Before the dust has even settled on the flurry of activity in completing annual tax compliance obligations for 2016, the General Department of Taxation (“GDT”) has now extended the due date for submission and payment of the 2016 Annual Tax on Profit Returns from 31 March 2017 to 30 April 2017.
We discuss this and other recent announcements below.
Annual Tax on Profit (“TOP”) Return and Payment
Last Friday despite the chaos of last minute tax submissions, the GDT found the time to issue Notification 5517, extending the deadline for annual tax declarations and payments for the 2016 tax year by one month, from 31 March 2017 to 30 April 2017.
The reasons behind the extension varied from individual taxpayer requests, delays due to taxpayers amending historical returns under the tax amnesty and enterprises requesting a delay in submitting the audited financial statements as they had not yet been finalized by auditing and accounting firms.
To solve these problems, the GDT decided to extend the following deadlines:
- Submission and payment of TOP for the year 2016 is extended to 30 April 2017.
- The current tax amnesty is extended to 30 April 2017.
- Submission of audited financial statements is extended to 30 June 2017.
Whilst many taxpayers and their tax agents would have appreciated more timely notice about the extension, one cannot fault the logic of the GDT which presumably wanted to get as many returns and payments in by 31 March as possible, before declaring a formal extension. Human nature often errs on the side of procrastination when the pressure is off, resulting in the same eleventh hour deadline submission chaos merely being deferred by another month.
For those self-assessed taxpayers in 2016 (i.e. a small, medium or large taxpayer under the revised real regime of taxation), yet to submit and pay their annual tax declaration or tax for 2016, you now have an additional month to do what is required before having to face tax penalties.
Taxpayers who have already submitted their annual tax declaration, but suspect that they may have made a mistake or possibly underpaid tax, may also take advantage of this extension to amend their original tax declaration without concern over penalties.
For those small taxpayers that only entered into the self-assessed regime last year, we advise you to use this time wisely, act with care, and ensure that you satisfy your annual tax compliance obligations. In pursuit of this, the GDT has issued specific Annual Tax on Profit Return templates to aid and guide taxpayers. Small taxpayers should also take note of the new 2016 simplified tax accounting procedures that now apply to their business.
Under the same Notification above – the Tax Amnesty first introduced in January this year by Notification 1219 has now been extended from 1 April 2017 to 30 April 2017. The broad wording of this Amnesty in theory allowed all registered taxpayers in Cambodia until 1 April 2017 to voluntarily disclose and pay underpaid tax for their last three years of tax declarations. During this amnesty period, the GDT will not impose additional penalties or interest on disclosures of underpaid tax made by taxpayers.
While many view the extension of the Tax Amnesty as welcome news, some contend that it should be longer, given the confusion and often inconsistent interpretation from tax officials within the GDT as to its application and scope.
The concept of voluntary tax disclosures is not unique to Cambodia. From a glance at examples overseas, it is clear that the crucial element in making a voluntary disclosure campaign effective; is that the tax authority must provide clear and unambiguous guidelines to taxpayers and their advisers as to what sets of circumstances do or do not apply.
Instances of unscrupulous Tax Officers
The GDT also issued Notification 5186 on the 25th of March 2017, to remind those small businesses with annual sales revenues of less than KHR 250 million (approx. USD 62, 000) that they are not obliged to register as a Small Taxpayer, and thus de facto exempted from paying tax.
It has become apparent that there may be a number of unscrupulous tax officials or other individuals who persist in trying to extort money from small businesses below the Small taxpayer threshold, on the pretext of conducting a tax audit or inspections.
If you believe that you are a victim of this kind of extortion, you are encouraged to notify the GDT in writing:
General Department of Taxation,
Building no. 522-524,
Corner of Russian Federation Blvd. (110) and Mao Tse Tong Blvd. (245),
Sangkat Teuk Laak 1, Khan Tuol Kok,
Or by email: email@example.com, or via the following contact numbers;
- 023 886 708
- 012 932 032
- 010 858 802
Tax Exemption for Small to Medium Enterprises (SMEs)
Finally, the GDT issued Notification no. 5251 on 27 Mar 2017.
Aside from notifying taxpayers of their annual tax compliance obligations, Notification 5251 clarified the application of the recent tax exemption awarded to SMEs that formally registered for tax in 2017 and 2018 – please see our previous update for more information on this.
Since the introduction of this SME tax exemption under Sub-Decree no. 17 ANK.Br dated 7 February 2017, the GDT has found that some taxpayers have incorrectly interpreted the exemption as applying to all SMEs – not just those that registered for tax in 2017 and 2018.
Additionally, for those SMEs that registered for tax in 2017 or 2018, important to remember is that the exemption only applies to the annual tax on profit, the 1% monthly pre-payment of tax on profit, and annual Minimum tax. It does not apply to other taxes that SMEs may be liable to pay by law.
Finally, all SMEs that are registered for tax must still declare monthly and annual taxes in accordance with the tax regulations. This is regardless of whether they are subject to the tax exemption or not.
The DFDL tax team is always on hand to assist you in answering any questions that you may have on this and other tax matters.
If you need any assistance with dealing with your annual tax compliance obligations or applying under the current tax amnesty please contact us.
Cambodia Head of Tax