2020 31 August

Cambodia: Capital Gains Tax


The long anticipated Prakas 346 on Capital Gains was released for the public to dissect last week by the General Department of Taxation (“GDT”). Prakas 346, signed on 1 April 2020, was intended to apply to all capital gains from 1 July 2020 however the Director General of the GDT has announced that the implementation of Prakas 346 will be postponed to 1 January 2021.

Prakas 346 – The key takeaways

What is a capital gain?

Prakas 346 defines a capital gain as the taxable income that results from the revenue received from the sale or transfer of capital less allowable expenses.

What expenses can be deducted from the revenue received from the sale or transfer of capital?

A taxpayer can either use a determination based deduction of 80% of the revenue received from the sale or transfer of immovable property or they use the actual expenses method.
For the sale or transfer of capital other than immovable property a taxpayer is required to use the actual expense method to calculate the capital gain. 

What is the rate of the capital gains tax?

The capital gains tax is taxed at a flat rate of 20% on capital gains.

Who does the capital gains tax apply to?

Capital gains tax applies to taxpayers who make capital gains. A taxpayer is defined as a resident or non-resident taxpayer who has sold or transferred capital to any other person. A resident taxpayer refers to a physical person whereas a non-resident taxpayer can be either a physical person or a legal entity who is not considered to be a resident person.

What is capital?

Capital is defined to include the following:

Categories of Capital Definition
Immovable Property Land, house, or building and construction erected on land as defined in the tax on Immovable Property regulations
Lease Agreements involving the authorization of a lessee to occupy and use property for a period of time by paying rent. Leases include subleases as stated in in the Law on Special Lease
Investment Asset Shares, bonds and securities issued by a private enterprise
Goodwill Licenses, customer lists and brandnames
Intellectual Property Patents, literary and artistic works, logos, pictures and drawings used for commercial purposes
Foreign currency Any currency other than Khmer Riel

Prakas 346 – The Detail

Immovable Property:

Capital gains is triggered with respect to immovable property when:

  • The immovable property is sold or transferred;
  • At the time the transfer of ownership is registered with the authorities in Cambodia;
  • At the time a decision is made to transfer ownership of the immovable property through a court judgment.

When determining the amount of gain that would be subject to 20% capital gains tax on the sale or transfer of immovable property first the sale/transfer value of the immovable property needs to be determined.

The revenue received from the sale/transfer of immovable property is based on the price indicated in the sale/purchase agreement of the immovable property and other supporting documents. If the GDT determines that the price indicated in the sale and purchase agreement is lower than the market price the GDT can re-assess the sale/transfer price of the property in accordance with:

  • The  market value; or
  • The value attributed to the immovable property based on its location and characteristics as detailed in the Annex attached to the Prakas on the Transfer of Ownership or Occupancy Right over Immovable Property; or
  • A value determined by the committee for the evaluation of capital gains tax on immovable property.

Once the sale/transfer value of the immovable property is determined then a taxpayer can choose to deduct expenditure from the sale/transfer value based on two methods: 

    –    Determination Based Expense Deduction

Under this method a taxpayer can deduct 80% from the revenue received from the sale or transfer of the immovable property without needing to provide supporting documentation for the expense.

    –    Actual Expense Based Deduction

Under this method a taxpayer may deduct expenses actually incurred in acquiring, holding and transferring the immovable property which qualify as deductible expenses i.e. expenses that have occurred, that relate to the property and can be evidenced with invoices or other supporting documents.

The costs that fall under an actual expense based deduction could include:

  • The cost of the property and expenses incurred during its purchase, occupation and subsequent sale/transfer, including but not limited to:
    1. Consulting fees,
    2. Registration tax paid when the property was purchased,
    3. Expenses relating to cadastral administration or land management fees,
    4. Expenses relating to commercial advertising of the property for sale,
    5. Commission fees,
    6. Property evaluation fees,
    7. Expenses on administrative fees to obtain a loan to purchase the property,
    8. Interest expenses relating to a loan used to purchase the property paid during the occupancy of the property,
    9. Property maintenance and renovation,
    10. Expenses on the creation or protection of property occupancy rights.


Example 1: Capital Gains Tax calculation on Immovable Property using the determination-based method

– Mr. A sells a house to Mr. B for Khmer Riel 800,000,000.

– The capital gains tax calculation under the determination based method would be as follows:

  Revenue from house sale = 800,000,000 KHR
  Determination-based expenses deduction  = 80% x property sale

= 80% x 800,000,000 KHR

= 640,000,000 KHR

  Capital Gain (Revenue from house sale minus expense) 

= 800,000,000 KHR – 640,000,000 KHR

 = 160,000,000 KHR

  Calculation of capital gains tax of 20%

= 20% x 160,000,000 KHR

= 32,000,000 KHR

  Example 2: Capital gains Tax calculation on Immovable Property using the actual-expense based method


– Mr. A  sells a house to Mr. B for Khmer Riel 600,000,000

– Mr. A purchased the house for Khmer Riel 400,000,000. When initially purchasing the house Mr. A paid 4% registration tax of KHR 16,000,000, commission of KHR 24,000,000 and during the time he owned the house Mr. A incurred renovation costs of KHR 20,000,000.

  Revenue from house sale   = 600,000,000 KHR
  Total actual expense  = purchase price + registration tax + commission + renovation fee
= 400,000,000 + 16,000,000 + 24,000,000 + 20,000,000
  Total actual expense = 460,000,000 KHR
  Capital gains calculation  = Income from house sale – total actual expense
= 600,000,000 – 460,000,000
  Capital Gain = 140,000,000
  Capital Gains Tax  = 20% x 140,000,000
= 28,000,000 KHR

Exemptions with respect to Immovable Property

Capital gains tax is exempted on the sale/transfer of:

  • Immovable property owned by a public institution,
  • Immovable property owned by a diplomatic mission, foreign consul, international organization or technical cooperation agency of other governments,
  • The residence which is the principal place of residence for a taxpayer for at least five (5) years prior to the sale/transfer. In the event that the taxpayer has more than one residence or a taxpayer and their spouse have different residences only one residence shall be permitted as a principle residence,
  • The transfer of immovable properties among relatives as stated in the registration tax regulations, excluding the transfer of ownership or right to occupy immovable properties between biological brothers/sisters, parents-in-law and children-in-law and grandparents-in-law and grandchildren-in-law,
  • Immovable properties sold or transferred for the public interest in accordance with the Law on Expropriation.


It should be noted that the transfer of a lease is also subject to capital gains and is triggered based on the same events as immovable property (as outlined above). We assume that this refers to the transfer of a long term lease by a taxpayer for a premium by the leasee.

Tax Declaration

Taxpayers are required to submit a prescribed tax return and pay capital gains to the GDT within three (3) months after the capital gain has been triggered as outlined above. It is important to note that the transfer of legal title or occupancy rights of immovable property shall be null and void if the capital gains tax has not been paid on the sale or transfer.

DFDL – Comments

The taxation of capital gains is not a new feature to the Cambodian tax regime. Article 7 of the Law on Taxation has included capital gains under the umbrella of taxable income for some time. To date taxation of capital gains has only practically applied to those taxpayers registered under the self-assessment tax regime who have disposed of capital assets.

Historically as most individuals who brought and sold capital such as immovable property, shares and securities were not registered as taxpayers under the self-assessment regime of tax they had not been subject to tax on gains made from the disposal of those capital assets.

From 1 January 2021 that will change and Cambodian tax resident individuals and tax non-resident individuals and legal entities – will need to declare and pay capital gains tax on the transfer of capital (as defined above).

With respect to immovable property a Cambodian tax resident individual taxpayer will not only be assessed on capital gains derived from immovable property that they own in Cambodia but also on immovable property that they own that is located overseas which is sold or transferred – noting a tax credit is available for taxes paid on the disposal of the overseas immovable property if it was subject to tax in the jurisdiction that is located.

It should also be noted that when determining Cambodian tax residency for an individual if one or more of three listed criteria are met then an individual will be considered to be a tax resident of Cambodia. These criteria include place of residence i.e. whether the individual owns or rents property in Cambodia, whether the individual has a principal place of abode in Cambodia and whether they are physically present in Cambodia for more than 182 days within a period of 12 months. If the first two criteria are unclear then the physical presence criteria will be the deciding factor in determining tax residency. 

The emphasis in the Prakas is very much on the basis of calculation of the transfer of immovable property but it should also be noted that the capital gains tax applies equally to shares, securities, bonds, goodwill and foreign currency.

The Prakas does not give any clear guidance as to the method by which shares may be subject to the capital gains tax apart from providing that when calculating the gain on a share sale or transfer that the actual expense method must be used. We hope that the GDT provides more guidance on this over the coming months and also whether they will follow the lead of their Vietnamese counterparts in recent months by looking to tax indirect sales of shares in a Cambodian entity i.e. the transfer of shares in an offshore holding company which has a Cambodian subsidiary.

In conclusion we understand the rationale behind the introduction of a capital gains tax regime particularly with respect to the Cambodian property market where property speculation and short-term trading has been prevalent in recent years. However it is critical that the extent and scope and subject matter of the capital gains tax regime is clearly set out so that investors have confidence and clarity when investing in Cambodia. Further clarifications on short-term verses long term capital gains, trading stock in listed entities, determining the share value for share transfers, direct verses indirect share transfers are just some of the issues that taxpayers and investors need certainty on in the coming months.

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.


Clint O’Connell

Partner, Cambodia Deputy Managing Director & Head of Cambodia Tax Practice


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