PRAKAS ON THE DETERMINATION OF THE BASE FOR ACCOUNTING THE VALUE ADDED TAX ON TRANSPORT OF GOODS OR PASSENGERS

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Ministry of Economy and finance No. 498 MEF.TD KINGDOM OF CAMBODIA NATION RELIGION KING β PRAKAS ON THE DETERMINATION OF THE BASE FOR ACCOUNTING THE VALUE ADDED TAX ON TRANSPORT OF GOODS OR PASSENGERS Having seen: Senior Minister, Minister of Economy and Finance - the Constitution of the Kingdom of Cambodia; - the Royal Decree No. NS/RKT/1198/72 dated 30 November 1998 on the Appointment of the Royal Government of Cambodia; - the Royal Kram No. 02 NS-94 dated 20 July 1994 promulgating the Law on the Organization and Functioning of the Council of Ministers; - the Royal Kram No. NS/RKM/0196/18 dated 24 January 1996 promulgating the Law on the Establishment of the Ministry of Economy and Finance; - the Royal Kram No. NS/RKM/0297/03 dated February 1997 promulgating the Law on Taxation; - the Sub-decree No. 114 ANKR.BK dated 24 December 1999; - the Sub-decree No. 15 ANKR.BK dated 7 February 2001; - the Prakas on the Implementation of VAT on the Transport of Goods and Passengers No 326 MEF.TD dated 05 June 2001; - The need of the Tax Department.

Decides Article 1. Pursuant to Articles 61, 63 and 64 of the Law on Taxation, Article 54 of the Subdecree on Value Added Tax, and Article 1 of Prakas No. 326 MoEF.TD, the VAT on Transportation of Goods or Passenger shall be implemented as follows: 1- An enterprise transporting goods or passengers into or out of the Kingdom of Cambodia shall separate the turnover received from international transports and the turnover received from domestic transports, for the base to account for VAT as follows: a. The value of transport form a place outside to a place inside the Kingdom of Cambodia (international ports and airports or the first entrances to the territory of the Kingdom of Cambodia) shall be subject to 0% VAT; b. The value of transport from international ports and airports or first entrances to the territory of the Kingdom of Cambodia to a place inside the Kingdom of Cambodia including any charges for other services such as loading, customs clearance, packaging or other services, shall be subject to 10% VAT; c. Customs duties and taxes at importation, CamControl and SGS fees that transport enterprises paid on behalf of the owner of the goods shall not be taxable. 2- In the case where the transport enterprises perform customs clearance at importation on behalf of the owner of the goods, institutions or enterprises that perform the inspection, loading or other services, shall issue tax invoices to the transport enterprise by clarifying the name, address, and VAT TIN number of that transport enterprise. If the owner of the goods performs the customs clearance at importation or exportation, institutions or enterprises that perform the inspection, loading or other services, shall issue tax invoices to the owner of the goods by clarifying its name, address, and VAT number. 3- The transport enterprise shall issue invoices to the owner of the goods by separating the value for the international transport, the value for the domestic transportation including other service fees and customs duties, taxes, CamControl and SGS fees that the transport enterprise paid on behalf of the owner of the goods as stated in paragraph 1 of this Article. The invoices shall be in compliance with the sample invoices as provided in Annex 1 to this Prakas. 4- The enterprise shall be allowed as input tax credit only for tax invoices which its name, address and VAT number are clearly specified. 5- The enterprise transporting goods into or out of Cambodia via another transport enterprise, or buying and selling tickets for international transport, shall implement in the same way as the transport enterprise by recording on the same invoice the value payable by the customers as follows: a. The value of the international transport charged by the transporting enterprise shall be subject to 0% VAT;

b. The value of other services including terminal charges, domestic transport, packaging, formalities at importation/exportation and commission shall be subject to 10% VAT. The invoices shall be in compliance with the sample invoices as provided in Annex 2 to this Prakas. 6- The agent enterprise that sells transport tickets and receives a percentage of sales commission, shall account for VAT at the 10% rate on the commission received from the principal enterprise and pay this tax to the Tax Department. The principal enterprise may use the tax invoices issued by the agent enterprise for claiming input tax credit to deduct against the output tax. The calculations of tax for the agent enterprise and the principal enterprise are illustrated in Annex 3 to this Prakas. 7- For the purposes of this Prakas, the phrase the supply of services in connection with international transport of goods or passengrs as stated in sub-paragraph (d) of paragraph 2 of Article 54 of the Sub-Decree on Value Added Tax means the services provided by the airports or ports to the transportation means such as navigation, landing and other information services related to the international transport of goods or passengers. 8- As stated in Article 61 of the Law on Taxation, in the case where the distinguishing of the value of the supply as stated in paragraph 1, paragraph 5, and paragraph 6 of this Prakas does not represent the fair value, the Tax Department may determine the value for the supply and that value shall be considered as fair value until the enterprise can present the documentary evidence agreed by the Tax Department. Article 2. The Secretary General of the Ministry of Economy and Finance, Royal Delegate in charge as the Director of the Customs and Excise Department, Chief of the Cabinet of the Ministry of Economy and Finance, Director of the Tax Department, directors of all relevant departments, all institutions and enterprises with relation to transport activities, shall effectively implement this Prakas from the date of signature. Phnom Penh, Date 18 July 2001 KEAT CHHON CC: - General Secretariat of the Senate (For information only) - General Secretariat of the Senate (For information only) - Cabinet of Ministers (For information only) - All ministries and secretariats (For information only) - All provinces and municipalities (For information only) - As in Article 2 - Documentation and chronology.

Annex 1 Enterprise A transports goods from country B to Sihanoukville via ship and transports those goods via trucks to Phnom Penh. The enterprise shall record on only one invoice the price its charges from enterprise C who is the owner of the goods by distinguishing the followings: Enterprise A Address:...Monivong Blvd VT01.1043333 Customer: Enterprise C VT 01.1067777 Address: No...Sihanouk Blvd No. Description Price Tax Rate Tax Amount Price inclusive of tax 1 Freight 800 0% 0 800 2 Packaging 100 10% 10 110 3 Lift on, Lift off(lolo) 40 10% 4 44 4 Customs clearance 200 10% 20 220 5 Domestic Transport 300 10% 30 330 6 Other services 50 10% 5 55 7 SGS 80 80 8 CamControl 20 20 9 Customs Duties and Other Taxes 400 400 1,990 69 2,059 Total or No. Description Price 1 SGS 80 2 CamControl 20 3 Customs Duties and Other Taxes 400 500 4 Freight 800 800 5 Packages 100 6 Lift on, Lift off(lolo) 40 7 Customs Clearance 200 8 Domestic Transport 300 9 Other services 50 690 VAT 10% 69 759 Total 2,059

Annex 2 Enterprise A transports goods to a place outside of Cambodia for Garment Factory B. Enterprise A shall issue an invoice as follows: Enterprise A Address No...Monivong Blvd TIN: VT01.1045555 Customer: Garment Factory B TIN: VT 01.1062222 Address: No... Road 6A No. Description Price Tax Tax Price inclusive of 1 Freight 103 0% 0 130 2 Terminal charge 50 10% 5 55 3 Customs clearance 30 10% 3 33 4 Packaging fees 20 10% 2 22 5 Domestic transport 20 10% 2 22 Total 250 12 262 or No. Description Price 1 Freight 130 130 2 Terminal charge 50 3 Customs clearance 30 4 Packaging fees 20 5 Domestic transport 20 120 VAT 10% 12 132 Total 262 Enterprise A buys transporting tickets from a transporting company at a cost of 130 and sells at 140. Enterprise A issues invoices using the following format: Enterprise A Address No...Monivong Blvd Customer : Mr. Mao Mok No. Description Price Tax Rate Tax Amount TIN: VT01.1044567 Price inclusive of Tax 1 Freight 130 0% 0 130 2 Gain 10 10% 1 11 Total 140 1 141 Or No. Description Price 1 Freight 130 130 2 Gain 10 VAT 10% 1 11 Total 141

Annex 3 Enterprise A uses Agent B to sell transporting ticket and give 20% commission fee to that agent. During the month, Agent B sells: - Tickets for international transport 50 X 140 (Price inclusive of 0% VAT) = 7,000 - Tickets for domestic transport 200 X 90 (Price inclusive of 0% VAT) = 18,000 At the end of the month, Agent B shall charge the commission of: (7,000+18,000)X 20% =5,000. Agent B shall issue invoices to Enterprise A showing the amount of 5,000 + 500 (Tax) =5,500 and pay 25,000 5,500 =19,500 to transporting Enterprise A. Agent B shall declare VAT as follows: - Input tax = 0 (assumed as NIL) - Output tax = 500 (tax from Enterprise A) - Tax to be paid = 500 Enterprise A shall declare VAT as follows: - Input tax = 500(paid to Agent B) - Output tax = 1,636 (of 7,000, fee for international transport is subject to 0% VAT, domestic transport also includes the tax amount of 18,000/11 = 1,636) - Tax to be paid = 1,136 β