Issued: 02 December 2025
The General Department of Taxation (“GDT”) issued Instruction No. 37705 on 2 December 2025 to provide comprehensive operational guidance on the accrual accounting basis for tax purposes in alignment with Cambodia’s International Financial Reporting Standards requirements. The Instruction clarifies how taxpayers must record and declare transactions—both income and expenses—that are incurred and recognized in accounting before actual payment.
Below is the summary of Instruction No. 37705
A. Accrued Expenses
Taxpayers recording accrued expenses must ensure that the supporting documents, tax treatment, and subsequent adjustments are handled in accordance with Cambodian tax regulations.
1. Documentation Requirements
Accrued expenses must be supported by a Purchase Voucher that includes, document name or description, document reference number and date, Account and sub‑account codes, Debit and credit amounts, Description of the transaction, Name, signature, and date of the preparer and approver.
This ensures proper audit support and validation of expense recognition.
2. Reporting in the Purchase Journal
All accrued expenses must be recorded in the Purchase Journal, including Voucher number, Date. Amount, Description.
This ensures accurate liability recognition in the accounting period.
3. Withholding Tax (WHT) and VAT Input Implications
- For transactions subject to WHT, the taxpayer must declare the WHT in the monthly return at the time the expense is accrued.
- Input VAT cannot be claimed until a valid tax invoice is received from the supplier.
4. Adjustment Upon Receipt of Actual Invoice
Once the supplier’s actual invoice is issued:
- Accrued WHT > actual WHT:
Excess WHT may offset the current month’s WHT payable; any remaining amount is carried forward. - Accrued WHT < actual WHT:
The shortfall must be declared and paid in the current month.
B. Accrued Revenue
Accrued revenue must be supported and reported properly for tax purposes, including PTOI and VAT obligations.
1. Documentation Requirements
Accrued revenue must be supported by a Sale Voucher, containing similar required elements as a Purchase Voucher.
2. Reporting in the Sales Journal
Accrued revenue must be recorded in the Sales Journal, including Voucher number, Date, Amount, and Description.
This ensures revenue is recognized in the correct accounting period.
3. Prepayment Tax on Income (PTOI) and VAT Output Treatment
- Accrued revenue arising from business activities or subsidiary income is subject to PTOI.
- VAT output is not recognized until the actual tax invoice is issued.
This aligns VAT liability with invoice issuance, not accrual.
4. Adjustment Upon Issuance of Actual Invoice
After issuing the actual invoice:
- Accrued PTOI > actual PTOI:
Excess PTOI may offset current month’s PTOI; any remaining balance is carried forward. - Accrued PTOI < actual PTOI:
Additional PTOI must be declared and paid in the current month. - VAT output is based solely on the actual invoice amount.
The GDT has also issued Instruction No. 37706, which provides guidance on how to declare accrued revenue and expense transactions in the E‑Filing system.
If any taxpayer intentionally declares false accrued transactions purposely for reducing tax based, it will result in penalties being imposed by the tax administration in accordance with relevant tax law and regulations in force.
DFDL Commentary
Instruction 37705 provides clearer guidance on accrual accounting for tax purposes and offers improved consistency in treatment across withholding tax, Value Added and related tax filing. DFDL can assist taxpayers with compliance reviews and implementation support.
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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