The General Department of Taxation (“GDT”) has recently issued a notification № 437 dated 19 April 2012, to provide clarification to Directors and/or Managers of enterprises operating in Cambodia who are subject to the real regime of tax. The notification sets out the responsibilities with respect to the payment of tax liabilities in cases of a sale or transfer of a business in Cambodia, including by way of a sale of shares.
The notification provides that initially the seller will be required to settle any outstanding tax liabilities prior to the date of the sale or transfer.
Notification № 437 further clarifies that any outstanding tax liabilities not settled by the seller will automatically become the responsibility of the purchaser.
The general practice in Cambodia requires taxpayers to request a comprehensive tax audit to be conducted by the GDT prior to the finalization of the sale or transfer of a business. Generally, comprehensive tax audits will normally cover three years preceding the date of sale or transfer of a business. However, under Cambodian tax law this period can be extended for periods of up to ten years.
On finalization of the tax audit, the GDT will issue the taxpayer with a final tax reassessment letter. This letter sets out the outstanding tax liabilities to be paid. Tax liabilities are required to be settled within 30 days from the date of the final tax assessment letter.
Tax liabilities outstanding after 30 days will be subject to interest penalties at a rate of 2% per month.
Our legal and tax teams will be happy to discuss the implications of selling or transferring a business in Cambodia.