On 29 July 2026, the Ministry of Economy and Finance issued Prakas No. 584 on Tax Debt Liability for Business Transfer, Share Transfer, or Enterprise Merger (“Prakas 584”). The Prakas provides much-anticipated guidance on how tax liabilities are allocated between transferors, transferees, shareholders and surviving entities when businesses, shares or enterprises change hands in Cambodia.
Prior to the issuance of Prakas 584, the only reference on the assumption of tax liabilities in such transactions was Article 215 of the Law on Taxation (“LOT”), which introduced the principle that tax debt obligations may pass to new owners, shareholders, or surviving enterprises in business transfers, share transfers, or enterprise mergers. Article 215, however, provided only a broad framework, without specifying how those liabilities would be allocated in practice.
Prakas 584 fills that gap by setting out detailed rules on successor liability, notification requirements, value-added tax (“VAT”) treatment for business transfer, and the circumstances in which historical tax debts may transfer to new owners, shareholders, or surviving entities.
Key Clarifications under Prakas 584
| Transaction Type | Key Requirement | Assumption of Tax Liability |
|---|---|---|
| Business Transfer | Notify the General Department of Taxation (“GDT”) and update taxpayer information within 15 working days from the business transfer agreement date. | For the transfer of a sole proprietorship or partnership business: If the transferor is the owner of a sole proprietorship or partner of a partnership, and the business is deregistered with all tax debts settled up to the transfer date, the transferee (new owner) is liable only for taxes arising after the transfer date. If deregistration is not completed, the transferee is liable for all tax debts, including those arising before the transfer. |
| For a business transfer involving a legal entity that ceases operations: If the transferor applies to the GDT to deregister the business after the transfer date, all pre-transfer tax debts remain with the transferor, and the transferee is liable only for tax debts arising after the transfer. If no deregistration application is submitted, all tax debts become the obligation of the transferee enterprise. | ||
| For a business transfer involving a legal entity that continues its operations: All pre-transfer tax debts remain with the transferor (whether or not a deregistration application is submitted), and the transferee is liable only for tax debts arising after the transfer. | ||
| Business transfers are not subject to VAT if the notification and information-update requirements under the Prakas 584 are fulfilled and the business continues under the transferee (consistent with Article 35 of the VAT Sub-Decree dated 11 March 2024). Otherwise, VAT applies at the standard rate of 10%. | ||
| Share Transfer | Notify the GDT and update ownership information within 15 working days following the date of approval by the Ministry of Commerce (“MOC”). | For a share transfer involving a legal entity: New shareholders are liable for tax debts in proportion to their invested shares, based on the principle of limited liability. |
| For a transfer of a partnership interest: New partners are liable for tax debts in proportion to the partnership interest acquired. General partners of a general or limited partnership are liable beyond the value of the capital they agreed to contribute (including their personal assets), while limited partners of a limited partnership are liable only up to the amount or value of the capital they agreed to contribute. | ||
| In cases of tax fraud or tax evasion: Shareholders may be held liable for the resulting tax debts in proportion to their ownership interests in the legal entity. | ||
| Enterprise Merger | Notify the GDT and update information within 15 working days following approval by the MOC. Where two or more enterprises merge or consolidate into a new enterprise, the new entity must comply with the tax registration requirements. | The surviving entity or the new entity resulting from the merger is liable for all tax debts of the merged enterprises. |
DFDL Commentary
Prakas 584 operationalizes Article 215 of the LOT by clarifying how tax liabilities are allocated in business restructuring transactions. It sets out when tax debts remain with the transferor, transfer to the buyer, or fall to shareholders or the surviving entity. Key practical considerations for taxpayers contemplating a business transfer, share transfer or merger in Cambodia are:
- Proper tax deregistration is critical. For sole proprietorships, partnerships and legal entities that cease business, timely deregistration with the GDT is the key mechanism to ring-fence historical tax liabilities with the transferor. Failure to deregister exposes the transferee to all pre-transfer tax debts.
- Thorough tax due diligence is essential. Transferees in business or share acquisitions should undertake robust tax due diligence, as successor liability may attach even where limited liability principles apply.
- Liability allocation depends on the transferor’s post-transaction status. If the transferring legal entity continues to operate, pre-transfer tax debts stay with the transferor; if it ceases business, liability turns on whether deregistration is completed.
- The VAT exemption for business transfers is conditional. A business transfer is exempt from 10% VAT only where the notification and information-update requirements under Article 3 of Prakas 584 (and Article 35 of the VAT Sub-Decree dated 11 March 2024) are met and the business continues under the transferee. Otherwise, VAT applies at 10%.
- Share and partnership interest transfers follow the ownership acquired. Prakas 584 confirms that tax liability follows the shareholding or partnership interest acquired, so acquirers should assess historical tax exposures before completing a share or interest acquisition.
- Mergers transfer historical tax liabilities in full. The surviving or new entity inherits all tax debts of the merged enterprises, making comprehensive pre-merger tax due diligence essential.
In particular, timely notification to the GDT and proper tax deregistration will be critical to ring-fencing liability at the transfer date and to preserving the VAT exemption available for qualifying business transfers.
DFDL’s tax team is ready to assist with tax due diligence, structuring, and compliance in connection with business transfers, share transfers, and enterprise mergers in Cambodia.
Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.
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