2017 05 January

Cambodia Tax Update: Annual Tax Obligations 2017

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On the 23 December 2016 the General Department of Taxation issued Notification 21588 which provided guidance as to the submission of the 2016 Tax on Profit return for those taxpayers who are registered in the self-assessment regime of taxation in Cambodia.

Along with the 2016 Tax on Profit return most enterprises in Cambodia will also need to submit their Annual Declaration of Commercial Enterprise and apply for their 2017 Patent Tax Certificate. In most cases these submissions, and associated payments, are required to be submitted to the authorities by the 31 March 2017. We discuss these below in more detail;

2016 Tax on Profit Return

The key points to be taken from Notification 21588 are as follows:

  • Enterprises who operate in Cambodia and follow the standard tax year from 1 January to 31 December, must summit and pay Tax on Profit (“TOP”) for 2016 no later than the 31 March 2017 at the tax department where those enterprises are registered.
    • Bear in mind that the 31 March 2017 falls on a Friday this year so to avoid the queue’s on the last day please try and lodge your return well before the final day.
  • Enterprises who are allowed to use a different tax year, must summit and pay TOP no later than 3 months after their tax year ends.
    • Please note that to be able to use a non-standard tax year an enterprise must have received formal approval from the GDT after submitting an application.
  • Enterprises that have many branches, must summit a consolidated TOP derived from the total combination of the principal and all branches by attaching the profit and loss statements of each branch. Each branch must declare the profit and loss statement in accordance with the TOP template to the GDT where the branch is located.
  • Enterprises who operate multi-QIP or multi-QIP and multi-non QIP that have obtained different TOP exemption periods or different TOP rates must implement their obligations as stated in Prakas No.1127 MEF.BrK dated 11 October 2016 on the obligations for Multi-Projects Enterprise.
    • Please see our tax update of 13 December 2016 here for further details.
  • All enterprises that have an obligation to summit and pay TOP, must attach their balance sheet, Income Statement, and related parties transactions table as per the attached table in the notification.

Annual Declaration of Commercial Enterprise (“ADCE”)

By law, an ADCE must be filed each year by every enterprise (whether a company, branch or representative office) in order to update the Ministry of Commerce on any changes to the information registered.  If your enterprise fails to submit an ADCE it may be subject to fines and, if an ADCE is not filed for three consecutive years, it may be deregistered. 

2017 Patent Tax

All taxpayers operating in Cambodia are required to register and pay Patent Tax by the 31 March each year for each business activity that they carry out.

The amount of Patent Tax payable in 2017 is dependent on what class a taxpayer is classified as under the Self-Assessment Regime of Taxation that was amended in the 2016 Law on Financial Management. The 2017 Patent Tax fees are as follows:

 Self-Assessment Regime

2016 Patent Tax Fee
Khmer Riel (KHR)
2016 Patent Tax Fee
United States Dollars (US)
 Small Taxpayer KHR 400,000 USD 100
 Medium Taxpayer KHR 1,200,000 USD 300
 Large Taxpayer

KHR 3,000,000
or
KHR 5,000,000*

USD 500
or
USD 1,250

*If the annual turnover of the Large Taxpayer exceeds KHR 10,000 million (USD 2.5 million) then the Patent Tax payable will be USD 1,250. If the annual turnover of the Large Taxpayer is less than KHR 10,000 million (USD 2.5 million) the Patent Tax payable will be USD 500.

Key points to note

Filing Procedures

  • Patent tax is payable at the commencement of business operation and every subsequent year – payable from 1 January to 31 March.
  • Large taxpayers can pay their patent tax at the Department of Large Taxpayer (DLT) while medium and small taxpayers can pay at the Khan or Provincial tax branches where they are located or at any branch of Acleda or Canadia Bank.
  • For those who wish to pay at the bank they can then show their tax payment receipt to the tax office where their business is located to obtain their patent tax certificate.
  • If a taxpayer has a branch office, warehouse, factory or workshop with the same business objective but in a different location (i.e. city or province) then the taxpayer is required to pay an additional Patent Tax fee of KHR 3,000,000 (USD 750) to the tax authority where the branch office, warehouse etc. is located.
  • Taxpayers are obliged to display their valid patent tax certificates in their business premises.
  • Taxpayers who commence business within the first 6 months of the year shall pay patent tax in full while those that commence business in the last 6 months of the year shall pay half the patent tax fee.

Tax Agent Requirement

Notification 21588 also makes the point that the employee(s) of an enterprise or tax agent who has the obligation to communicate with the GDT and summit the monthly and yearly tax returns on behalf on the taxpayers, must wear either a staff Identification card or proxy confirmation from the registered tax agent as referred to in Article 106 of the Law on Taxation and the Prakas No.455 MEF. BrK dated 12 April 2013 on the tax agent.

This requirement follows Notification Letter No. 17509 GDT on 18 October 2016 which stated that from 1 January 2017:

  1. Taxpayers who do not have a Tax Service Agent (“TSA”) license were permitted to undertake certain restricted tax work, but only for their own employer. The permitted activities are restricted to tax compliance, including the preparation and filing of monthly and annual tax returns, and the related payments. For other tax services a licensed TSA must be engaged.
  2. TSA-license holders can undertake tax compliance or other services for clients, and act as a taxpayer representative under a written power of attorney.
  3. From 1 January 2017 individuals or companies who do not have a TSA license will not be allowed to provide tax services, or act as a taxpayer representative. Those found to be in breach of this provision will be penalized under Article 136 of The Law on Taxation, and taxpayers who engage unlicensed TSA’s will be subject to a fine of KHR 5 million (USD 1,250).

DFDL Services 

In order to avoid penalties, we can provide the tax compliances services including an assistance with preparing and filing the 2016 ADCE, the payment of your 2017 patent tax and annual tax on profit returns, which must be submitted to the Ministry of Commerce and tax authority by 31 March 2017. Tax compliance and tax audit services are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian Tax Service Agent.

 

For any further information regarding this update please contact your usual DFDL advisor or contact;
Clint O’Connell
Senior Director, Head of Cambodia Tax Practice
clint.oconnell@dfdl.com