“This vice brings in one hundred million francs in taxes every year. I will certainly forbid it at once – as soon as you can name a virtue that brings in as much revenue.” Napoleon III.
Notification 28271, issued by the General Department of Taxation (GDT) on the 15th of August 2023, adjusts the rates of Specific Tax (SPT) that applies to locally produced non-alcoholic beverages in Cambodia. The adjusted rates of specific tax will take effect from 1 September 2023.
What non-alcoholic beverages are impacted by this update?
The table below outlines the locally produced non-alcoholic beverages that are impacted by Notification 28271, the old rate of SPT that applied to those beverages and the new rate of SPT that will apply from 1 September 2023.
What is Specific Tax?
SPT is a form of excise tax imposed on the importation or domestic production and supply of certain goods and services. SPT is commonly referred to as a sin tax as it applies to luxury items and items which may be detrimental to one’s health. Two Government Departments in Cambodia are responsible for collecting SPT, namely the General Department of Customs and Excise (GDCE) and the GDT. The former collects SPT on the import of certain goods while the latter collects Specific Tax on the domestic supply of certain goods and services.
How are Non-Alcoholic Beverages defined?
Prakas no. 012 MEF.Prk, dated 14 January 2020 (Prakas 012) defines non-alcoholic drinks as drinks which can be:
- Aerated (carbonated),
- Have added sugar or other sweetening matter,
- Be flavored,
- Or other non-alcoholic drinks except water and mineral water, milk and fruit or vegetable juice.
Prakas 012 defines “fruit juice” and “vegetable juice” as the sole product of fruit and vegetables with the following two (2) criteria:
- No processing, change of quality and packing; and
- No added taste, flavor, or color.
How is Specific Tax calculated?
Prakas 012 outlines that the basis for the calculation of SPT on applicable locally produced goods, including non-alcoholic drinks, shall be set at ninety percent (90%) of the selling price recorded on the invoice (ex-factory invoice) excluding Value Added Tax (VAT), and SPT (noting that Public Lighting Tax only applies to alcohol and tobacco products).
SPT is declared via the monthly tax returns of a taxpayer which for most taxpayers is required to be submitted to the GDT via its e-filing system by the 25th of the month following the month in which the supply occurred. The time of supply rules applicable to SPT follow the standard VAT time of supply rules.
The changes to the SPT rate introduced via Notification 28271 are aligned with the design and intention of SPT i.e., to tax certain products which may be harmful for health. Excess consumption of high sugar and energy drinks would fall into this category. At the same time Notification 28271 has reduced the SPT rate for certain products which may be considered less harmful to health i.e., soya milk or coconut water-based drinks.
Following the promulgation of the Law on Taxation on the 16th of May 2023 and recent developments as to how both SPT and Public Lighting Tax are calculated we expect to see more updates in the coming months.
The DFDL tax team is always ready to answer any questions you may have on this and other tax issues, please contact us at: firstname.lastname@example.org.
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.