Cambodia Investment Review
DFDL’s tax experts navigate through the detailed features and implications of Cambodia’s new comprehensive tax law.
Cambodia is embarking on a new journey of fiscal reform with the introduction of the New Law on Taxation, promulgated under Royal Kram No. NS/RKM/0523/004 on May 16, 2023. This extensive legislative measure replaces the former Taxation Law of 1997 and its amendment in 2003, marking a substantial shift in Cambodia’s tax landscape.
The New Law is considerably more detailed than its predecessor, encompassing 20 Chapters and 255 Articles, compared to the previous 7 Chapters and 155 Articles. The expanded New Law aims to provide clarity, ensuring consistency and filling in gaps in previous tax laws.
Changes to the definitions of key terms
One notable feature of the new law is the centralization of various taxes under one umbrella. New chapters are dedicated to Specific Tax, Public Lighting Tax, Accommodation Tax, Patent Tax, Tax on Advertising Billboards, Rental of Immovable Property and Tax on Immovable Property, Stamp Duty, Capital Gains Tax, Unused Land Tax, and Transportation Tax.
Read more: Explainer on New 2023 Annual Compliance Obligations For Enterprises In Cambodia
While these taxes existed in previous regulations, the New Law aims to simplify access and understanding of these taxes for taxpayers.
DFDL tax consultants also highlighted the changes to the definitions of certain key terms, including “Permanent Establishment,” “Related Party,” and a new term, “Business Alliances.” These adjustments are designed to align Cambodia’s tax laws with international tax treaties and reflect global trends.
The New Taxation Law also incorporates recent domestic tax developments such as the 2021 Investment Law and the Non-Resident E-Commerce Value Added Tax regime, ensuring the law remains current and relevant.
Evolution in use of electronic communication
The tax authority has also been given extended powers under the new law, including the use of electronic communication. “This evolution in communication means has important implications for tax audits. It’s imperative that businesses ensure their contact information, including email addresses, remain updated with the tax authority,” advises a DFDL tax consultant.
The New Taxation Law does not shy away from imposing hefty penalties for non-compliance, with a significant increase in fines and imprisonment terms. Moreover, it introduces four new crimes, including practicing as a tax agent without a license, failing to pay collected taxes, collecting taxes without permission, and criminal liability for legal entities.
A prominent feature of the new law is the General Anti-Avoidance Rule (GAAR), empowering the tax authority to counteract perceived tax avoidance. While there has been some tension surrounding the application of GAAR, DFDL experts anticipate further clarification in the coming months.
As the New Taxation Law takes effect, DFDL encourages businesses to seek expert advice to comprehend its full implications. “The new law marks a turning point in Cambodia’s tax system. We strongly recommend businesses stay informed about these critical changes, as they could have substantial implications for their operations,” concludes the Senior Tax Advisor at DFDL.
