Tax return amendment penalty waiver and tax incentives for tourism enterprises in Cambodia.

Following the 19th Government-Private Sector Forum on 13 November 2023, a number of measures were introduced by the government, including tax incentives to taxpayers to reduce their burden during the current economic downturn. It is understood that some incentives need separate Prakas (regulation) in order to be implemented.

For the tax incentives, the Ministry of Economy and Finance (MOEF) issued the Prakas to provide clarification on the implementation procedure. There are two tax incentives in particular that we think you should be aware of:

1. Penalty waiver for voluntary amendment of tax returns
2. Tax incentives for tourism enterprises

Penalty waiver for voluntary amendment of tax returns – Prakas no. 071 dated 30 January 2024

Based on the tax provisions, the taxpayers or withholding tax agents can request to revise a tax declaration within three years after the tax declaration submission date. The revision request is based on an error or an oversight made by the taxpayers in the previous tax declaration. If the amendment of tax returns results in additional tax payable, it shall be subject to penalties (additional tax of 10% and accrued interest of 1.5% per month).

To encourage voluntary amendment of tax returns, the MOEF issued the Prakas no. 217 dated 14 March 2022 to reduce the penalty as follows:

• The additional tax shall be only 10%.
• The accrued interest of 1.5% per month shall be reduced by 50% or 20% if the amendment is made within six months and after six months, respectively, after the submission date of the tax declaration.

The 19th Government-Private Sector Forum extended Prakas no. 217 until the end of June 2024. However, it’s worth noting that Prakas no. 217 originally had no specified expiration date, creating confusion for taxpayers in its implementation.

Therefore, the MOEF issued the Prakas no. 071 dated 30 January 2024 to provide clarification as follows:

1. The taxpayers/withholding agents who voluntarily request the amendment of the accounting records and tax returns shall be exempted from all administrative penalties, including additional tax, interest, and fines, with a timeframe by the end of June 2024 as follows:
   1. Requests to amend the accounting records and tax returns for transactions that occurred before January 2024. However, the exemption does not apply to requests for amending returns related to transactions occurring from January 2024, and administrative penalties will still be applicable in such cases.
   2. Requests to amend the accounting records and tax returns during a tax audit event, prior to the identification of mistakes by tax auditors (assuming the auditor is absent and there is no record of the audit’s result), will also be eligible for the exemption.
2. If the amendment of tax returns is based on the audit result that the auditor identified during the tax audit, the taxpayers/the withholding agents shall be subject to the additional tax of 10% and interest of 1.5% per month in accordance with tax laws and regulations in force. In this case, the taxpayers and withholding agents shall be subject to additional tax and interest according to the procedures and results of the tax audit. Where additional tax and interest is paid through the voluntary amendment of tax returns, the taxpayer is allowed to offset the payment against the additional tax and interest, which is the result of the tax audit.

Our comments

The tax provision mentioned in point two, stating that “amendments from tax audit results are still subject to normal penalties,” appears impractical in our view. This is because, in practice, the GDT typically does not accept amendments to tax returns during the tax audit process. Even if, in rare instances, such amendments are accepted during a tax audit, the tax auditors usually do not reassess the same item in the subsequent tax reassessment.

Given the clarity that voluntary amendments to tax returns for transactions before the year 2024 will not incur penalties if made by the end of June 2024, we strongly recommend a thorough review of transactions preceding 2024 to identify any errors leading to under-declaration of tax. If such errors are found, it is advisable to submit amendments to the GDT before June 2024 to benefit from the waiver of penalties.

Tax incentives for tourism enterprises – Prakas no. 119 dated 08 February 2024

The tourism sector, encompassing hotels, guest houses, restaurants, and more, has faced significant challenges due to the COVID-19 Pandemic. In response to these difficulties, the government, having already provided tax incentives in the past, announced further support during the 19th Government-Private Sector Forum. The additional measures include exemptions from monthly tax payments, waivers of tax liabilities, and a suspension of tax audits.

To provide clarification on these tax incentives, the MOEF issued the Prakas no. 119 dated 08 February 2024 as follows:

1. For Enterprises in the tourism sector, including hotels, guesthouses, restaurants, and tourism agent companies located in Siem Reap, they shall:
   1. Be exempt from all types of monthly tax payable, excluding VAT and Accommodation Tax, from October 2023 to June 2024
   2. Be exempt from 2023 Tax on Income. For already paid Prepayment of Tax on Income, it will be allowed as a tax credit to offset the Tax on Income for the year 2024
   3. Have all tax liabilities waived for the period before the year 2023 including tax payable, additional tax, interest, an additional 25% and continuous run interest
   4. Not be subject to tax audits for the years 2020 to 2023

2. For Enterprises in the tourism sector, including hotels, guesthouses, restaurants, and tourism agent companies located in Phnom Penh, Sihanouk Ville, Kep, and Kampot Provinces, such enterprises shall not be subject to tax audit for the years 2020 to 2022.

Our comments

• Point 1.C: The process for obtaining confirmation on the tax liability waiver lacks clarity. It remains uncertain whether the GDT will automatically issue the confirmation or if taxpayers need to initiate a request with the GDT for confirmation. Unfortunately, we have not received any response from the GDT regarding this matter thus far. If your entity, operating in Siem Reap, has tax liabilities, it is advisable to proactively submit a request to the GDT for clarification.
• Points 1.D and 2: Does the statement “not be subject to tax audit for years 2020 to 2023/2022” imply that there won’t be any tax liability in the future for these years? Typically, tax liability arises after a GDT-conducted tax audit. Therefore, one might anticipate that the years exempt from tax audits would not incur future tax liabilities.

Please contact our team for expert support and further information about accounting & tax requirements in Cambodia to ensure you are compliant in the market.