Tax in Cambodia
Cambodia's tax system is a self-declaration regime that categorises individuals as small, medium or large taxpayers. Unfortunately, tax requirements in Cambodia can be confusing, as there are extensive tax avoidance and corruption issues. However, here is an overview of what you should be paying in accordance with the law.
Personal Income Tax
Although everyone earning above a certain amount should pay taxes, in practice a large percentage of both Cambodians and expats do not pay tax on their incomes.
Cambodia does not have a system that requires expatriates to file and pay personal income tax directly to the General Department of Taxation (GDT) in Cambodia. Nor is it required to submit an annual tax return.
Your employer is obliged to register you as an employee, help you to arrange your work permit and even pay your income tax on your behalf. However, many employers choose not to do this, which leaves employees in a bit of a legal limbo as there isn't an easy way for individuals to declare and pay their taxes, so most people simply do not do so. This may well change in the future, but there is currently little enforcement for individuals to comply with tax laws in Cambodia.
That said, by law, how much you are taxed on your salary should depend on your residency status and where you earn your salary, regardless of where this salary is paid (the term salary includes basic remuneration, bonuses and overtime). A resident is liable to pay taxes on their worldwide salary, but non-residents are only required to pay tax on any salary they earn in Cambodia itself.
You are considered a resident taxpayer if you have a residence or primary abode in Cambodia or are physically present in the country for more than 182 days in any 12-month period ending in the current tax year.
Non-residents should pay a flat tax rate of 20%, whereas the tax rate varies for residents, depending on their monthly salary. Those earning under KHR1.2 million (~US$300), do not have to pay any tax.
Residents are then taxed in accordance with the following:
- 5% for those earning between KHR1.2 million and KHR2 million (~US$300-US$500)
- 10% for those earning between KHR2 million and KHR8.5 million (~US$500-US$2,125)
- 15% for those earning between KHR8.5million and KHR12.5 million (~US$2,125-US$3,125)
- 20% for those earning over KHR12.5 million (~US$3,125).
NB. Tax rates are stated in Cambodian Riel (KHR) and the tax authorities issue official exchange rates for calculation purposes each month.
Corporate Income Tax (CIT)
If you own a business or have investments in Cambodia, you will likely be liable to pay corporate income tax, withholding tax, value-added tax (VAT), minimum tax, import duties and tax on the salary of employees each month (usually on the 20th).
As a business owner, you must register with the General Department of Taxation (GDT) to receive your taxpayer's identification number (TIN) within 15 days of registering with the Ministry of Commerce. This registration will cost you US$650 for a year, and the GDT will also issue you with a tax patent and a VAT certificate.
The same applies to corporate income tax as it does to personal income tax ' resident taxpayers are taxed on their worldwide income, while non-resident taxpayers and those with permanent establishments are taxed on their Cambodian income only.
The standard corporate tax rate is 20% payable monthly at 1% of monthly turnover and then trued up on an annual basis after the submission of a tax return. Should the CIT paid during the year exceed the annual CIT liability as per the tax return, a credit can be carried forward to the following tax year.
If your business earns more than US$750,000 a year, employs more than 100 people, or has assets worth more then US$500,000 in total, your financial statements should be audited by a registered external auditor within six months of the end of a financial year.
If you are found to have underpaid in taxes, you will be issued with a notice outlining the outstanding sum and be liable to pay a penalty of up to 40% of this amount owed, as well as 2% interest per month.
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