2018 04 September

Cambodia Real Estate Update: Transfer Pricing Update – Impact on The Use of Loans To Acquire Land


Instruction 11946 issued by the General Department of Taxation (“GDT”) on the 21st of August 2018 (“Instruction 11946”) provides an important clarification regarding the determination of interest rates between related parties.

Since the introduction of Circular 151 in early 2014 Cambodian taxpayers were historically able to receive and extend interest free loans to domestic as well as overseas related parties. However since Prakas 986 brought in comprehensive transfer pricing guidelines in Cambodia in October last year there has been a large amount of speculation as to whether interest-free loans between related enterprises were still acceptable.

Instruction 11946 has now put the speculation to rest by clearly stating that when Cambodian taxpayers lend to, or borrow money from, related parties, the rate of interest to be applied to those loans must adhere to the “arm’s length principle” as set out in Prakas 986. In other words, the interest rate to be charged on related party loans should be determined based on the rate of interest that would have been charged between independent parties under similar circumstances.

In light of the above development, where loans between related parties have been used to acquire land in Cambodia these loans may be impacted by transfer pricing rules and may have to be updated.

Our recommendation is that a thorough analysis of existing related party loans be conducted during the ongoing fiscal year. Please do not hesitate to contact us should you need further advice in this regards.

DFDL Contacts

Guillaume Massin

Managing Director


DFDL Cambodia


Davy Kong

Consultant, Deputy Head of Cambodia Real Estate Practice Group

DFDL Cambodia


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.

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