2017 11 October

Cambodia Tax Alert: Tax Relief on Alcohol and Cigarette Sales


Alcohol and Cigarettes are subject to a number of taxes in Cambodia including Specific Tax and Public Lighting Tax. In recent years domestic producers and importers of Alcohol and Cigarettes in Cambodia have had to face substantial increases in the rate of Specfic Tax charged on their products. Producers meanwhile, have had to deal with a broadened tax base on which Specifc Tax is calculated – from 65% to 90% of the ex-factory sales price (excluding Specific Tax and Value Added Tax).

A meeting was held in June this year between the General Department of Taxation and the Cambodia Chamber of Commerce. One of the key issues discussed was the application of Public Lighting Tax (explained in more detail below). This had previously been levied on all stages of the Alcohol and Tobacco supply chain in Cambodia. The effect of this was to have the same tax potentially being levied twice or more on the sale and resale of the exact same product within Cambodia.

Responding to this issue, the Minstry of Economy and Finance issued Prakas 976 MEF. PrK “On the Determination of the Tax Base for Public Lighting Tax” (“Prakas 976”) whch was signed and entered into force on 9 October 2017.

Prakas 976 brings a measure of downstream tax relief on the secondary sales of Alcohol and Cigarettes. This essentially reduces the tax base on the calculation of Public Lighting Tax (“PLT”) to 20% of the selling price, excluding PLT itself and VAT. Whie the PLT calculation remains the same for domestic producers and importers of Alcohol and Tobacco, the distributors of those products now enjoy the benefit of a reduced PLT tax base.

We provide more detail on the calculation of PLT, the types of goods affected, and some illustrated examples below.

What is Public Lighting Tax?

PLT is an indirect tax imposed on the sales of Alcohol and Cigarettes at all stages of supply i.e. on both imports and domestically-produced goods, at 3% of the taxable value, including all taxes except PLT and VAT. Usually, the taxable value is equivalent to the selling price excluding PLT and VAT.

As its name suggests, PLT had been originally introduced to bolster the provincial and municipality budgets for public electricity.

Key Definitions

Prakas 976 re-states and provides some additional key definitions for PLT calculating purposes.

In terms of determining liability to pay PLT, Alcohol is defined as:

  • Beer
  • Wines made from grapes, including wine enriched with alcohol
  • Vermouths and other fresh grape wines prepared with plants and/or aromatic substances
  • Beverages with a low alcoholic content excluding palm wine and alcohol made from fermented rice (Sra Sar) for personal use
  • Pure ethyl alcohol with 80% alcohol content or higher, and ethyl alcohol and denatured alcoholic drinks 
  • Impure Ethyl alcohol, with 80% alcohol content and alcoholic drinks, and other spirits transformed and mixed during alcoholic beverage production.

Cigarettes include all types of products made from tobacco and importantly, this definition now includes all types of electronic cigarettes.

The term “Producer” refers to a person who converts the materials, assembles, packs, and processes the finished goods.

The term “Importer” refers to persons who imports any products by themselves or by any other persons across the Cambodian border.

The term “Distributor” refers to a person other than a Producer or Importer, who distributes/resells Alcohol or Tobacco goods that are subject to PLT.

Time of supply

PLT is calculated and paid when the supply of goods occurs. The rules determining the time of supply for PLT are the same as those for Value Added Tax.

In summary, the VAT time of supply is the earlier of the time by which the seller must issue the invoice or the time the seller actually issues the invoice.

By law, a VAT invoice must be issued within seven days once the goods are shipped or services rendered, or, within seven days if payment occurs before the goods are shipped or services rendered.

For imported goods, the time of supply is when the importer submits a declaration to the customs administration, and when customs duty and other import charges are paid.

A self-assessment regime taxpayer supplying products subject to PLT, must declare and pay PLT on such a supply by the 20th of the following month at the latest. PLT is recorded on the Pre-Payment of Tax on Profit monthly tax return.

Illustrated Example

In the example below a beer factory in Cambodia sells its product to a Cambodian Distributor who in turn sells to a Cambodian supermarket who then sells the product to the final consumer.

Invoice 1 Invoice 2 Invoice 3
$100 exclusive of PLT and VAT $120 exclusive of PLT and VAT $150 exclusive of PLT and VAT
PLT Tax Base = $100 PLT Tax Base = 20% of $120 = $24 PLT Tax Base = 20% of $150 = $30
PLT = $3 PLT = 0.72 PLT = 0.90

Comments from our tax professionals

Prakas 976 provides welcome relief from the previously onerous application of PLT on the full value at every stage in the re-sale of Alcohol and Tobacco products in Cambodia.

It is very encouraging to witness the Ministry of Economy and Finance responding positively to feedback from the private sector and instituting practical amendments to the tax regulations.

Of particular interest in Prakas 976 is the inclusion of electronic cigarettes under the definition of Tobacco.

The DFDL tax team, as always, stands 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.

DFDL Contact:

Clint O’Connell
Cambodia Head of Tax