2016 28 January

Instruction No. 1127 issued by the General Department of Taxation (“GDT”) on the 26th of January 2016 provides important instructions on the issuance of invoices for taxpayers who are registered under the revised real regime of taxation – commonly referred to as the self-assessed regime (for further information about the abolishment of the estimated tax regime and revision of the real regime, please click here).

Instruction No. 1127 issued by the General Department of Taxation (“GDT”) on the 26th of January 2016 provides important instructions on the issuance of invoices for taxpayers who are registered under the revised real regime of taxation – commonly referred to as the self-assessed regime (for further information about the abolishment of the estimated tax regime and revision of the real regime, please click here).

The key points to be taken from Instruction 1127 are as follows:

  • All VAT registered taxpayers under the revised real regime of taxation (“RRT”) are required to issue an invoice for every sale or supply of goods or services in accordance with the 4 invoice templates that have been provided by the GDT – (please refer to the link at the bottom of this article to see the four templates that have been issued by the GDT).
  • Any invoice which does not conform to the requirements of Instruction 1127 shall not be permitted to be used to obtain a VAT input credit or to claim as an expense with respect to tax on profit.

The GDT provided four types of invoice templates as annexes to Instruction No. 1127 and we have included these in the link at the bottom of this article for your reference. The invoice templates (1) and (2) are to be used for handwritten or computer printed copies, whilst templates (3) and (4) are to be used by a point of sale (POS) terminal or computer billing system.

The invoice templates (1) and (3) shall be used by VAT registered taxpayers to customers of theirs who are also VAT registered taxpayers. These templates can be used by the VAT registered recipients (customer) of the good or service to claim a VAT input credit and a deductible expense for tax on profit purposes.

The invoice templates (2) and (4) shall be used by VAT registered taxpayers for issuance to non-VAT register taxpayers. These templates will not be able to be used to claim VAT input credits.

Invoice Requirements

Notification 1127 restates the VAT invoice requires as set out in the Law on Taxation and adds some addition requirements for good measure (emphasized in italics below). As per Notification 1127 a VAT invoice is now required to include the following:

  1. Name, address, and value-added tax identification number (VATTIN) of the seller or supplier;
  2. Clear invoice number in a chronological order and date of issuance of the invoice;
  3. Name and address of the purchaser and value-added tax identification number in case the purchaser is a taxpayer under the self-assessed regime;
  4. Description, quantity, and selling price of the goods or services;
  5. Total prices excluding tax and separate tax amount;
  6. The ink quality printed in the invoice and the invoice paper shall be able to be kept for a long period of time; and
  7. All invoices shall be written or printed in Khmer, or both Khmer and English, and the English text shall be under the Khmer text.

VAT registered taxpayers must issue a tax invoice for all supplies of goods or services to taxpayers or commercial invoices to non-taxpayers.

VAT registered taxpayers shall issue invoices in a chronological order all and shall preserve the document for taxation purposes for a period of 10 years.

The standard penalties apply under the Law on Taxation with respect to a VAT registered taxpayer who fails to issue an invoice or incorrect invoice which include re-assessment, business closure, fines or imprisonment.

DFDL Commentary:

Any measure taken by the GDT to provide certainty and consistency with respect to the issuance of tax invoices should be welcomed by most taxpayers. By providing invoice templates the GDT is at least making an attempt to ensure that even new participants to the amended RRT have some guidance as to how to issue standardized tax and commercial invoices.

As per before a VAT registered taxpayer has the choice of whether to issue a tax invoice or a commercial invoice. If the recipient of the good or service is a VAT registered taxpayer then they will want to obtain a valid tax invoice to ensure that they can claim both a VAT input credit and a deduction of the expense for tax on profit purposes – template (1) and (3) as per the link below. If the recipient of the good or service is not a VAT-registered taxpayer then they can receive a commercial invoice which is in compliance with templates (2) and (4) as per the link below.

We do note that it does seem somewhat overly punitive to impose quite significant consequences on a VAT registered taxpayer that receives an invalid VAT invoice. We understand, as per the existing VAT regulations, why an input VAT credit would be disallowed for an invalid VAT invoice but for Notification 1127 to impose an additional burden in the form of a disallowed expense for tax on profit purposes seems a bit heavy handed.

It is our understanding that the reference to a disallowed expense for tax on profit purposes would only apply in the event that a VAT registered taxpayer issued an invoice that was not in compliance with the requirements of Notification 1127. However a very broad interpretation of the new Notification could read it as inferring that “any invoice” that is received by a VAT registered taxpayer that is not in compliance with the requirements of Notification 1127 would not be allowed as an expense for tax on profit purposes. This scenario would include invoices received from non RRT taxpayers for goods and services.

As noted above we don’t believe this broad interpretation should apply as it would lead to potentially absurd results such as invoices from non-residents being excluded as expenses for tax on profit purposes. We are however clarifying this point with the GDT.

Whilst it is not stated expressly we believe this Notification would be in effect from 2016 onwards and should not impact the completion and filing of the annual tax on profit returns for 2015 with respect to expense deductibility for tax on profit purposes.

Please click here refer to the invoice templates as issued by the GDT.

DFDL Contact:

Clint O’Connell
Head of Tax – Cambodia
clint.oconnell@dfdl.com  

*The information is provided 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.