Cambodia. Rules and procedures for resolving tax appeal at the General Department of Taxation of Ministry of Economy and Finance

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Cuthbert Woods
5 years ago
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1 Cambodia Modification of fiscal stamp tax rates The Royal Government of Cambodia (RGC) amended the fiscal stamp tax (FST) rates imposed on certain legal documents, business advertising posters, and sign boards. The details are outlined in the sub-decree which replaces Sub-Decree No. 76 dated 11 October An exemption is granted for sign boards that are used for non-profit purposes such as promoting social moral and environmental issues, etc. Value added tax exemption for supply of clean water According to the above regulation (Prakas), the production and supply of clean water for public use is exempt from value added tax (VAT). Consistently, Article 32 of the sub-decree does not allow taxpayers who make non-taxable supplies to claim input VAT on the purchase of materials or services used for non-taxable supplies. Supply of services or goods other than supply of clean water is subject to 10% VAT. Supply of drinking water is not covered in the Prakas. The Prakas became effective from 25 June Suspension of prepayment of tax on profit payment for listed companies The Ministry of Economy and Finance (MEF) issued a Prakas suspending listed companies from payment of monthly prepayment of tax on profit (PToP) for the period that they are entitled to tax incentives under Sub-Decree No. 01 dated 8 January The suspension is subject to conditions under Article 8 of the Sub-Decree No. 01. Rules and procedures for resolving tax appeal at the General Department of Taxation of Ministry of Economy and Finance The MEF outlined rules and procedures to resolve a tax appeal with the General Department of Taxation (GDT). The taxpayers appeal can be rejected if they fail to comply with the procedures and requirements set out in this new Prakas properly. However, the tax authority will issue a formal decision which indicates clear reasons for the rejection. Tax mechanism for finance lease transactions The MEF issued a Prakas outlining a mechanism to tax finance lease transactions. The key points are highlighted as follows: Key areas Registration requirements Lease period Conditions Taxes on finance lease transactions VAT PToP and minimum tax Tax on profit (ToP) Tax depreciation Withholding tax (WHT) PwC s comments The lessor must be a real-regime registered taxpayer and have a finance lease licence from the National Bank of Cambodia. Must be more than one year. There are various conditions that finance lease transactions must be complied with. Output VAT applies to the principal and other charges, except for interest. Input VAT is allowed as a credit to both the lessor and lessee. The lessor is subject to PToP and minimum tax on all charges and interest, excluding the principal. The lessor must recognise income at the earlier of the payment to be received is due or paid. The lessee is entitled to tax depreciation on the leased asset. WHT does not apply to finance lease transactions. Other related matters Please refer to the Prakas No MEF.PrK dated 9 December Cambodia 11

Prakas on the suspension of PToP payment for garment and footwear manufacturing enterprises Garment and footwear manufacturing enterprises are not required to pay monthly PToP for another two years,

2 Prakas on the suspension of PToP payment for garment and footwear manufacturing enterprises Garment and footwear manufacturing enterprises are not required to pay monthly PToP for another two years, until the end of However, the payment suspension requires the enterprises to submit the statutory financial audited reports to the tax administration. That means these enterprises must have the financial statements audited by independent external auditors. Otherwise, they will be subject to penalty stipulated in the taxation law. Enterprises that support the export activities of garment, textile, footwear, bag, handbag and headwear are not entitled to this suspension. Prakas on taxpayer classification under the self-declaration regime Under the self-declaration regime (real regime), taxpayers will be reclassified into three categories based on their turnover (total value of supplies of goods and services), legal form and other criteria. The criteria are summarised below: Type of taxpayer Small Criteria (approximated USD amount) Sole proprietorship or general partnership: Annual turnover of USD62,500 to USD175,000 Total turnover for any three consecutive calendar months exceeds USD15,000 Total expected turnover for the next three consecutive months exceeds USD15,000 Medium Large Participating in bidding, fee consultation or fee surveys for the supply of goods or services Annual turnover of USD175,000 to USD500,000 Registered as a legal person Government institutions below national level, associations and non-government organisations Annual turnover of over USD500,000 Branch of a foreign company Qualified investment projects Government institutions, diplomatic and consular missions, international organisations and technical cooperation agents of other governments Rules and procedures for implementing simplified accounting records for small taxpayers Prakas No MEF.PrK, dated 25 December 2015 sets out the rules and procedures for implementing simplified accounting records as well as monthly and annual tax obligations (ToP/minimum tax, VAT, PToP, tax on salary/tax on fringe benefits and WHT) for small taxpayers. Small taxpayers are required to maintain the following three accounting records: a daily purchases book, a daily sales book and an inventory book. Please refer to the Prakas for more details. 12 Asia Pacific Tax Notes

3 Rules and procedures for managing patent tax collection The Prakas sets out the rules and procedures for collecting patent tax. The amount of tax payable varies depending on the taxpayer s category and turnover. Type of taxpayers Small Medium Large Patent tax (approximated USD amount) USD100 per year USD300 per year USD750 for turnover from USD500,000 to USD2,500,000 USD1,250 for turnover over USD2,500,000 Additional tax of USD750 if the taxpayer has a branch, warehouse, factory or workshop for a business activity in a different city or province Financial Management Law The Financial Management Law for 2016 was promulgated on 17 December 2015, the key points are summarised below: Small taxpayers must follow the simplified accounting rules set out in Prakas No dated 25 December Medium and large taxpayers must follow the international accounting and reporting standards of Cambodia, which are similar to International Financial Reporting Standards (IFRS). Amounts due to related parties that are not under the selfdeclaration regime (real-regime) cannot be deducted as an expense until they are actually paid. For tax on profit purposes, banks and saving and lending institutions are allowed to record provisions for doubtful debts. The rules and procedures for tax deduction of these provisions will be defined by a Prakas issued by the Ministry of Economy and Finance. Stamp tax exemption on the transfer of a title deed or possession rights of immovable properties between relatives The RGC granted a stamp tax exemption on the transfer of a title deed or possession rights of immovable properties (i.e. lands and/or buildings) between blood parents and children, husband and wife, and blood grandparents and grandchildren. The exemption has no retroactive effect and will be included in the Financial Management Law for Cambodia 13

4 Amendment of customs duty and specific tax rates on certain imported goods The RGC amended the customs duty and specific tax rates on the following types of imported goods. Relevant authorities are required to implement the sub-decree from 1 April 2016 onwards. No. Type of tax Types of goods (please refer to the corresponding sub-decree for details) 1 Customs duty 2 Specific tax Rate Books From 7% to 0% Toys From 7% to 0% Computers and accessories Some from 15% to 7%, and Some from 35% to 15% Aluminium frame From 0% to 7% Beer From 25% to 30% Wine From 20% to 35% Cigarette From 15 to 20% Petroleum products Some from 0% to 15%, Some from 5% to 25%, Mirror (as construction materials) From 0% to 10% Electronic products Some from 0% to 10%, Some from 10% to 25%, and Some from 10% to 0%. Motor vehicles Some from 10% to 15%, Vehicles Some from 25% to 30%, Some from 50% to 60%, Some from 50% to 65%, Some from 30% to 40%, and Some from 10% to 20%. Vehicle accessories Some from 10% to 15%, The GDT issued a notification to indicate that the increase in the above specific tax rates are also applicable for locally produced beer, wine and cigarettes. Invoicing of selfdeclaration taxpayers The GDT issued an 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 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. Based on the sample of invoices attached in the GDT s instruction, the buyers also have to sign on the invoices. More importantly, the invoice must be issued either in Khmer or both Khmer and English. Any tax invoices not issued according to the existing and new criteria will not be accepted as valid invoices to claim input VAT credit or to support expense deductions. Organisation and functioning of the Tax Disputation Committee The RGC issued a sub-decree on the organisation and functioning of the Tax Disputation Committee (TDC). The TDC has the duties to review, solve and decide on disputations filed by taxpayers who disagree with the final decision or measures of the GDT and the General Department of Customs and Excise that creates any obligations on them. Any taxpayer who is not satisfied with the TDC s decision can file a complaint to the court within 30 working days after receiving the TDC s formal decision. 14 Asia Pacific Tax Notes

Procedures for collecting stamp tax on the transfer of title deeds or possession rights of registered and non-registered immovable properties To ease the transfer of property ownership, the RGC

5 Procedures for collecting stamp tax on the transfer of title deeds or possession rights of registered and non-registered immovable properties To ease the transfer of property ownership, the RGC agreed to impose stamp tax at 4% (once only on the ultimate transaction) on the transfer of title deeds of registered immovable properties and the possession rights of non-registered immovable properties. Notifications of market interest rates on loans for 2015 tax on profit For 2015 ToP returns, the GDT set the annual market interest rates on (i) loans borrowed in USD at 10.28% based on the average rate of nine major commercial banks in Cambodia and (ii) loans borrowed in KHR at 19.51% based on the average rate of two major commercial banks in Cambodia. The maximum deductible interest rates are as follows: Loans in USD % for third-party loans (10.28 x 120%) 10.28% for related-party loans Loans in KHR % for third-party loans (19.51 x 120%) 19.51% for related-party loans Cambodia 15

Turbulence in the global tax environment A disruptive storm or an opportunity to outshine? Asia Pacific Tax Notes 2016

www.pwc.com Turbulence in the global tax environment A disruptive storm or an opportunity to outshine? Asia Pacific Tax Notes 2016 Issue 29 Territories tax updates Australia Cambodia China Hong Kong India