Cambodia - Income Tax

Cambodia - Income Tax

Taxation of international executives

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Tax returns and compliance

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? 

Residents

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

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.

Tax rates

What are the current income tax rates for residents and non-residents in Cambodia?

Residents

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
0 800,000 0 0
800,001 1,250,000 22,500 5
1,250,001 8,500,000 747,500 10
8,500,001 12,500,000 1,347,500 15
12,500,001 Over 0 20

The following relief is given to resident individuals:

  KHR
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

Non-residents

For non-residents, the taxable salary includes salary from Cambodian sources only and shall be withheld at a flat rate of 20 percent.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Cambodia?

An individual is considered a tax resident, if:

  • the individual is domiciled in Cambodia
  • the individual has a principal place of abode in Cambodia or
  • the individual is present in Cambodia for more than 182 days during the 12-month period ending in the current tax year.

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.

No.

What if the assignee enters the country before their assignment begins?

No.

Termination of residence

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.

Communication between immigration and taxation authorities

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.

Filing requirements

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.

Economic employer approach

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.

De minimus number of days

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

Not applicable.

Types of taxable compensation

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.

Tax-exempt income

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:

  • reimbursement of business expenses by the employer, provided the costs were incurred in the course of employment, the amount is not excessive, and can be substantiated 
  • indemnity for layoff within the limit as stated in the labor law
  • additional remuneration received with social characteristics as provided in the labor law 
  • supply of free or subsidized costs of uniforms or special professional equipment used in the course of employment 
  • flat allowances for mission and travel costs received in the course of employment. The amount of the allowance shall not be in excess of the actual expenditure incurred.

Expatriate concessions

Are there any concessions made for expatriates in Cambodia? 

None.

Salary earned from working abroad

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.

Taxation of investment income and capital gains

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.

Dividends, interest, and rental income

Income from dividend, interest, and rental are not subject to salary tax; however, they may be subject to profit tax.

Gains from stock option exercises

Currently, there is no provision on taxability of stock options.

Foreign exchange gains and losses

Realized foreign exchange gains/losses are taxable/deductible for profit tax purpose.

Realized foreign exchange gains/losses are taxable/deductible for profit tax purpose.
Realized foreign exchange gains/losses are taxable/deductible for profit tax purpose.

Principal residence gains and losses

Not applicable.

Capital losses

Not applicable

Personal use items

Certain items provided by the employer for employee’s personal use are subject to fringe benefits tax at the rate of 20 percent.

Gifts

Gifts are not tax deductible for profit tax purpose.

Additional capital gains tax (CGT) issues and exceptions

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.

Pre-CGT assets

Not applicable.

Deemed disposal and acquisition

No deemed disposal and acquisition provisions for tax purposes.

General deductions from income

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.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Cambodia? 

Based on receipts.

Calculation of estimates/ prepayments/withholding

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.

Pay-As-You-Earn.

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.

Relief for foreign taxes

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.

General tax credits

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.

 

Sample tax calculation

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

  2015USD 2016USD 2017USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Average exchange rate used for calculation: USD1.00 = KHR4,000.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Cambodia.
  • The company car is used for business and private purposes and originally cost USD50,000. 
  • The employee is deemed resident throughout the assignment. 
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.
Calculation of taxable income
Year-ended 2015KHR 2016KHR 2017KHR
Days in Cambodia during year 365 365 366
Earned income subject to income tax      
Salary 400,000,000

400,000,000

400,000,000

Bonus 80,000,000

80,000,000 80,000,000

Cost-of-living allowance 0 0 0
Net housing allowance 0 0 0
Company car 0 0 0
Moving expense reimbursement 0 0 0
Home leave 0 0 0
Education allowance 0 0 0
Total earned income 480,000,000 480,000,000

480,000,000

Other income (interest income) 0 0 0
Total income 480,000,000 480,000,000

480,000,000

Deductions (dependent and spouse relief): 2,700,000 2,700,000 2,700,000
Total taxable income 477,300,000 477,300,000

477,300,000

 

Calculation of tax liability

  2010KHR 2011KHR 2012KHR
Taxable income as above/per month 39,775,000 39,775,000

39,775,000

Cambodian tax thereon 6,802,500 6,802,500

6,802,500

Less:       
Domestic tax rebates (dependent spouse rebate      
Foreign tax credits      
Total Cambodian tax/per month 6,802,500

6,802,500

6,802,500

  • Number total taxable income divided by 12 months 
  • Note 1: Salary tax is declared and payable on a monthly basis. 
  • Note 2: Please note that cost-of-living allowance, housing allowance, company car, moving expense, home leave, and education allowances are taxed under the fringe benefits tax (at 20 percent and is borne by the employer). 
  • Note 3: Interest income is not subject to salary tax.

Footnotes

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.

© 2016 KPMG Cambodia Ltd, the Cambodian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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