Cambodia

Withholding tax (WHT) incentives for local airlines

The Ministry of Economy and Finance (MEF) has issued Prakas 198 to reduce the WHT rate for local airlines.

The WHT rate is reduced to 2% for local airlines’ below payments to non-resident taxpayers:

• Aircraft rental.
• Aircraft maintenance and overhaul.
• Overseas technical assistance.
• Overseas airport charges.
• IT shared service costs.
• Brand licensing fees.
• Online ticket booking systems.
• Training by overseas vendors.
• Centralised system shared costs.
• System licence fees.

The WHT rate is reduced to 10% for local airlines’ below payments to non-resident taxpayers:

• Management service fees.
• Other services.

The above revised WHT rates are effective from 17 March 2025 to 31 December 2028.

All local airlines must submit monthly and annual tax returns and record and maintain accounting records and information related to their business activities in accordance with tax laws and regulations.

Value-added tax (VAT) exemption on certain e-commerce financial transaction services

The General Department of Taxation (GDT) issued letter No. 29613 to confirm to the Associations of Banks and Microfinance that certain e-commerce financial transaction services are considered non-taxable supplies. They are summarised as follows:

• Expenses on education, training, relevant study documents, and educational documents in electronic form (e.g. electronic documents, books, videos) supplied by educational institutions officially recognised by the countries where the institutions are established.
• Overseas lawyer service fee expenses supplied by law firms.
• Independent director fee expenses.
• Expenses on risk rating assessment services provided by Moody, S&P, or Fitch, the agencies recognised by the National Bank of Cambodia.
• Monthly fees, bank charges, and telegraphic transfer (TT) fees and charges related to money settlement transactions, money transfers, or inward remittance services for customers or the bank itself from overseas banks.
• Expenses on overseas transfers for customers.
• Expenses on transactions to obtain overseas loans (e.g. interest and other charges by the lenders).
• Direct expenses incurred for money transfers charged by SWIFT or BOTTOMLINE. Annual fees for system usage, license, royalty, or system maintenance paid to SWIFT or BOTTOMLINE are subject to VAT on e-commerce transactions.
• Direct expenses incurred for settlement transactions via credit or debit card and cash withdrawal services from ATM charged by Visa, Mastercard, Union Pay, UPI, AMEX, or JCB company. Annual fees for system usage, license, royalty, or system maintenance paid to Visa, Mastercard, Union Pay, UPI, AMEX, or JCB companies are subject to VAT on e-commerce transactions.
• Customer’s expense for staying at VIP lounge in airports in other countries is not non-taxable supply and not subject to VAT on E-commerce transactions.

The above confirmation is not retroactive for tax amounts already paid.

Clarification of tax relief for a rent-free period during construction, improvements, or reparation and claimable input VAT credit on mobile phone service charges used for business purposes

At the GDT and Private Sector Tax Working Group meeting on 4 July 2024, the private sector raised various points for discussion, including the following.

Rent-free period provided by landlord

During the rent-free period provided by the landlords for the lessees to prepare for construction, improvements, or reparation, the GDT agreed that the relevant taxes, including income tax, VAT, or WHT, are not applicable as long as those period and purposes are stated clearly in the lease contracts. Income or expenses were recognised by the relevant parties during that period. The GDT will prepare regulations to clarify further.

VAT input credit for mobile phone charges

The GDT agreed that VAT charges on mobile phone services are allowed to claim the input VAT credit as long as the charges are used for business purposes and there is sufficient evidence (e.g. records of the mobile phones as the company’s assets) to support it. The GDT will prepare regulations to clarify further.

Tax incentive measures

On 22 August 2024, Prime Minister Samdech Thipadei made a special announcement (statement) to continue providing support, including tax incentives, for certain business sectors. We summarise the key tax incentives as follows:

• Extension of capital gains tax exemption for real estate business until the end of 2025. At this stage, it is still unclear whether the extension applies to capital gains arising from other investments (e.g. share disposals).
• Exempt penalty and interest for voluntarily filing amended tax returns until the end of June 2025.
• Extensions of other tax incentives for specific sectors, such as tourism in Siem Reap province, agriculture, and education.

The relevant regulations will be issued later.  

Establishment of special tax audit unit under the GDT of the MEF

The Cambodian government issued a sub-decree to establish a special tax audit unit under the supervision of the GDT of the MEF on 16 July 2024. The unit’s rank is equal to the GDT’s department level. The purpose of the newly established unit is to advance and speed up resolutions to taxpayers’ problems with tax audits, to improve the business and investment environment in Cambodia.

The key roles and responsibilities of the unit include:

• managing and performing tax audit work in accordance with existing laws and the standard operating procedures for tax audits
• verifying documents and performing risk analyses for one-time comprehensive tax audits without going through desk audits or limited audits
• preparing annual tax audit planning
• performing tax audits upon taxpayers’ requests, and
• informing enterprises of the reasons they’re selected for a comprehensive tax audit.

The special tax audit unit can ask the Director General of the GDT to review and resolve outstanding issues in the tax audits of the enterprises it oversees, working together with other GDT units.  

Enterprises that may be transferred under the supervision of this special tax audit unit include those that have received a Gold Tax Compliance Certificate and other enterprises determined by a committee to be established by the GDT.

Reduction of WHT and specific tax (SPT) rates for airline companies

The MEF issued Instruction 009 to provide the following instructions for implementing WHT and SPT to relieve airline companies’ tax burden on the lease of aircrafts from foreign companies and the burden of people travelling by air.

• The WHT rate will change from 14% to 10% on the aircraft lease from foreign companies by domestic airline companies.
• The SPT rate will change from 10% to 5% on air transport service of passengers, regardless of the service provided by domestic or foreign airline companies.
• These reductions will last for three years, from 1 June 2024 to 31 May 2027.

Standard operating procedures for tax audits (SOP for tax audits)

The Cambodian tax authorities have issued a tax audit SOP to guide tax officers in managing the tax audit process. This SOP aims to prevent different departments from creating duplicate tax audits.

Income tax incentives for the expansion of qualified investment projects (QIPs)

The MEF issued Prakas 313 dated 10 May 2024 to provide further guidelines for income tax incentives for the expansion of QIPs as stated in Article 16 of Sub-Decree 139 on Implementation of the Investment Law in Cambodia.

The income tax exemption is provided for the below expansion of QIPs:

• Expansion of existing production.
• Expansion through product line diversification within the same lines.
• Expansion through equipping new technologies for improvement of productivity and environment protection.
• Other expansion activities to be approved by the government.

The expansion of the QIP is entitled to a specific period of income tax exemption in line with initial investment activities, which ranges from three to nine years depending on the sectors and investment activities as stated in the annex of Sub-Decree 139.

The qualified expansion is limited only to additional investment capital paid each year and used for construction materials and new production equipment (excluding the value of land and working capital).

Tax for public lighting (TPL)

The Royal Government of Cambodia has issued a Sub-Decree to determine the TPL rate for the supply of alcoholic or tobacco products in Cambodia.

Effective from 1 April 2024, the TPL rate for the supply of alcoholic or tobacco products will be 5%.

Detailed rules and procedures for managing the TPL collection will be determined by a Prakas of the MEF.​

Capital gains tax

The MEF issued Prakas No. 496 to implement capital gains tax on sale or transfer of immovable property, leases, investment assets, goodwill, intellectual property (IP), and foreign currencies. The capital gain is subject to income tax at a flat rate of 20%.

Calculation of the capital gains tax

For immovable property, the tax authorities provide a choice where the taxpayer can claim a standard tax deduction of 80% of the taxable income or actual expenses with supporting documents. For capital gain from sale or transfer of other assets, taxpayers must claim tax deduction based on actual expenses incurred.

Taxpayers must submit tax returns and pay capital gains tax to the GDT within three months after realising the capital gain.

Under this Prakas, the capital gains tax on sale or transfer of leases, investment assets, goodwill, IP, and foreign currencies shall be implemented from 1 September 2025, and the capital gains tax on immovable property shall be implemented from 1 January 2026.