Taxation of international executives
All income tax information is summarized by KPMG Cambodia and the Cambodian Ministry of Economy and Finance, Prakas no:1173 MoEF dated 31 December 2003 on Taxation of Salaries.
When are tax returns due? That is, what is the tax return due date?
The salary tax return is due for lodgment by the 15th of the following month.
What is the tax year-end?
Individuals are not required to submit annual personal income tax returns. Accordingly, the monthly salary tax deduction is considered to be a final tax for individuals.
What are the compliance requirements for tax returns in Cambodia?
Employers or the resident representative of foreign employers, and employees are jointly responsible for the payment of tax on salary in Cambodia, regardless of whether the salary is paid in Cambodia or abroad.
A resident is subject to a monthly deduction of salary tax on salaries received from both Cambodian and foreign sources. The tax rate is on a sliding scale, with a top marginal rate of tax of 20 percent (refer to table). Salary tax is due to be paid by the 15th day of the month following the payment of salary. Currently, the tax law does not require a resident individual to submit an annual personal income tax return to the General Department of Taxation, and therefore, the monthly tax deducted is considered a final tax.
Non-residents are subject to a monthly deduction of salary tax on salaries received from Cambodian sources only. Cambodian-sourced salary is taxed at a flat rate of 20 percent.
What are the current income tax rates for residents and non-residents in Cambodia?
For residents, taxable salary includes salaries from both Cambodian and foreign-sources. The tax to be paid shall be determined on the gross monthly taxable salary and shall be withheld by the employer, in accordance with the progressive rates as follows:
Income tax table for 2016
|Taxable income bracket||Total tax on income below bracket||Tax rate on income in bracket|
|From KHR||To KHR||KHR||Percent|
The following relief is given to resident individuals:
|Relief for each child per month|
|(Condition under 14 years old or up to 25 years old if still at school)||75,000|
|Dependent spouse (who is no employed)||75,000|
For non-residents, the taxable salary includes salary from Cambodian sources only and shall be withheld at a flat rate of 20 percent.
For the purposes of taxation, how is an individual defined as a resident of Cambodia?
An individual is considered a tax resident, if:
A non-resident is any person who is not a resident.
Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.
What if the assignee enters the country before their assignment begins?
Are there any tax compliance requirements when leaving Cambodia?
The employer is required to withhold the salary tax before payment to the employee.
What if the assignee comes back for a trip after residency has terminated?
No special tax compliance requirement if just coming back for a trip.
Do the immigration authorities in Cambodia provide information to the local taxation authorities regarding when a person enters or leaves Cambodia?
There is minimal communication between the immigration authorities and local tax authorities.
Will an assignee have a filing requirement in the host country after they leave the country and repatriate?
There is no personal income tax return to be lodged by the assignee. Currently, there is also no mechanism for an individual assignee to register with the local tax authorities and directly pay their salary and fringe benefit tax on their own, and hence only registered employers would do the compliance for the assignee.
The salary tax withheld by the employer is considered a final tax for the assignee.
Do the taxation authorities in Cambodia adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Cambodia considering the adoption of this interpretation of economic employer in the future?1
KPMG in Cambodia is not aware of this interpretation by the Cambodian tax authorities. There are currently no double tax agreements between Cambodia and other countries.
Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?2
What categories are subject to income tax in general situations?
As a general rule, it can be stated that all types of remuneration and benefits received by an employee within the framework of fulfilling employment activities constitute taxable income. These include wages and salary, bonuses, overtime, and other remuneration.
Are there any areas of income that are exempt from taxation in Cambodia? If so, please provide a general definition of these areas.
Employment-related payments received by a tax resident, which are not subject to salary tax, include:
Are there any concessions made for expatriates in Cambodia?
Is salary earned from working abroad taxed in Cambodia? If so, how?
Resident taxpayers in Cambodia are liable to salary tax on Cambodian and foreign-sourced salary income, whereas non-resident taxpayers are subject to tax on Cambodian-sourced salary income only.
Are investment income and capital gains taxed in Cambodia? If so, how?
Non-employment income sourced within Cambodia is not subject to salary withholding tax. However, profits tax may be payable.
Income from dividend, interest, and rental are not subject to salary tax; however, they may be subject to profit tax.
Currently, there is no provision on taxability of stock options.
Realized foreign exchange gains/losses are taxable/deductible for profit tax purpose.
Certain items provided by the employer for employee’s personal use are subject to fringe benefits tax at the rate of 20 percent.
Gifts are not tax deductible for profit tax purpose.
Are there additional capital gains tax (CGT) issues in? If so, please discuss?
Capital gain is subject to profit tax.
Are there capital gains tax exceptions in Cambodia? If so, please discuss?
No deemed disposal and acquisition provisions for tax purposes.
What are the general deductions from income allowed in Cambodia?
Tax is deducted from cash salary payable to employees. There is no general deduction from salary entitlement.
What are the tax reimbursement methods generally used by employers in Cambodia?
Based on receipts.
How are estimates/prepayments/withholding of tax handled in Cambodia? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.
When are estimates/prepayments/withholding of tax due in Cambodia? For example: monthly, annually, both, and so on.
Monthly basis and required to be declared by 15th of the following month.
Is there any Relief for Foreign Taxes in Cambodia? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?
A resident taxpayer who has received foreign-sourced salary and who has paid taxes according to foreign tax laws shall receive a tax credit in Cambodiaproviding there is compliance with certain conditions.
What are the general tax credits that may be claimed in Cambodia? Please list below.
There are no other general tax credits for resident employees apart from the earlier mentioned tax relief.
This calculation assumes a married taxpayer resident in Cambodia with two children whose three-year assignment begins 1 January 2015 and ends 31 December 2017. The taxpayer’s base salary is USD100,000 and the calculation covers three years.3
|Moving expense reimbursement||20,000||0||20,000|
|Interest income from non-local sources||6,000||6,000||6,000|
Average exchange rate used for calculation: USD1.00 = KHR4,000.
|Days in Cambodia during year||365||365||366|
|Earned income subject to income tax|
|Net housing allowance||0||0||0|
|Moving expense reimbursement||0||0||0|
|Total earned income||480,000,000||480,000,000
|Other income (interest income)||0||0||0|
|Deductions (dependent and spouse relief):||2,700,000||2,700,000||2,700,000|
|Total taxable income||477,300,000||477,300,000
Calculation of tax liability
|Taxable income as above/per month||39,775,000||39,775,000
|Cambodian tax thereon||6,802,500||6,802,500
|Domestic tax rebates (dependent spouse rebate|
|Foreign tax credits|
|Total Cambodian tax/per month||6,802,500
1Certain tax authorities adopt an ‘economic employer’ approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee's salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the ‘economic employer’ and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.
2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.
3Sample calculation generated by KPMG Cambodia Ltd., the Cambodian member firm of KPMG International, based on Cambodian Ministry of Economy and Finance, Prakas no:1173 MoEF dated 31 December 2003 on Taxation of Salaries.
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