Businesses have several legal requirements that they must fulfil, and some could possibly make mistakes. In this guide, we have put together some of the common compliance mistakes for businesses operating in Cambodia and how to avoid them.
1. Sub-leasing a business premises
All companies must have a registered business address to keep their accounts and records. If the company’s business operations are located in Phnom Penh, the company must register the business address with the Phnom Penh Municipal Office.
Records that must be kept at the registered office in Cambodia are:
- Articles of incorporation
- Accounting records
- Directors’ records
- Minutes of meetings
- Directors’ resolution
- Shareholders’ resolution
- Securities register
Newly incorporated companies must register with the Ministry of Commerce (MoC), which requires a copy of the land title or the lease agreement of the company’s business premises.
If your business office is sub-leased, you must ensure you have the owner’s consent, not just the person who is leasing the premises to you.
Some may make a mistake by renting a business office from a lessor who is not the legal owner of the office; therefore, it is necessary to make sure that the lessor is the legal owner or that the legal owner allows the sub-lease of the office.
In the case that your business premise is sub-leased and does not have the owner’s permission to rent the location, your registration may be rejected.
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2. Submission of the annual declaration
Companies in Cambodia must file an Annual Declaration of Commercial Enterprise that states the current status and any changes that apply to the company. If the company has not made any changes, the declaration is still required to be submitted.
The annual declaration must be submitted to the MoC and the deadline is three months from the date of the Company approved registration and then annually thereafter.
Changes that companies must report in the annual declaration are:
- Address of the registered office
- Company name
- Current address of the shareholders
- Form of the company
- Name of the shareholders and number of shares held by each shareholder
- Objectives of business
- Registered office
Companies may make a mistake by not reporting these changes that are made within the company. Failure to submit the declaration exposes the company to a fine of up to KHR 2 million (around USD 500).If the company fails to submit the annual declaration for three consecutive years, the company may be deemed illegal and be deregistered.
3. Accounting noncompliance
Not following the accounting rules is another compliance mistake that companies may encounter.
All books, records and documents must be in the Khmer language and Cambodian Riel and kept for at least 10 years at the business premise in Cambodia.
However, companies that carry out business with foreign countries or are subsidiaries of foreign companies are allowed to prepare accounting documents in another language and other currencies only if the company has received approval from related authorities.
The accounting period in Cambodia coincides with the calendar year (1 January to 31 December).
For noncompliance, there are various types of penalties you could possibly face.
|Type of noncompliance||Large taxpayers (KHR)||Medium taxpayers (KHR)||Non-profit organisations (KHR)|
|Using a different accounting period other than what is required by the Law of Accounting and Auditing (LOAA) without prior approval||2 million||1.5 million||800,000|
|Using another language other than Khmer in the accounting records and financial statements||2 million||1.5 million||800,000|
|Using other currencies other than KHR in accounting records and financial statements without prior approval||2 million||1.5 million||800,000|
|Late or non-filing of financial statements with the General Secretariat of the National Accounting Council (NAC)||2 million||2 million||800,000|
|Failure to maintain accounting records||10 million||10 million||6.4 million|
|Failure to prepare the financial statements in accordance with the existing accounting standards||10 million||8 million||6.4 million|
|Failure to have the financial statements audited by an independent auditor||20 million||16 million||1.6 million|
|Using financial statements to fulfil tax obligations that are not prepared in accordance with the existing accounting standards||10 million||8 million||4.8 million|
|Failure to keep accounting documents as required by the law||10 million||8 million||8 million|
Delayed settlement of the penalties listed above from the date the penalty notice is received will be subjected to the following additional penalties:
- Over 30 days – double penalty amount
- Over 60 days – triple penalty amount
- Over 90 days – legal action initiated by the NAC
To ensure you accurately follow the accounting requirements, you can find out more information in our Introduction to Accounting in Cambodia Guide, or you can rely on Acclime’s accounting services to help prepare and maintain your accounts.
4. Violation of tax provisions and additional tax
Once you have registered the company, you will need to register for tax by completing the General Department of Taxation’s (GDT) application form on the registration service website.
The following documents must be attached:
- Proof of paid property tax or property information of the enterprise
- Bank account information (must be provided in digital form within 15 working days after tax registration. Failure to do so would result in the revocation of the given certificates from GDT).
Companies and individuals in Cambodia are subject to the following taxes:
- Corporate income tax
- Personal income tax (salary and fringe benefit tax, which must be prepared and submitted by the employer)
- Withholding tax
- Value-added tax (VAT)
When must tax returns be submitted?
Annual tax returns must be filed within three months after the tax year-end.
Monthly returns must be paid by the 20th of the following month. However, if the 20th falls on a weekend or a public holiday, the deadline will be extended to the next working day. If the monthly return is filed electronically, the deadline is the 25th of the following month
What are the penalties for noncompliance?
According to article 125 of the Law on Taxation, a taxpayer is considered negligent if the amount of tax paid is less than the amount of tax determined by tax provisions by no more than 10%, and if they fail to file a tax declaration or pay tax by the deadline.
Taxpayers are considered seriously negligent if the amount of tax paid is less than the determined tax amount by more than 10%.
An individual is considered as obstructing the implementation of the tax provisions when the individual:
- Fails to maintain proper records of accounts and other documents or fails to issue invoices on transactions
- Fails to allow the tax administration access to records of accounts and other documents
- Fails to register with the tax administration
- Fails to notify the tax administration of any changes in the registration
- Makes fraudulent records, documents, reports or other information
- Conceals or destroys accounting papers, records, documents, reports or other information
- Attempts to obstruct the assessment or the collection of taxes
- Fails to submit a nil tax declaration within 30 days of the date required by the law
- Supports any of the above acts
A taxpayer who:
- Is negligent will be subjected to an additional tax of 10% of the amount of the underpaid tax and 1.5% interest per month on the amount of the underpaid tax.
- Is seriously negligent is subjected to an additional tax of 25% of the amount of the underpaid tax and 1.5% interest per month on the amount of underpaid tax.
- Where a unilateral tax reassessment is issued, the taxpayer is subjected to an additional tax of 40% of the amount of the underpaid tax and 1.5% interest per month on the amount of underpaid tax.
- In the event of a failure to pay tax by the deadline, additional tax will be imposed at a rate of 10% of the amount and 1.5% interest per month on the amount of the late payment, plus obstruction of the implementation of tax, which is KHR 2 million.
Some compliance mistakes that businesses in Cambodia could possibly make are sub-leasing a business premises without the legal owner’s consent, not submitting the annual declaration, not complying with the accounting standards and violating the tax provisions. Acclime can ensure you stay up to date with your company compliance requirements. Feel free to contact us for assistance.
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