Business in Cambodia

  1. Currency
  2. Taxation
  3. Visa Applications - Ministry of Foriegn Affairs (external link)
  4. Hotels and Accommodation - by Lonely Planet (external link)
  5. Flying to Cambodia - Flights to Phenom Phen and Siem Reap (external link)
  6. Cambodian Government (external link)

Currency

Cambodian CurrencyWhen compared to nearby countries such as Thailand and Malaysia, Cambodia is a very cheap place to travel. The Cambodian Riel is the local currency of Cambodia but US dollars are used just as commonly. Many tourism caterers such as hotels and restaurants state their prices in dollars. Riels are usually saved for the smaller transactions. It is very handy to carry small notes for taxis, tuk tuks, bargaining and all your small purchases.

See the latest currency exchange rates.

Credit cards and travelers checks are not as common as neighboring countries but are still generally accepted by hotels, high priced souvenir shops and many restaurants. US dollar travelers checks are much more easily cashed than others. Furthermore, there are plenty of ATMs dispensing US currency that will access foreign accounts and accept major credit cards.

There are also plenty of money changers scattered around the country. When exchanging money make sure that your notes are in good condition as any tears and they are rendered useless. Especially large US notes.

There are banks in all of the larger cities, including Phnom Penh, Siem Reap, Sihanoukville, Battambang.

Taxation

Taxation in Cambodia

Most foreign investments and foreign investors will be affected by the following taxes:

  •  Tax on Profit

  •  Minimum Tax

  •  Withholding Tax

  •  Value Added Tax

  •  Import Duties

  •  Tax on Salary

There are various other taxes that affect certain investors, including:

  •  Accommodation Tax

  •  Specific Tax on Certain Merchandise and Services

  •  Tax for Public Lighting

  •  Other taxes 

Tax on Profit

Cambodia’s taxation rules vary according to the taxpayer’s regime. Real regime taxpayers will include most large or incorporated taxpayers. The majority of foreign investors will fall into the real regime. Unless otherwise noted, our comments are therefore restricted to real regime taxpayers.

Residency and Source

Resident taxpayers are subject to tax on world-wide income/profits while non-residents are taxed on Cambodian sourced income/profits only. Residents earning foreign sourced profits and income can receive credits for foreign taxes paid. Resident taxpayers include companies organised or managed or having their principal place of business in Cambodia. For individuals, a non-Cambodian national will become a resident by having their residence or principal place of abode in Cambodia, or by being present in Cambodia for more than 182 days in any 12 month period ending in the current tax year. A permanent establishment (PE) is taxable on its Cambodian source income only.

Value Added Tax (VAT)

Under a VAT system, output tax is collected from a customer by adding VAT to the amount charged. However a business also pays input tax to its suppliers on purchases that it makes. The business must pay the output tax to the State after deducting the input tax paid to its suppliers. In theory, the business therefore pays tax on the value that it adds in the supply chain. The tax is ultimately borne by the end consumer, or a business that is exempt from tax, as these persons cannot recover input tax paid.

Cambodia’s VAT applies to the business activities of real regime taxpayers making taxable supplies. In each case the business must charge VAT on the value of goods or services supplied. VAT also applies on the duty paid value of imported goods (but it appears not services). However, there are concessions for exporters and certain tax-exempt bodies. These are in addition to cigarettes, alcohol and motor vehicle products imported for the purpose of re-export. Imported goods include any associated services. Services connected to immovable property will be deemed to take place where the property is located. The importer must pay VAT to Customs at the same time they pay Import Duties. VAT may be payable on the appropriation of goods for personal use, or as a result of the gifting of goods or services.

VAT will NOT be payable in respect of a number of activities, including the supply of:

  •  Public postal services

  •  Hospital and medical services, and the provision of goods incidental thereto

  •  Public transportation activities operated by state owned providers

  •  Insurance activities

  •  Certain financial services

  •  The import of certain personal effects

  •  Non-profit activities in the public interest (as approved)

  •  Electricity

Tax on Salary

Cambodia’s Tax on Salary rules follow internationally familiar residency and source principles. A Cambodian resident taxpayer’s worldwide salary will be subject to Cambodian Tax on Salary. For nonresidents, only the Cambodian sourced salary will be subject to Tax on Salary. The place of salary payment is not considered relevant in determining source. Tax on Salary extends to employment related remuneration only, as opposed to general personal income per se. Genuine consulting income is also excluded (although such income will be subject to Tax on Profit). There are rules that enable the authorities to deem certain consultants to be employees.

A Cambodian resident taxpayer includes any physical person who:

  •  has residence in Cambodia, or

  •  has a principal place of abode in Cambodia, or

  •  is physically present in Cambodia for more than 182 days in any 12 month period ending in the current tax year

Taxable Salary - A distinction is made between cash and fringe benefit salary components. Different tax scales also apply.

Cash Salary  - Includes remuneration, wages, bonuses, overtime, compensations and employer provided loans and advances.

Fringe Benefits include:

  •  The (presumably private) use of motor vehicles

  •  The provision of accommodation support (including utilities and domestic helpers)

  •  Low interest loans and discounted sales

  •  Educational assistance (unless employment related, say, for training)

  •  Certain insurance support

  •  Excessive or unnecessary cash allowances, and social welfare and pension contributions

  •  Entertainment or recreational expenditure (which may additionally be non-deductible to the provider for Tax on Profit purposes)

Exempt Salary includes:

  •  Certain redundancy payments

  •  Reimbursement of employment related expenses

  •  Certain uniform entitlements

  •  Certain traveling allowances

  •  The salaries of certain employees of approved diplomatic, international and aid organizations

  •  The salaries of non-residents where the salary cost is not deducted in Cambodia 

  •  The salaries of members of the National Assembly and Senate

Deductions - There are small rebates for employee dependents and deduction for the repayment of employer loans or advances.

International Agreements

Cambodia has entered into various Investment Promotion and Trade Agreements with countries including:

  •  Peoples’ Republic of China 

  •  Republic of Korea 

  •  Malaysia 

  •  Republic of Singapore 

  •  Switzerland 

  •  Thailand 

  •  Laos People’s Democratic Republic

  •  Republic of Indonesia 

  •  Socialist Republic of Vietnam 

  •  Federal Republic of Germany 

  •  France 

  •  Philippines

  •  Republic of Cuba 

  •  Republic of Croatia 

  •  Kingdom of the Netherlands 

     

CDC and Investment Issues

Most investments will require registration with the Ministry of Commerce (MoC) and other relevant ministries. The CDC may also be approached for the purposes of seeking investment incentives, as outlined under the Amended Law on Investment and Sub-decree on the Implementation of the Amended Law on Investment.

Negative List

CDC licensing is however, not mandatory (except for certain large, politically sensitive projects, etc.) and are applicable to those projects that do not fall within the Negative List. We list some of the projects in the Negative List below:

  •  All kinds of commercial activities, import and export, any transportation services (except railway sector)

  •  Currency and financial services

  •  Activity related to newspaper and media

  •  Production of tobacco products

  •  Provision of value added services of all kinds of telecommunication services

  •  Real estate development

The investment incentives primarily consist of:

  •  An exemption from Minimum Tax

  •  A Tax on Profit holiday of up to 6 years

  •  Import duty exemptions

Annually, a QIP is required to obtain a Certificate of Compliance (CoC) from the CDC to guarantee its investment incentives. The CoC is intended to provide confirmation that the QIP has acted in compliance with the relevant tax regulations.

Statutory Audit Requirement

All enterprises (physical or legal persons) that meet 2 of the following criteria are required to have their financial statements audited by an independent external auditor registered with the Kampuchea Institute of Certified Public Accountants and Auditors (KICPAA):

  •  Annual turnover above 3,000,000,000 Riels (Approx. US$750,000).

  •  Total assets above 2,000,000,000 Riels (Approx. US$500,000).

  •  More than 100 employees.

QIPs registered with the CDC are required to have their financial statements audited by independent external auditors registered with the KICPAA. The law does not state the deadline for the enterprises to submit their audited financial statements. However, the deadline for audited financial statements to be completed is 6 months after accounting year-ended i.e. for financial year ended 31 December 2007, the deadline is 30 June 2008.

For a more detailed summary on Cambodia ’s taxation laws please view PriceWaterhouseCoopers’ Cambodia Pocket Tax Book 2008 (PDF 183KB).

 

 
 


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