Following the issuance of a Notice of Tax Re-Assessment or a Notification Letter for Tax Collection from the General Department of Taxation (“GDT“) at the end of a tax audit investigation or a tax disputes process a Taxpayer may be in the position where they have to pay a significant amount of re-assessment tax, penalties and interest within a short period of time. Instruction 18382 that was issued by the GDT on the 27th of August, 2019 provides guidelines as to how the re-assessed tax can be paid in installments over a period of time.
We outline the salient points of Instruction 18382 below.
How do I apply to pay my re-assessed tax in installments?
Taxpayers, who are not in a position to pay their re-assessed tax liability within the timeframe outlined under the tax regulations (typically 30 days after the receipt of a Notice of Tax Re-Assessment or Collection Letter) may request the payment of the re-assessed tax liability by installment by submitting a request letter, signed by the owner or legal representative of the Taxpayer, to the GDT with the following documents:
- The most recently issued Patent Tax(s) Certificates of the Taxpayer;
- The Notice of Tax Re-Assessment/Tax Collection Notification Letter or Reminder Letter of Notification for Tax Collection;
- Supporting documentation evidencing the inability of the Taxpayer to make a one-off payment of the tax liability within the required timeframe. This may include financial statements, bank starements or other documents which evidence the inability of the Taxpayer to pay the tax liability on time;
- Other documents issued by the Ministry of Economy and Finance (the “MEF”) or the GDT in the event there are any changes in the tax status or tax liability of the Taxpayer; and
- Contact numbers which clearly confirm the name and title of the taxpayer or representative of the taxpayer that are applying.
When reviewing a tax liability installment request what factors do the GDT take into account?
When accessing a application for tax liability installments by a Taxpayer the GDT will take into account the following factors:
- Whether the Taxpayer has complied with their obligations under the tax regulation to notify the GDT of any changes in the status of the taxpayer i.e. change of address, shareholder, director etc;
- The financial ability of the Taxpayer to pay the tax liability on time based on the information provided;
- The period of time and tax amount proposed by the Taxpayer to pay by installment; and
- The overall tax compliance status of the Taxpayer with respect to their obligations under the tax regulations in Cambodia.
How long can I request to pay off my tax liability under installments?
If the GDT decides to approve a Taxpayers request to pay their tax liability in installments the GDT the installment period would be subject to the following timeframe and conditions:
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The maximum period that a Taxpayer can pay their tax liability under installment cannot be more then three (3) years;
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The GDT will apply interest to the tax liability during the installment period as follows:
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First (1st) twelve (12) months : No interest will be charged by the GDT;
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Second (2nd) twelve (12) months: The GDT will apply additional interest, based on the market rate, to the balance of the tax liability;
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Third (3rd) twelve (12) months: The GDT will apply the additional interest based on the market rate as per above plus an additional 2% interest per month on the balance of the tax liability.
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It is unclear as to how the GDT will determine the market interest rate but if we were to use the example whereby a Taxpayer has a tax liability of USD100,000 for which they have been approved by the GDT to pay over three years in equal monthly installments the repayment schedule could look like the following (applying the 2018 annual market interest for USD as issued by the GDT of 8.35%):
| Monthly Instalment | ||
| Monthly Tax Liability Installment | Monthly Tax Liability Installment | |
| First 12 months | 2,778 | – |
| Second 12 months | 2,778 | 464 |
| Third 12 months | 2,778 | 898 |
What happens if I fail to make the payments under the installment schedule for my tax liability?
If a Taxpayer fails to make the installment payments as agreed with the GDT then the GDT will rescind the approval to pay the tax liability in installments and the Taxpayer will be subject to additional penalties and interest as outlined under the tax regulations in Cambodia.
Please note that Taxpayers can now pay their tax liabilities to the GDT via any bank in Cambodia that has a MOU with the MEF. Once the payment has been made with the bank the bank tax payment receipt(s) must be submitted by the Taxpayer to the Department of Large Taxpayers or the Provincial- Khan Tax Branch in order for the Taxpayer to get the tax payment receipt(s) as evidence of the tax liability payment.
The DFDL tax team has a vast and varied depth of experience with tax re-assessments and the tax disputes process. Our team has won the prestigious Tax Disputes Firm of the Year for Cambodia (awarded by the International tax Review) for the last two years. We stand ready to answer any questions that you may have on this and other tax issues of concern.
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 here 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
