Corporate income tax (tax on income) in Cambodia.

Corporate income tax (tax on income) in Cambodia

This guide is an overview of the corporate income tax in Cambodia.

Corporate income tax is an essential tax that both resident and non-resident companies must pay in Cambodia.

Listed below are the different matters on corporate income tax investors should know.

What is corporate income tax in Cambodia?

Corporate income tax is the tax imposed on income that a company made. Corporate income tax rates differ based on company size and residency.

Corporate income tax rate in Cambodia

Corporate income tax rates in Cambodia range from 0% to 30%.

The standard corporate income tax rate in Cambodia for companies that are classified as medium and large taxpayers is 20%.

Companies classified as small taxpayers are taxed at rates from 0% to 20%.

Company classification
Type of taxpayerCriteria
 

Small (sole proprietorship or partnership)

Annual turnover of KHR 250 million to KHR 700 million
Total turnover for any three consecutive months in the calendar year from KHR 60 million
Total expected turnover for the next three consecutive months from KHR 60 million
Participating in bidding, price consultation or surveys for the supply of goods or services
 

Medium

Annual turnover of KHR 700 million to KHR 4,000 million
Registered as a legal person or representative office
National or sub-national state institutions, associations and non-government organisations
Foreign diplomatic and consular missions, international organisations and technical cooperation agencies of other governments
 

Large

Annual turnover of more than KHR 4,000 million
Subsidiary of multi-national company or branch of a foreign company
Qualified Investment Projects (QIP)

The following activities are not allowed to apply for QIPs:

·      Commercial activities, import and export and transportation services

·      Tourism services

·      Entertainment services

·      Casino and gambling business

·      Currency and financial services

·      Activities related to newspapers and media

·      Professional services

·      Production and processing of wood products

·      Production of tobacco products

·      Real estate development

Additional corporate income tax rates
Type of companyTax rates
Oil or natural gas production or natural resources (timber, ore, gold and precious stones) exploitation30%
General insurance, reinsurance or small-scale enterprises, including property, liability and health insurance5% (gross premium income)
Life insurance or reinsurance companies, including life, endowment and annuity insurance20%
QIP during the tax exemption period0%

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Compliance Calendar

 

Tax residency of a company

What is a resident taxpayer in Cambodia?

A resident taxpayer is a company that is organised or managed in Cambodia or has its principal place of business in Cambodia.

What is a non-resident taxpayer?

A non-resident taxpayer is deemed to have a permanent establishment in Cambodia if there is a fixed place of business, a branch of a foreign company which the non-resident person carries on their business, also includes online such as e-commerce activities, if the goods or services are supplied or used in Cambodia and the business activities (including heavy equipment operations) for one or more exploration or business of natural resources for the total more than 90 days at a time or more in any 12 months period will be considered as having a PE in Cambodia.

Worldwide income and Cambodia-sourced income

Resident taxpayers are subject to tax on worldwide income, while non-resident taxpayers and branches are taxed on income sourced in Cambodia.

Year of assessment and corporate tax return filing

What is the year of assessment in Cambodia?

The year of assessment (YA) for companies in Cambodia is the calendar year, from 1 January to 31 December.

When to submit corporate income tax return in Cambodia?

The annual tax return must be filed within three months after the tax year-end. The corporate income tax or minimum tax liability can be reduced by prepayment of corporate income tax payments.

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.

Prepayment of corporate income tax

The prepayment of corporate income tax (CIT) is calculated as 1% of the company’s turnover in the previous months. It is required to be paid monthly.

If the taxpayer is in the tax holiday period, the taxpayer is also exempted from the prepayment obligation, but a nil monthly return must be lodged.

What is minimum tax?

Minimum tax is separate from the CIT and imposed at a rate of 1% on annual turnovers. If the CIT is less than the minimum tax, then the company must pay the minimum tax. The prepayment paid for the year will be equal to the minimum tax of the company.

If the CIT is lower than the prepayment of CIT payments, then no refund is due to the taxpayer as the prepayment of CIT will be used to offset the minimum tax obligations. Companies that maintain proper accounting records are exempted from minimum tax. The criteria for maintaining proper accounting records and procedures of the minimum tax will be determined by the Prakas of the Ministry of Economic and Finance.

Tax incentives available in Cambodia

The Ministry of Economy and Finance (MEF) issued Prakas No. 159 Prk to guide the implementation of tax incentives for small and medium-sized enterprises (SMEs).

Company sizeAnnual turnover (USD)Number of employees
Small-sized62,500 – 175,00010 – 50
Medium-sized175,001 – 1 million51 – 100

SMEs that are entitled to tax incentives include:

  • Agricultural or agro-industrial products
  • Food production and processing
  • Manufacturers producing domestic consumers goods, waste recycling and produce goods for the tourism sector
  • Research and development involving information technology (IT), including services for management through IT systems which are innovative
  • Enterprises located the SME cluster zones and enterprises developing the cluster zone

Tax incentives for SMEs include:

  • A three-year tax on income exemption from the registration date for new companies or for existing companies; or
  • A five-year tax on income exemption from the registration date for new companies or for existing companies, if the companies meet any of the following conditions:
    • The company uses at least 60% of local raw materials
    • The company increases its staff by 20%
    • The company is in the SME cluster

The tax incentives may be withdrawn under the following circumstances:

  • The company fails to comply with the tax obligations
  • The company changes its business activity
  • The company changes address or owner without notifying the tax administration

What depreciation is deductible in Cambodia?

Property is depreciated at specific rates if the property is used for the purpose of carrying on business. Property depreciation is classified into four classes, and the straight-line or declining balance method is applied to each class of property.

PropertyRateMethod
Intangible property   
Have specific useful lifeBased on useful lifeStraight-line
No specific useful life10%Straight-line
Tangible property   
Class 1: Building and structure5% &10%Straight-line
Class 2: Computers, electronic information systems, software and data handling equipment50%Declining balance
Class 3: Automobiles, trucks, office furniture and equipment25%Declining balance
Class 4: All other tangible property20%Declining balance

Long-term agriculture:

  • Rubber crops: is allowed for depreciation for 20 years at the rates as follows:
Beneficial yearDepreciation rate
1st and 2nd year3%
3rd and 4th year4%
5th to 10th year5%
11th and 12th year7%
13th to 15th year6%
16th to 19th year5%
20th yearThe remaining balance
  • Other crops apart from rubber: should be calculated by the straight-line method based on beneficial life of the productivity or 5% per year whichever is shorter.
  • Animal husbandry: should be calculated by the straight-line method based on beneficial life of the productivity or 10% per year whichever is shorter.

What are the non-deductible expenses?

The non-deductible expenses in Cambodia include:

  • Accounting depreciation
  • Donations, grants or subsidies
  • Extravagant and/or unrelated business expenses
  • Expenses on activities considered to be recreation or entertainment
  • Increase in provisions
  • Loss on sales or exchange of property, directly or indirectly, between related parties
  • Non-deductible tax expenses (ie withholding tax, salary tax)
  • Loss on the disposal of fixed assets as per accounting record
  • Penalties, additional tax and late payment interest imposed for violation of the 1997 Law of Taxation
  • Salary unpaid within 180 days of the next year
  • Expense with related parties unpaid within 180 days of the next year
  • Other non-deductible expense

Conclusion

To assure that your corporate income tax filings are accurate and compliant with Cambodia’s laws and regulations, we recommend engaging with Acclime’s tax services.

 

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