Cambodia Investment Review
The Royal Government of Cambodia has established a Special Tax Audit Unit (STAU) under Sub-decree 160, issued on July 16, 2024. The STAU is positioned within the General Department of Taxation (GDT) and is intended to enhance the business environment and foster investment by expediting the resolution of taxpayer issues related to tax audits.
The creation of the STAU is seen as a response to concerns raised by the private sector regarding the complexities and challenges of dealing with tax audits in Cambodia. The STAU will operate with the same authority as the Large Taxpayers Department and the Enterprise Audit Department, which currently perform desk, limited, and comprehensive tax audits.
Addresses Longstanding Issues With The Tax Audit Process
Clint O’Connell, Partner of DFDL Cambodia and one of Cambodia’s most respected tax consultants, commented on the establishment of the STAU: “The creation of the STAU is a significant development for Cambodia’s private sector. It addresses the longstanding issues that businesses have faced with the tax audit process. By providing a specialized unit to handle tax audits, the government is demonstrating its commitment to improving the business climate and encouraging investment.”
The STAU is anticipated to have jurisdiction over taxpayers with Gold Tax Compliance status, as well as other enterprises that meet criteria to be established by a forthcoming commission. The commission will be responsible for defining the specific criteria for inclusion under the STAU’s jurisdiction.
Sub-decree 160 outlines several key responsibilities for the STAU, including managing and conducting tax audits in accordance with laws, regulations, and Standard Operating Procedures (SOP); reviewing documents and conducting risk analysis for a one-time tax audit without the need for preliminary audits; developing an annual audit plan based on tax audit SOP criteria; carrying out tax audits at the request of taxpayers; and updating taxpayers on the reasons for their audits. Additionally, the STAU will undertake tasks assigned by the Director General of the GDT.
Leadership of the STAU will include a director with a rank equivalent to a Department Director in the GDT, as well as appointed vice chiefs from within the GDT and potentially from other governmental sectors.
O’Connell further noted, “The success of the STAU will largely depend on the technical competence and objectivity of its officials, as well as its efficiency in processing cases. It is crucial that the STAU operates with transparency and fairness to build trust among taxpayers.”
Provide Clarity and Education On The Tax Audit Process
The establishment of the STAU follows the issuance of the Manual on Tax Audit Procedures for Tax Officers and Taxpayers by the GDT in April 2024. This manual aims to provide clarity and education on the tax audit process. On July 9, 2024, the GDT announced via Notification 24145 that it plans to conduct 3,006 on-site tax audits in 2024, based on the criteria and risk profiles outlined in the Tax Audit SOP. Generally, taxpayers can expect to be audited at their location by the GDT no more than once every three years.
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O’Connell added, “There needs to be clear communication regarding the audit status of gold compliance taxpayers, who are generally exempt from all tax audits for the two-year period during which they hold gold compliance status, unless tax risks or irregularities are discovered by the GDT. The STAU’s role in conducting a one-time tax audit for taxpayers under its jurisdiction also requires further clarification.”
The introduction of the STAU represents a significant step towards addressing tax audit challenges and fostering a more favorable business environment in Cambodia. Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.
