Cambodia Investment Review

European Chamber of Commerce in Cambodia (EuroCham) have held its annual Tax Forum 2022, the first time the forum was hosted in person since 2019. The forum provided an overview of the tax landscape of the Kingdom and highlighted issues raised by the chamber’s tax questionnaire, which queried close to 70 anonymous taxpayers on their biggest taxation issues prior to the forum.

In his opening remarks, Director-General of the General Department of Taxation (GDT) H.E. Kong Vibol said the GDT’s main priorities included ensuring fair competition, combatting revenue loss through tax evasion schemes, and combatting money laundering.

To read our interview with Clint O’Connell on Cambodia’s modernizing taxation system click here.

“This mechanism [anti-money laundering] can help bring back Cambodia to the white list. When we are on the white list, more businesses will come and it will attract FDI. But now that we are on the grey list there is a lot of doubt and a lot of potential investors take a wait-and-see approach.”

EuroCham Tassilo Brinzer said in his welcome remarks that taxation in Cambodia had progressed immeasurably since he arrived in the country in 2000.

“The GDT and private sector have to work hand-in-hand to grow the economy and build skills, capacities, and the general wealth of society. In this, we are together… This idea lies at the core of our coexistence,” he said.

Survey finds tax system as too complicated

The results of the chamber’s tax questionnaire were presented by Antoine Fontaine, EuroCham’s Tax Committee Co-Chairman. Common issues revolved around VAT refunds, unclear processes, and disagreements over certain practices.

“We learned that some respondents see the tax system as too complicated and that there is not enough access to human resources to help alleviate issues,” Fontaine said.

To read more about tax as the major issue for merger and acquisition deals in Cambodia click here.

Concerning the banking sector, Association of Banks in Cambodia Head Researcher Thomas Schings, said the sector pays a disproportionate amount of taxes compared to its contribution to the GDP, adding that it was in the government’s and the banking sector’s interest to formalize more businesses in the economy.

“Banking represents 5.9 percent of the economy but pays more than 11 percent [of GDT’s total annual tax collection]. This showcases two things: the banking sector is very compliant but also the biggest potential gain for the government and the GDT is the formalization of sectors,” he said.

A proper benchmark to determine deemed salaries

The second half of the forum focused on e-commerce, transfer pricing, Accounting and Auditing Regulator (ACAR) Reporting and Deferred Tax, and Tax Audits, with a panel discussion on the topics closing out the forum.

To read more about Cambodia’s VAT requirements for international e-commerce transactions click here.

Several questionnaire respondents took issue with deemed salaries for foreigners that were often higher than their actual salaries. Addressing this question, Te Jeudi, the Director of the Department of Enterprise Audits at the GDT, said there was a proper benchmark used to determine these salaries.

The benchmark, he said, was dependent on the person in question’s nationality, capacity, and position at their respective company. On navigating e-commerce taxes, H.E. Eng Ratana, the Director of the Department of Large Taxpayers at the GDT, said: “We are not alone, we have to learn from all common understandings, including from experience in the private sector, to make our regulation easy to understand and implement.”

H.E. Eng Ratana also said the Law on Taxation would soon be consolidated to improve its clarity and make it easier for taxpayers to comply with regulations.