Cambodia Investment Review
The General Department of Taxation (GDT) in Cambodia has introduced several reforms aimed at simplifying tax audits and easing the administrative burden on businesses. These reforms have been welcomed by both foreign investors and local enterprises, as they promise to make tax compliance more efficient and less costly.
Edwin Vanderbruggen, Senior Partner at Andersen Cambodia, shared his insights with Cambodia Investment Review on the recent changes, following the EuroCham and AmCham Joint Tax Forum. He highlighted the key reforms that have the potential to improve the business climate in the Kingdom by making tax audits more predictable and cooperative.
“The GDT has recently launched a long list of reforms and initiatives to simplify the tax audit system in Cambodia, making tax administration smoother for both foreign investors and domestic businesses,” Vanderbruggen explained.
Creation Of A Special Audit Department
One of the most significant developments is the creation of a Special Audit Department designed for highly compliant and transparent taxpayers. Edwin Vanderbruggen elaborated on this measure, stating, “The plan is that these companies, mostly the so-called Gold Status taxpayers, will no longer be audited by the regular audit teams of the GDT. Instead, after one comprehensive audit, the companies are only lightly supervised by elite officials, who also focus on maintaining a fruitful long-term cooperation between the GDT and the companies.”
This approach, referred to as “cooperative compliance,” is endorsed by the OECD and is widely regarded as an effective, modern system for managing tax audits. Vanderbruggen emphasized that the new system is expected to not only ease the burden on Gold Status taxpayers but also enhance the relationship between the tax authorities and businesses.
Beyond the Gold Taxpayers, the GDT has simplified audits for all companies by transforming Desk Audits into a verification process. According to Vanderbruggen, this has led to “a 33% reduction in compliance burdens for companies, as they can much more easily follow the process by themselves.” This change allows businesses to handle much of the audit process internally, saving time and resources.
Correct Errors Without Facing Penalties Or Interest Charges
Another critical reform introduced by the GDT allows companies to correct errors in their tax returns without facing penalties or interest charges. This provision is particularly beneficial for companies that may have made inadvertent mistakes in their filings. Edwin Vanderbruggen noted, “Everyone can make mistakes, and companies who discover they missed something can, in many cases, still go back and fix it without any interest or penalty. I actually do not know any other country that is this accommodating.”
Time management has also been a focus of the GDT’s reforms. Tax audits are now subject to stricter deadlines, with most audits expected to be completed within six months. “The GDT has recently become stricter in their timelines,” Vanderbruggen explained. “Most audits must now be completed within six months. While the GDT is often able to meet these deadlines, companies are not always ready with their documentation.”
The GDT’s reforms are not limited to individual taxpayers. In a bid to resolve long-standing tax issues for entire sectors, the department has begun issuing draft regulations to clarify tax treatment for industries such as airlines and shipping lines. Vanderbruggen praised this move, saying, “By clarifying some long-standing tax issues for the sector in a new regulation, it becomes much easier to try and resolve legacy tax disputes from the past. I think the GDT is at the cusp of resolving literally hundreds of past audits this way, in one go. It is a very effective measure, and one that also gives those industries more predictability going forward.”
Increase In Transparency Within The GDT’s Operations
In addition to these broader initiatives, Edwin Vanderbruggen pointed to several smaller reforms that collectively enhance the tax audit process. “For example, they made a new rule that the taxpayer does not need to provide copies and documents more than once, even if there are different GDT teams working on a case. You can follow your correspondence with the GDT online, which reduces hassle and costs,” he said.
Furthermore, there has been an increase in transparency within the GDT’s operations, along with the establishment of complaint mechanisms for businesses. These developments have been praised for creating a more accountable and business-friendly tax environment.
Despite these advances, Vanderbruggen believes there is still work to be done. “Some work remains to be done, of course. I have often suggested that we should consider making an independent tax court in Cambodia,” he concluded. Nevertheless, he expressed optimism that the reforms enacted in recent months will significantly smoothen the tax audit process for many companies that aim to remain compliant with the country’s tax laws.
