2018 12 October

Cambodia Tax Update: SME Tax Incentives Announced

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Sub-Decree No. 124 R.N.Cr.BK (“SD 124”) that came into effect on the 2nd of October 2018 has introduced important tax incentives for qualifying Small and Medium Enterprises (“SME’s”) operating in defined priority sectors in Cambodia.
 
We have summarized the key points addressed by SD 124 below:
  • SD 124 applies to Small and Medium Enterprises which are defined in the regulation based on their annual turnover or their number of employees as per below:
Annual Turnover (USD) No. of Employees
Small Enterprise 62,500 – 175,000 10 – 50
Medium Enterprise 175,000 – 1,000,000 51 – 100
  • To benefit from the incentives provided under SD 124, the SME’s need to operate in “priority sectors”;
  • Priority sectors include:
    • Agricultural or agro-agricultural products;
    • Food manufacturing and processing;
    • Manufacturing of local consumable goods, waste recycling and production of goods for the tourism sector;
    • Manufacturing of finished products, spare parts or assembling parts to supply other manufacturers;
    • R&D associated with IT or the supply of IT-based services;
    • Enterprises located in SME Cluster Zones and Enterprises developing the Cluster Zone.
  • The tax incentives provided to qualifying SME’s include:
    • An exemption from Tax on Income for three (3) years for newly registered enterprises or from the date of tax registration update for existing enterprises;
    • An exemption from Tax on Income for five (5) years for newly registered enterprises or from the date of tax registration update for existing enterprises, that meet one of the following criteria:
      • The enterprise uses at least 60% local raw materials, or;
      • The enterprise increases its number of employees by 20%, or;
      • The enterprise is located in the SME Cluster zone.
    • An exemption from the monthly 1% Pre-payment of Tax on Income and annual Minimum Tax during the Tax on Income exemption period;
    • Incentives for deductible expenditure include:
      • A 200% weighted tax deductible expense for IT-based accounting software and training and staff technical training;
      • A 150% weighted tax deductible expense for equipment or new technology that increases productivity.

There are a number of clarifications that we will obtain from the tax authority over the coming days regarding the implementation of this Sub-Decree. As always, the DFDL tax team 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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