Cambodia Investment Review

Private sector gets clarification from GDT on Cambodia’s e-commerce tax requirements

Private sector gets clarification from GDT on Cambodia’s e-commerce tax requirements

Brian Badzmierowski

The Cambodian Association of Finance and Technology (CAFT), the Preah Srey Içanavarman Museum of Economy and Money (SOSORO), and the Cambodia Internet Startup Association (CISA) hosted the third edition of the CAFT-SOSORO Financial Series Friday morning, focusing on the recently implemented e-commerce value-added tax (VAT) laws for non-resident taxpayers.

Song Kosal, the deputy director of the Department of Large Taxpayers at the General Department of Taxation (GDT), said 31 companies had now officially registered for VAT payments with the GDT as the first filing deadline fast approaches on May 20 (May 25 for e-filing).

Before the March 31 deadline to register set by the GDT, 16 companies had registered. The list of registered companies includes some of the biggest e-commerce players in the world, including YouTube, Google, Microsoft, Meta, Amazon, and Tik Tok.

To read more about the tax requirements for e-commerce operators click here.

Cambodia's e-commerce tax requirements
DFDL Tax Manager Vajiravann Chamnan provided an outline of the new VAT regulations.

DFDL Cambodia Tax Manager Vajiravann Chamnan gave a brief overview of the new VAT regulations to the group gathered at the Sosoro Museum and outlined the requirements for foreign companies selling digital goods and services in Cambodia. 

Foreign companies will have three methods of payment when filings are due later this month: in-person at the GDT via a tax agent, with a credit or debit card, or through an international wire transfer to the GDT via a partner bank.

Kosal said the GDT recently partnered with ACLEDA Bank and ABA Bank to accept overseas VAT payments, an important step that will help streamline the payment process.

Chamnan highlighted the fact that registered small taxpayers have a five-year exemption from paying VAT via the reverse charge mechanism. Currently, foreign companies expecting to earn $62,500 annually or at least $15,000 over three consecutive months are required to register for VAT payments with the GDT. 

Getting the word out on VAT requirements 

Kosal said that in the early stages of the implementation of VAT on e-commerce, the GDT would rely on the goodwill of companies to register without threatening any harsh penalties. 

His main goal, he said, was to spread information on the new guidelines to companies doing business in Cambodia to ensure that every non-resident company operating in Cambodia’s e-commerce space is aware of the laws.

“Our main concern is getting the foreign companies to register. We’ve done our best to make them aware through spreading information, so they know they are obliged to comply,” he said.

Tomas Pokorny, CAFT’s board director and secretary general raised the question of double taxation at the morning talk held at Sosoro Museum.

There had been some confusion as to exactly what was defined as an e-commerce transaction in the business community, but this was mostly cleared up as Chamnan referenced an annex to Sub-decree 65, which describes the implementation of VAT on e-commerce.

The list of goods and services subject to VAT included software updates, electronic access to professional advice, technical information provided electronically, real-time web-based broadcasting, and delivery of high-value data. 

Double taxation concerns raised

Tomas Pokorny, CAFT’s board director, and secretary-general raised the concern that some transactions could carry a “double tax”. 

For example, a logistics company buying software overseas from a foreign company not registered in Cambodia would be responsible for paying the 10 percent VAT through the reverse charge mechanism as well as 14 percent withholding tax on the transaction.

Technical, management and IT services purchased by registered taxpayers in Cambodia would also be subject to both withholding taxes and VAT.

To read more about the opportunities for e-commerce companies in Cambodia click here.

Song Kosal, the deputy director of the Department of Large Taxpayers at the GDT said the department had made a concerted effort to alert all foreign companies to register for VAT payments.

Kosal said this was a non-issue and that it was standard procedure for other countries, including Vietnam, as well. He added that it’s not a double tax because they are classed differently – withholding tax is an income tax and VAT is a consumption tax – and VAT taxes can be claimed back, negating the expense.

Pokorny said the Financial Literacy series by CAFT was an example of the public and private sectors collaborating for a common good.

“There are still challenges, and at times points of disagreement, between the sectors and even between different industry verticals within the private sector. The core point is that we can lead a dialogue,” he said.

“Ultimately, we all pressing for clarity, collaboration, and understanding. This should help improve the overall micro and macroeconomic activity of businesses and the country itself. Today’s event on taxation, and the clarifications made on WHT (withholding tax) and VAT concerning e-commerce companies confirm our dedication has been invested into a noble effort.”

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