On 12 May 2025, the General Department of Taxation (“GDT”) issued Instruction 14256, providing guidance on related party loans. This instruction, issued under Prakas 574 MEF.Prk dated 19 September 2024, repeals several earlier regulations – Circular No. 151 (22 January 2014), Instruction No. 11946 (21 August 2018), and Instruction No. 10979 (25 May 2022) -and reaffirms the GDT’s evolving approach to transfer pricing for intercompany financing.
Key provisions of Instruction 14256
- Documentation-based approach for setting interest rates
Enterprises may apply a mutually agreed interest rate on related party loans without the need to comply with the Arm’s Length Principle, provided robust supporting documentation is maintained, including:
- An intercompany loan agreement that specifies the terms of loan and repayment obligations.
- A business plan or current/ forecasted financial statements.
- Board of Directors’ approval (not applicable for single-member private limited companies)
- Interest rate ceiling based on market average
The interest rate applied must not exceed the prevailing annual lending rate of the five largest banks in Cambodia, as published annually by the GDT.
- Exclusion for short-term advances
Cash advances repaid within one year are excluded from the definition of “loans” for transfer pricing purposes and are not subject to these rules.
- No reporting requirement to GDT
There is no requirement to report loan transactions – whether with related or unrelated parties – to the GDT.
DFDL Commentary
While Instruction 14256 appears substantively similar to Instruction 10979 and does not introduce significant policy changes, it serves important regulatory functions. It reflects the GDT’s effort to consolidate guidance, enhance legal clarity, and reaffirms the principles established in Instruction 10979, in addition to providing continued consistency in the treatment of related party loans.
The emphasis on proper documentation and adherence to the prescribed interest rate ceiling remains critical. Enterprises must ensure that all related party loan arrangements are well-documented and comply with the stipulated requirements in order to mitigate the risk of adjustments, imposition of penalty, and even double taxation, in some cases.
Key actions for businesses in Cambodia
- Strengthen internal governance: Implement robust internal processes for approving and documenting intercompany financing arrangements.
- Review existing intercompany loans: Assess current related party loan agreements to ensure compliance with the documentation and interest rate requirements.
- Maintain comprehensive documentation: Ensure that all necessary documents, including loan agreements and business plans, are properly prepared and retained.
- Monitor GDT announcements: Stay informed about the annual publication of the prevailing market interest rate by the GDT to ensure ongoing compliance.
Businesses should proactively adapt their practices to ensure compliance and mitigate potential risks. DFDL is available to provide further guidance and support. For further guidance or assistance, please contact:
