policy recommendations

and response from the GDT

3. Further initiatives from Eurocham

A CHANGING ENVIRONMENT FOR TAXPAYERS

Increased Regulation

Procedural Changes

More skilled and professional tax department

Stricter enforcement and heightened supervision

Expanding Tax Base

RECENT TAX CHANGES

2016 Law on Financial Management (LoFM) (Promulgated

on 17 December 2015) Prakas on classification of taxpayers

under Real Regime System (Prakas no. 1819. MEF.Prk dated

25 December 2015)

Prakas on procedure for the management of patent tax

collection and Instruction on the declaration and payment

of the 2016 patent tax

(Prakas no. 1821.MEF.Prk dated 25 December 2015 and

notification no. 032.GDT dated 4 January 2016)

WHAT WAS THE IMPACT

Abolished the Simplified and Estimated regimes in

Cambodia, only the Real Regime remained

Significantly expanded the Tax Base

Eliminated the competitive advantage of

Estimated Regime Taxpayers

Increased efficiency in the GDT/Tax Branches

WHAT ARE THE MAIN POINTS

Categorization of taxpayers by size

Small

Medium

Large

SMALL TAXPAYERS

Small taxpayers are Sole Proprietorships or Partnerships that:

Have annual taxable turnover from Khmer Riel (“KHR”) 250 million (USD62.5k) to KHR700 million (USD175k);

Have taxable turnover, in any period of three consecutive calendar months (within this tax year), exceeding 60 million KHR (USD15k);

Expected taxable turnover of 60 million KHR (USD15k) or more in the next three consecutive months;

Participate in any bidding, quotation or survey for the supply of goods and services including duties.

MEDIUM TAXPAYERS

Enterprises that have annual turnover from

KHR700 million (USD175k) to KHR2,000 million

(USD500k);

A Registered legal entity with competent

institution;

Sub-national government institutions,

associations, and non-governmental

organizations.

LARGE TAXPAYERS

Enterprises that have annual turnover over KH2,000

million (USD500k);

Branch of a foreign companies;

A Qualified Investment Project (“QIP”) as approved

by the Council for the Development of Cambodia;

Government Institutions, diplomatic missions and

foreign consulates, international organizations and

other Government Technical Cooperation Agency

2016 Patent Tax Fee

Khmer Riel (KHR)

2016 Patent Tax Fee

United States Dollars (US)

Small Taxpayer KHR400,000 USD100

Medium Taxpayer KHR1,200,000 USD300

Large TaxpayerKHR3,000,000

KHR5,000,000

USD750 or

USD1,250 (over 2,5m rev)

PATENT TAX FEES

ADDITIONAL PATENT TAX

Additional Patent Tax shall be paid:

If an enterprise carries out different types of

businesses, a separate patent tax certificate is

required for each activity.

If the enterprise carries out any branch, warehouse or

business in different cities or provinces, a separate

patent tax certificate for each location is required.

ADDITIONAL PATENT TAX

Large Taxpayers are required to pay KHR3,000,000 (~USD750)

for each additional patent tax certificate, if the enterprise

carries out any branch, warehouse or business in different

cities or provinces.

Taxpayers are obliged to display their valid patent tax

certificates on their business premises.

Taxpayers who commence business within the first 6 months of

the year shall pay patent tax in full while those that

commence business in the last 6 months of the year shall pay

half the patent tax fee.

PRAKAS no. 1820. MEF.PrkDATED 25 DECEMBER 2015

Rules and procedures for the implementation of

the simplified accounting for small taxpayers.

The objective of this Prakas is stated to provide

guidance on simplified accounting requirement

in order to facilitate the small and family

businesses operations.

Small taxpayer is required to maintain only 3

simplified accounting books:

Purchase Day Book is to record daily purchases

Sales Day Book is to record transactions on the

supply of goods or services.

Inventory Book is to record the beginning stock,

purchase during the year, and ending stock for

enterprises who making supply of goods.

PRAKAS no. 1820. MEF. PrkDATED 25 DECEMBER 2015

SPECIAL INCENTIVES FOR SMALL TAXPAYERS

2% VAT payment rather than 10%

Withholding Tax on Rent

Progressive Tax Tranches for Tax on Profit

GDT’s INSTRUCTION NO. 1127 DATED 26th OF JANUARY 2016

Instruction on invoicing requirements (including

invoice criteria) for self-declaration taxpayers (i.e. real

regime).

In addition to the existing criteria of a tax invoice as

stated in the Value Added Tax (VAT) regulations,

taxpayers are now required to use good quality ink

and paper for printing invoices to ensure that they

can be maintained in good condition for 10 years.

4 invoice templates have been provided by the GDT, can be

modified as long as the invoice contains the criteria

Buyers also have to sign on the invoices, however Customers do

not need to return signed invoices to the Supplier.

Invoice must be issued either in the Khmer language or two

languages (i.e. Khmer with English language underneath).

Any tax invoices not issued in accordance with the existing and

new criteria above won‟t be accepted as valid invoices to claim

input VAT credit, nor to support the deductibility of expenses

GDT’s INSTRUCTION NO. 1127 DATED 26th OF JANUARY 2016

Name, address, and value-added tax identification number

(VATTIN) of the seller or supplier

Clear invoice number in a chronological order and date of

issuance of the invoice. Invoice sequencing restarts at beginning

of tax year.

Name and address of the purchaser and value-added tax

identification number

Description, quantity, and selling price of the goods or services

Total prices excluding tax and separate tax amount

VAT INVOICE REQUIREMENTS AS SET OUT IN THE LAW ON TAXATION

SUB-DECREE, NO. 03 SD, DATED 6 JANUARY 2016THE ORGANIZATION AND FUNCTIONING OF THE COMMITTEE OF TAX ARBITRATION (CTA)

The CTA shall review, resolve and make decisions

on protests regarding customs, excise and tax

disputes arising from final decisions or rulings by the

General Department of Customs and Excise

(GDCE) and/or the General Department of

Taxation (GDT).

SUB-DECREE, NO. 03 SD, DATED 6 JANUARY 2016THE ORGANIZATION AND FUNCTIONING OF THE COMMITTEE OF TAX ARBITRATION (CTA)

A protest letter is to be submitted within 30

working days by the taxpayer, if dissatisfied with

the tax notices

GDT or GDCE to respond within 60 working days

of receiving the protest letter

A protest letter is to be submitted to the CTA

within 30 working days by the taxpayer, if

dissatisfied with the GDT or GDCE‟s resolution.

SUB-DECREE, NO. 03 SD, DATED 6 JANUARY 2016THE ORGANIZATION AND FUNCTIONING OF THE COMMITTEE OF TAX ARBITRATION (CTA)

The CTA to respond within 60 working days or reasonable timeframe depending on the tax issues/cases of receiving the protest letter

A protest letter is to be submitted as an Appeal to the Court within 30 working days by the taxpayer, if dissatisfied with the CTA‟s resolution

The appeal to the court does not prevent the implementation of the resolution by the CTA, as per the existing law, “The taxpayer must deposit in the national treasury an amount of money equal to the taxes, additional taxes and interest under dispute and as assessed by the tax administration before filing the appeal to the court.”

PRAKAS No. 496 MEF.P. ON TAX REGISTRATION, APRIL 6TH, 2016

Any company‟s chairperson/owner of foreign

nationality who resides outside of Cambodia and is

unable to be physically present for their photo

taken and finger prints scanned can issue a written

authorization to a board representative to act on

their behalf by having their picture taken and

fingers scanned

WHITE BOOK RECOMMENDATIONS

What is the “White Book”

EuroCham has developed an Advocacy pillar

dedicated to promoting dialogue with its

Cambodian counterparts, both within the Royal

Government and the private sector.

EuroCham relies on the works of its Sectorial

Committees, the Tax Committee is one of 9

committees

WHITE BOOK RECOMMENDATIONS

The committees contributed to the publication of

the “White Book”, a collective expression of the

views of EuroCham member companies on

specific aspects of the business environment in

Cambodia.

In July, a delegation from Eurocham Cambodia

met with H.E. Kong Vibol and his deputy director

generals to discuss the tax recommendations

raised in the “White Book”.

KEY TAXATION RECOMMENDATIONS

Withholding Tax

Reconsider Withholding Tax on Services to

non-registered taxpayers

Reconsider Withhold Tax on Rent on a Property

owned by a Registered Company

VAT

More specific guidance for VAT exemption on

exporting of services

Reiterate the timeframe within which VAT refund

application should be processed

KEY TAXATION RECOMMENDATIONS

Tax Registration

Requirement for a Lessee to provide evidence of

immovable property tax on a property it has leased

for conducting business.

Pre-payment of Profit Tax/Minimum Tax

Reconsider PPT/Minimum Tax for business models

that have high turnover and low margin

KEY TAXATION RECOMMENDATIONS

Entertainment Expense

Setting allowances for Entertainment Expense

QIP Tax on Profits, Dividends(R/E on Holiday Period)

Reconsider Article 23 which provides a „claw-back‟

mechanism – if a QIP has retained earnings during the

„profit tax exemption‟ period, the 20% tax rate that they

would have been paying if not holding QIP status is

applied at the point that they seek to repatriate dividends.

KEY TAXATION RECOMMENDATIONS

RECENT TAX CHANGES &WHITE BOOK RECOMMENDATIONS

Next Steps

Discussing MOU to continue dialogue and

collaborate on 2017 White Book

QUESTIONS

THANK YOU

EuroCham Cambodia

TAX FORUM

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