Cambodia’s annual corporate tax and accounting compliance obligations review (2023).
The end of the year 2023 is very close, so it is time to review the annual compliance obligations to ensure that these annual obligations have properly been fulfilled to avoid any adverse consequences.
Set out below are the common annual compliance obligations for your reference and attention:
1. Annual tax compliance
1.1 Annual tax on income/Corporate income tax return for the year 2023
A large or medium real regime taxpayer entity is generally liable to 20% Tax on Income (TOI) calculated on net taxable profit, which is calculated by adjusting accounting profit. This is done by adjusting various expenses that are either not allowable or are subject to limitation, as well as income which is taxable in the applicable year but not reflected in the annual accounting profit.
The common tax issues that you should take into consideration or take necessary action during the preparation of the 2023 TOI return include:
- Unearned/deferred income
- Tax expenses borne on behalf of the supplier/employee
- Accounting vs tax depreciation
- Salary and related party payables
- Provision expense
- Interest expense
- Utilisation of tax loss or tax credits, etc.
The TOI return for the year 2023 is due by 31 March 2024, at which time the tax due must also be paid. The General Department of Taxation will impose penalties and interest on the late lodgement of the TOI return and any late payment of tax due. Therefore, we would suggest submitting the 2023 TOI return by this deadline to avoid any penalty imposition.
1.2 Annual patent tax for the year 2024
Patent Tax is a business registration that requires payment every year before 31 March. The 2024 patent tax is due by 31 March 2024. If an entity carries a different type of business activity, a separate patent tax payable is required to pay for each business activity.
The patent tax payables are as follows:
- Small taxpayer – KHR400,000 (~USD100)
- Medium taxpayer – KHR1,200,000 (~USD300)
- Large taxpayer – KHR3,000,000 (~USD750) or KHR5,000,00 (~USD1,250) if annual turnover above KHR10,000,000 (~USD2,500,000)
Acclime can assist with ensuring that your company remits the applicable 2024 patent tax by 31 March 2024. This can be done early in 2024 to ensure the deadline is not missed.
2. Submission of 2023 financial statements to Accounting and Auditing Regulator
All entities (other than small taxpayers) which are not subject to an independent financial audit are required to submit annual financial statements to the Accounting and Auditing Regulator (ACAR) by 15th April 2024. However, as 13th will be on Saturday and 14th and 15th will be the public holidays (Khmer New Year), the deadline will be 12th April 2024.
For the Entities that are subject to an independent financial audit, it is required to submit the annual audited financial statements to ACAR by 15th of July 2024.
Acclime can assist the company to prepare and submit the financial statements to ACAR by the above required deadline to avoid the imposition of any penalties.
If a company has not submitted its 2021 and 2022 accounts to ACAR, the Government has announced that any penalties for late lodgement will be waived as long as the accounts are lodged by February 2024. If your company is in this position, Acclime can assist to prepare the accounts for lodgement prior to that date.
3. Annual Declaration of Commercial Enterprise
The Annual Declaration of Commercial Enterprise (ADCE) is a mandatory requirement for all commercial entities registered in Cambodia. It serves as a crucial mechanism for the Ministry of Commerce (MOC) to maintain accurate and up-to-date information on the country’s business landscape.
To streamline the ADCE filing process, the MOC has implemented an online system that allows companies to submit their declarations electronically. This digital approach enhances convenience and efficiency, reducing the administrative burden for businesses.
The ADCE filing deadline is within three months from the 12th month of the enterprise’s re-registration or registration date. This deadline ensures that the MOC receives updated information on a regular basis, allowing for effective monitoring and analysis of business activities. Failure to file the ADCE within the stipulated timeframe will result in penalty of KHR 2 million (~ USD500) per year.
Though the online system frequently notifies the due date for ADCE filing, we recommend that all entities registered with the MOC pay attention and file the ADCE on time to avoid penalties imposed by the MOC. If you need help with this process, please contact us at Acclime.
4. Certificate of Compliance for Qualified Investment Project for year 2024
A Qualified Investment Project (QIP) entity is generally granted duty-free imports and tax holiday incentives. To continue enjoying these incentives, a QIP must comply with all required laws and regulations. Otherwise, a QIP will lose its QIP status.
The annual Certificate of Compliance (COC) is a document certifying that a QIP is in compliance with all of the relevant laws and regulations which is issued by the Council for the Development of Cambodia (CDC) or Municipal-Provincial Investment Sub-Committee (MPISC) in the subsequent year.
However, in the event of some non-compliance, it is understood in practice that the CDC/MPISC normally requests a QIP to remedy the situation and fulfil all the outstanding requirements/obligations (i.e., submitting additional documents, requesting any missing COC from the previous year(s), etc.), rather than revoking the QIP status.
Even though there is such practice, we strongly recommend a QIP to obtain COC as per the prescribed timeline to avoid any risk of losing the QIP status.
5. Renewal of foreign work permit for the year 2024
The application for the 2024 foreign employee quota is now open and will close on November 30, 2023. Businesses that employ or intend to employ foreign nationals in Cambodia in 2024 are required to apply for a foreign employee quota from the Ministry of Labour and Vocational Training (MLVT).
A maximum of 10% of an employer’s total local workforce may be foreign nationals. However, employers can apply for an additional quota, which is more than this maximum rate, if they can demonstrate that there is a shortage of qualified Cambodian workers for a particular position.
Once the employer has the quota approved by the MLVT, the foreigner can apply for a work permit through the employer. The work permit is valid until the end of the calendar year and must be renewed by 31 March of the following year.
The Cambodian government has been enforcing the laws concerning the employment of foreign nationals in Cambodia more strictly. Employers who are found to be employing foreign workers without a valid work permit may be subject to fines and/or imprisonment. The Ministry of Interior may also expel foreigners who work without a work permit.
Employers should note that the Cambodian work permit process can be complex and time-consuming. It is, therefore, advisable to start the application process as early as possible to avoid any delays. Aclime can assist with the application process.
Contact our teams for expert support and further information about accounting & tax requirements in Cambodia to ensure you are compliant in the market.
Hugh Darwell, Director, Business Development, h.darwell@acclime.com
Bun Pesey, Corporate Services Director, b.pesey@acclime.com
