Introduction
With the issuance of Prakas 192 on Tax Rules and Procedures for Trust, dated 12 March 2025 (“Prakas 192”) by the Ministry of Economy and Finance, Cambodia has introduced a new taxation framework for trusts, emphasizing compliance, transparency, and proper fiscal governance. This briefing outlines the key tax obligations trustees must adhere to.
Trust Registration & Tax Classification
Under the new framework:
- Trust entities must register as medium or large taxpayers.
- Independent individual trustees must register as small, medium, or large taxpayers based on their revenue and assets.
- Trust Registration must occur within 15 working days after receiving a license/approval from the Trust Regulator or commencing operations.
Example: A newly licensed independent individual trustee overseeing several high-value real estate trusts must assess their revenue and assets. If their financial profile exceeds the threshold for small taxpayers, they are required to register at least as a medium taxpayer.
Accounting & Financial Reporting Requirements
Trustees must maintain separate accounting records distinguishing:
- Trust transactions from personal/business finances of the trustee.
- Ownership of trust property and financial movements of trust transactions.
- Accounting documentation for each trust administered.
Example: A trustee managing multiple trusts—one dealing with equity investments and another focused on agricultural land development—must maintain distinct financial records for each, preventing asset contamination.
Taxable Income & Applicable Rates
Trustees are taxed on remuneration or profits from trust administration but not on trust assets or funds held on behalf of beneficiaries.
- Legal entities: 20% income tax.
- Individuals & small entities: Progressive rates (0–20%) depending on annual income structure.
Example: A registered trustee company charges a 5% management fee on a property rental generating 2 million riels per month. The fee is considered taxable income under corporate tax regulations, subject to standard deductions before applying the 20% rate.
Taxation of Trust Property Transactions
Trust assets, when generating income or undergoing ownership transfers, are subject to specific taxation mechanisms:
Tax on Rental of Immovable Property
Income from leasing trust property is taxable under Cambodia’s rental tax rules.
Example: A trust leases an office building for 100 million riels annually. The trustee must declare rental income and comply with tax on rental of immovable property calculations, as applicable.
Capital Gains Tax
Gains from asset sales or transfers are taxable.
Example: A trustee acquires land for 500 million riels as property under the trust, later selling it for 700 million riels. Under an 80% expense deduction method for immovable properties, capital gains tax is calculated as follows:
- Capital gains: 700M – (80% × 700M) = 140M riels
- Tax owed: 140M × 20% = 28M riels
Stamp tax/Registration Tax
Ownership transfers trigger registration tax liabilities.
Example: A trustee purchases an apartment for 300 million riels as property under the trust. Registration tax (4%) applies:
- Tax owed: 300M × 4% = 12M riels
Withholding Tax on Non-Resident Transfers
Income transfers to non-resident settlers may be taxed at 14%, unless capital gains tax has been paid.
Example: A non-resident trustor receives 176 million riels from the sale of trust property. If capital gains tax was already paid, withholding tax does not apply.
Compliance Obligations & Tax Exemptions
Beyond standard taxation rules:
- Trustees must comply with all applicable tax laws.
- Trust assets are eligible for tax exemptions when aligned with general exemption provisions.
Example: Certain charitable trusts holding assets for public benefit purposes may qualify for tax exemptions.
Conclusion
The taxation of trusts in Cambodia is becoming increasingly structured, reinforcing compliance, transparency, and fair taxation principles. With the issuance of Prakas 192, it formalizes the legal and tax framework for trusts in Cambodia. As such, trustees and those engaged in trust operations must ensure timely registration, accurate financial reporting, and compliance with taxation rules to ensure compliance adherence.
For any queries regarding the tax or legal obligations of the parties to a trust arrangement in Cambodia please reach out to the authors or your usual DFDL advisor.
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
