Prakas No. 361 MEF.PrK dated 3 April 2018 (Prakas 361) provides a Value Added Tax (VAT) exemption on basic food items that are sold by Cambodian taxpayers operating under the self-assessment regime. The purpose of Prakas 361 is to improve the living standards of Cambodian citizens by rendering basic food products more affordable.
We outline the key points of Prakas 361 below.
- Objectives
Prakas 361 applies to tax payers in Cambodia who are registered as self-assessment regime taxpayers, i.e. small, medium, or large taxpayers. The Prakas relates to the domestic sale of “basic food” products within Cambodia by self-assessing taxpayers – typically, exported goods would be zero-rated for VAT purposes.
- Basic Food
Basic food as defined by Prakas 361 includes:
- Meat – including that of beef, buffalo, goat, sheep, pork, chicken, duck, including all uncooked, cooked, or dried meats;
- All types of egg including fresh or pickled eggs;
- Seafood including lobsters, prawns, shrimp, and shellfish, whether uncooked, cooked, or dried;
- All types of sugar;
- Salt; and
- Condiments such as fish sauce and soy sauce.
Prakas 361 provides that food served at restaurants falls outside the scope of this VAT exemption.
- Duration
The state’s VAT exemption on all types of basic food supplies will be effective from the signing date of the Prakas until the end of 2019.
Analysis
Providing a VAT exemption on basic foodstuffs is a useful initiative which will hopefully make these items more accessible and affordable to local citizens. This type of exemption is not unique to Cambodia, and a number of overseas jurisdictions – particularly Australia – have traditionally exempted certain food groups from consumption taxes such as VAT or Excise Tax.
The Australian model has clearly demonstrated however, that a degree of uncertainty will always persist as to what goods will fall within, and those which will fall outside of the consumption tax exemption. While Prakas 361 excludes food that is served at restaurants from the VAT exemption, a grey area remains in terms of the product types that could be classified as “basic food’ for the purposes of this Prakas.
Whereas the Australian Tax Office has a detailed searchable database through which a taxpayer can verify if a product is exempted, this is not the case in Cambodia. Practically speaking, a Cambodian taxpayer looking to benefit from the Prakas 361 VAT exemption will have to hope that their interpretation of ‘basic food’ aligns with that of an auditor during the course of a tax audit. While this will usually be a straightforward process, as is often the case with these types of regulations, there are a number of uncertainties with regard to what products this Prakas does or does not encompass. A taxpayer that fails to charge 10% VAT on products not considered to be ‘basic food’ may be subject to late payment penalties and interest.
This welcome initiative by the Ministry of Economy and Finance is to be applauded, and it is widely hoped that the General Department of Taxation will be efficient and co-operative in dealing with those taxpayers seeking formal confirmation on whether the products they are selling will come within the remit of Prakas 361.
If you have any queries or concerns regarding the above, please feel free to contact your usual DFDL adviser or Clint O’Connell.
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.
The information provided in this email is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
DFDL Contact
Clint O’Connell
Partner & Head of Cambodia Tax Practice
clint.oconnell@dfdl.com
