The Postponement to Pay Immovable Property Tax for 2013 Tax Payment for the Business of Boreys, Flats, Villas and Buildings for Sale

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Lambert Fowler
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1 Bun & Associates TAX UPDATE The Postponement to Pay Immovable Property Tax for 2013 Tax Payment for the Business of Boreys, Flats, Villas and Buildings for Sale Registration Obligation for Organizations and Businessmen

2 * This TAX UPDATE is part of our publication series updating developments in the Cambodian tax regulations. Subsequent publications can be subscribed for at associates.com.

3 Determination of Interest on Loan Ref: Instruction IST GDT 1707 dated 02 October 2013 Based on the notification on the determination of low, high, and free interest loans which was recently issued by the General Department of Taxation, the tax official no longer deems interest free loans or low market rates obtained from banks and financial institutions or other enterprises, as an interest expense or interest income (i.e. deemed subsidy) for the purpose of Withholding Tax and Tax on Profit. However, in the case that such an interest rate is higher than the market rate, it shall be subject to an adjustment by the exceeding interest expense by the tax official down to the market rate for the purpose of calculating tax on profit. In addition, exceeding interest expense shall become a non deductible expense for tax purpose, and an applied market interest expense is subject to limitations of deductibility within one taxable year (i.e. interest income plus 50% of net non interest profit). Moreover, the market rate for loans which the tax official shall use is determined as follows: Overseas loan: annual interest rate is the annual average rate of SIBOR plus 6%. Domestic loan: annual interest rate is the annual average rate of the National Bank of Cambodia. In addition, all of these kinds of loans require supporting documents to be maintained, such as a loan agreement which is certified by a lawyer, a telex transfer of money, and accounting records for relevant loan transactions. Whenever documents are not maintained or kept properly, such loans shall be treated as non existent and considered as taxable profit by the tax official. The Postponement to Pay Immovable Property Tax for 2013 Ref: Notification SChN GDT 1721 dated 08 October 2013 The General Department of Taxation ( GDT ) has decided and informed the owners of immovable property that the deadline for collection of the immovable properties tax will be delayed to 31 October Additionally, The GDT will provide for further service on Saturdays and Sundays at the ongoing Provincial District Tax Branch. Tax Payment for the Business of Boreys, Flats, Villas and Buildings for Sale Ref: Notification SChN GDT 1728 dated 09 October 2013 The General Department of Taxation ( GDT ) has informed the owners of boreys, flats, villas and buildings for sale that they must include the Value Added Tax ( VAT ) at the rate of 10% to the buyer when the property is sold. Also each month, they must declare 1%

4 Prepayment of Tax on Profit to the tax administration on the turnover. Otherwise, the said owners shall be subject to tax reassessments. In addition, the GDT suggested that owners obtain the supplies from VAT registered suppliers, in order to receive the VAT input or credit, to offset against the VAT output which is imposed on sale. Registration Obligation for Organizations and Businessmen Ref: Notification SChN GDT 1734 dated 10 October 2013 The General Department of Taxation has informed businessmen, on going organizations such as religious and charitable, and non profit organizations etc. that they must register with the tax administration within 15 (fifteen) days after commencement of their activity, so that they can be categorized in one of the following tax regimes: 1. Registration under real regime: a) All kinds of companies and on going organizations b) Businessmen excluding (a) those which have an annual income starting at 500 Million Khmer Riel (approximately 125,000 USD) for goods supplies, and b) those starting at 250 Million Khmer Riel (approximately 62,500 USD) for service supplies, and c) those starting at 125 Million Khmer Riel (approximately 31,215 USD). 2. Registration under estimated regime: Any other kinds of businessmen who do not meet the above mentioned criteria shall be required to register under the estimated regime. Also, failure to register shall be considered as an obstruction on the implementation of taxation, and shall lead to penalty fines of two Million Khmer Riel for real regime taxpayers and 500 Thousand Khmer Riel for estimated regime taxpayers. Moreover, in the case of tax audits, the said entities or businessmen might be subject to a unilateral tax reassessment from the tax auditor. Disclaimer: The B&A TAX UPDATE is published for the purpose of notifying readers of changes in the tax regulations. This is not an academic text, nor is it intended to be relied upon while making legal decisions. Bun & Associates accepts no responsibility for use of this information. Bun & Associates TAX UPDATE For more information, please contact: info@bun associates.com associates.com

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Tax System in Cambodia

Tax System in Cambodia BNG Legal 2016 No 65B, St 111 PO Box 172 Phnom Penh Cambodia +855 23 217 510 +855 23 967 450 +855 23 212 840 cambodia@bnglegal.com www.bnglegal.com Tax System in Cambodia TABLE OF