Welcome to the first DFDL tax update for the year – we wish all our clients and readers a healthy and prosperous 2017.
Whilst this festive season has not seen the large amount of tax reform that was witnessed in 2015/2016 there are still a number of important updates that we would like to bring to your attention below. We covered the salient changes brought about by the 2017 Law on Financial Management in our earlier update which you can find on our website. In addition to these changes December 2016 saw the introduction of the following:
Extension of due date for monthly tax returns
On the 23 December 2016, the Ministry of Economy and Finance issued Prakas No. 1539 MEF.PrK (“Prakas 1539”) concerning the amendment of the due date for filing monthly tax returns and making the associated tax payments.
Prior to Prakas 1539 all monthly tax returns, aside from VAT, were required to be filed with the General Department of Taxation (“GDT”) by no later than 15th day of the following month after the applicable transaction(s) took place. Under Prakas 1539 the due date for monthly returns and payments has been changed to the 20th day of the following month.
In practice Prakas 1539 gives all taxpayers under the self-assessment regime an additional five (5) days to declare their monthly tax returns and make their tax payments.
Implementation of Tax on Salary changes
With reference to our tax update on 11 November 2016 the 2017 Law on Financial Management introduced changes to the monthly Tax on Salary bands and the dependents rebate that employees may be eligible for. Instruction No. 017 MEF.GDT dated 27 December 2016 (“Instruction 017”) provided a summary and working examples of how these changes will be implemented.
As from 1 January 2017 all resident enterprises including government institutions, organizations, and other enterprises have an obligation to withhold and pay the Tax on Salary (“TOS”) for resident employees as below:
|MONTHLY TAX ON SALARY BANDS||DEDUCTION|
|Khmer Riel (KHR)||USD||Tax Bands||KHR||USD|
|From 0 riels to 1,000,000 riels||0-250||0%||0 riels||0|
|From 1,000,001 riels to 1,500,000 riels||250 – 375||5%||50,000 riels||12.50|
|From 1,500,001 riels to 8,500,000 riels||375 – 2,125||10%||125,000 riels||31.25|
|From 8,500,001 riels to 12,500,000 riels||2,125 – 3,125||15%||550,000 riels||137.50|
|Over 12,500,000 riels||Over 3,125||20%||1,175,000 riels||293.75|
This implementation is effectively from the salary for January 2017 which the Tax on Salary (TOS) payment and return submission is due by 20th February 2017 (see Prakas 1539 above).
The rebate for dependent children and housewife is changed from 75,000 Khmer Riel (approximately USD19) to 150,000 Khmer Riel (approximately USD38). This is to reduce the poverty for employees, factory workers, teachers, and government officers.
1. An employee receives a monthly salary of KHR2,000,000.
2. An employee who receives monthly salary of KHR12,600,000.
Instruction 017 also makes the following observations;
As per Article 42 (new) of the Law on Taxation, the term “salary” includes remunerations, wages, bonuses, and overtime, compensations and fringe benefits which are paid to an employee, or which are paid for the direct or indirect advantage of the employee for the fulfillment of employment activities.
Allowances that are provided to the employees of factories, enterprises within the fulfillment of employment activities under Circular No.001 MEF dated 6 October 2016 on the Implementation of Obligation to Withhold Tax on Fringe Benefits “TOFB”, are allowed to be excluded from an employee’s taxable salary and are also not subject to TOFB. Please find further information on Circular 011 here.
Claiming VAT Input Credit
On the 20th of December 2016 the GDT issued Notification 21406 which provided instructions as to how a taxpayer can claim VAT input credits in their VAT monthly tax return. For clarification VAT input refers to VAT that is paid by a tax in the self-assessment regime to a supplier that is registered for VAT also and issues a VAT invoice.
In all cases where a taxpayer wishes to claim VAT input in their monthly VAT return, they must attach a valid invoice which has been issued by a seller (supplier) in accordance with the format and instructions No. 1127 GDT dated 26 January 2016 on the issuance of invoices for the taxpayers who are registered as a self-assessment regime – for further information on Instruction 1127 please refer to our client alert on 28 January 2016 here.
In addition, for enterprises that have not yet completed the tax update requirement, the GDT will temporary suspend the ability to claim VAT input and/or a VAT refund until those enterprises complete the tax update requirement. After the completion of, the GDT will allow those affected enterprises to claim the VAT input and VAT refund again.
In case there is no invoice issued or an incorrect invoice provided, it will be considered as obstruction on the implementation of the Law on Taxation and penalized in accordance with Article 133 and 136 of the Law on Taxation including suspension of operations that determines by the law, reassessment of tax, or a fine of KHR 10,000,000 (USD 2,500), or possible imprisonment for one year or both.
Numbering of Invoices
Notification 21606 issued by the GDT on the 26th of December 2016 provided instructions to enterprises in the self-assessment regime on how to properly issue invoices for a supply of a good or service in accordance with the invoice templates annexed in Instruction No.1127.
For any further information regarding this update please contact your usual DFDL advisor or contact.
Senior Director, Head of Cambodia Tax Practice
The information provided in this email 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.