Cambodia–Malaysia double taxation agreement now in effect.

On 1 January 2021, the double taxation agreement between the Government of the Kingdom of Cambodia (Cambodia) and the Government of Malaysia (Malaysia) came into effect.

The double taxation agreement was officially signed in September 2019 by Cambodian minister Aun Pornmoniroth and Malaysian Minister of Foreign Affairs Saifuddin Abdullah.

However, according to Article 29 of the agreement, the double taxation agreement could not come into effect until the exchange of diplomatic notes took place, and domestic procedures in both countries were completed.

The purpose of this treaty is to afford relief double taxation with respect to taxes on income and to prevent of tax evasion and avoidance between Cambodia and Malaysia.

To benefit from and to implement the reduced withholding rate under the double taxation agreement, a taxpayer in Cambodia shall obtain the approval from the General Department of Taxation of Cambodia via administrative application.

Provisions of the Cambodia–Malaysia double taxation agreement

Taxed covered

The taxes covered in Malaysia include:

• Income tax
• Petroleum income tax

Taxes covered in Cambodia are:

• Tax on profit including withholding tax, minimum tax, additional profit tax on dividend distribution and capital gains tax
• Tax on salary

This agreement shall apply to persons who are residents of one or both of the contracting states.

Residency

A resident of a contracting state is any person who, under the laws of the state, is liable to tax by reason of his domicile, residence, place of incorporation, place of management, principal place of business or any other criterion of a similar nature, and also includes that state, local authority or a statutory body thereof or, in addition for Malaysia, its political subdivision.

Permanent establishment

A permanent establishment is the fixed place of a company which the business is wholly or partly carried on.

Permanent establishment also includes:

• A building site, a construction, installation or assembly project or supervisory activities in connection therewith, but only if such site, project or activities last more than 9 months.
• The furnishing of services through employees or other personnel engaged if the activities continue for the same or connected project within a contracting state continue for a period of more than 183 days within any 12-month period.
• An enterprise carries on activities in a contracting state for the exploration or the exploitation of natural resources for a period of more than 183 within any 12-month period.
• The operation of substantial equipment within a contracting state for a period of more than 183 within any 12-months period.

Withholding tax rates

Withholding tax rates under the agreement, applicable to eligible taxpayers, are:

• Dividends – 10%
• Interest – 10%
• Royalties – 10%
• Fees for technical services (technical, managerial or consultancy) – 10%

For more information on how you can take advantage of the double tax agreement between Cambodia and Malaysia, please contact your Acclime specialist.