2019 16 September

Cambodia Tax Update: Invoice Requirements

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On the 14th of August 2019 the Ministry of Economy and Finance issued Prakas 723 which provides rules on the proper usage of invoices by taxpayers operating in Cambodia. We set out the main points of Prakas 723 below.

Scope

The invoicing rules contained in Prakas 723 apply to all registered taxpayers in Cambodia.

Invoice Requirements

A registered taxpayer in Cambodia may issue two types of invoices – a VAT Invoice or a Commercial Invoice.

  1. A VAT Invoice needs to include the following:
    • The name, address, and Tax Identification Number (“TIN”) of the registered taxpayer providing the good or service;
    • A invoice number which needs to follow a chronological order;
    • The date of issuance of the invoice;
    • The name and address of the purchaser and their TIN if they are a registered taxpayer;
    • A description, quantity, and selling price of the goods or services;
    • The price of the goods and services being provided exclusive of transactional taxes (such as VAT, Public Lighting Tax, Specific Tax and Accomodation Tax);
    • The respective transactional taxes that have been applied to the services or goods that are being provided – for example if the services or goods are subject to Specific Tax, Public
    • Lighting Tax, Specific Tax or Accomodation Tax these have to be shown as a separate line item in the VAT Invoice along with separate line item for the VAT;
    • The name and signature of the supplier.
  2. A Commercial Invoice needs to include the following:
    • The name, address, and TIN of the registered taxpayer providing the good or service;
    • A invoice number which needs to follow a chronological order;
    • The date of issuance of the invoice;
    • Name and address of the purchaser;
    • A description, quantity, and selling price of the goods or services;
    • The price of the goods and services being provided inclusive of all taxes;
    • The name and signature of the supplier.

Medium and Large Taxpayers that provide goods and/or services are required to issue VAT Invoices to customers who are registered taxpayers and are required to issue Commercial Invoices to those customers that are not registered for tax.
 
Small Taxpayers shall issue Commercial Invoices to all their customers regardless of whether they are registered for tax or not.
 
Please follow the link here to fine out more about the difference between Large, Medium and Small Taxpayers.

All invoices, VAT or Commercial, shall be written or printed in Khmer, or both Khmer and English, with the English text being provided under the Khmer text.
 
Large and Medium Taxpayers must keep their invoices for 10 years and Small Taxpayers must keep their Invoices for 3 years.

Exemptions

The requirements on the issuance of VAT and Commercial Invoices contained in Prakas 723 do not apply to certain entities such as banks, insurance enterprises, financial institutions and other industries that cannot issue invoices.
 
Those exempted entities are required to maintain proper accounting records and supporting documentation in the absence of VAT or Commercial invoices.
 
The General Department of Taxation will issue additional clarification on which taxpayers may qualify as exempted from issuing VAT and Commercial Invoices.

VAT Input Credits

Medium and Large Taxpayers are able to record and utilize VAT input credits (on VAT invoices paid to suppliers) on a monthly basis through the e-VAT online system and supported by copies of the underlying supplier VAT invoice or scanned VAT invoice.
 
If the supplier VAT Invoice does not comply with the requirements set out above the Medium and Large Taxpayer will not be able to claim a VAT input credit.
 
Medium Taxpayers and Large Taxpayers who receive a Tax Invoice from a Small Taxpayer will not be able to claim a VAT input credit on the VAT that is charged but may expense the VAT payment which can be offset with the annual Tax on Income liability.

Penalties

Entities or individuals issuing fake VAT or Commercial invoices are required to pay all taxes that are shown on the invoice within 7 days from the date the invoice issued.
 
In addition to the above those Entities or Individuals who issue fake VAT or Commercial Invoices or who fail to issue a invoice when they supply goods or services will be considered to have obstructed the tax law and may be subject to a re-assessment of their taxes, the closure of their business, fines up to ten million Khmer Riel or imprisonment up to one year.

Implementation

The requirements as provided under Prakas 723 will be in effect from 1 January 2020.

DFDL Commentary

Prakas 723 is the latest in a number of recent regulations outlining the requirements of taxpayers with respect to their invoicing requirements and provides some useful clarifications on some areas that were previously unclear.
 
In particular the clarification that Large and Medium Taxpayers cannot claim a VAT input credit on invoices issued by Small Taxpayers confirms the practice which has been in place for some time already by some Tax Branches.
 
Of note also is the requirement for Large and Medium Taxpayers to separately include the various taxes that may apply to the good or service being provided when issuing VAT Invoices and not just the VAT. Those industries that are required to apply Specific Tax, Public Lighting Tax and Accomodation Tax will from 1 January 2020 now need to include those taxes as separate line items in VAT invoices that they issue. This may require industries such as Hospitality, Telecommunications, Beer and Tobacco to revise their current invoicing templates.
 
The DFDL tax team has a vast and varied depth of experience with the tax invoicing process. Our team has won the prestigious Tax Firm of the Year for the last three years and the Tax Disputes Firm of the Year for Cambodia (awarded by the International tax Review) for the last two years. We stand 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.

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.


DFDL Contact


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


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