2016 11 April

Tax alert Cambodia: New prakas on tax registration

#Cambodia #Tax #TaxRegistration

Back

On the 6th of this month, the Ministry of Economy and Finance issued a new Prakas on Tax Registration No. 496 MEF.P. (Prakas 496). Prakas 496 abrogates Prakas 1139 (dated 9 October 2014) that had previously set out procedures for all existing taxpayers to update their information and for new taxpayers to register for tax with the General Department of Taxation (GDT).

It is fair to say that the implementation of Prakas 1139 and its associated regulations caused a fair degree of angst for a number of taxpayers (both existing and new) with some of its procedural requirements, varying degrees of interpretation by tax officials and lengthy delays in processing tax registration applications.

As the expression goes ‘come a new dawn come a new day’ and Prakas 496 appears to have addressed some of the concerns of its predecessor. The jury is still out on consistency of interpretation and timeframes to complete the registration. We outline below the salient points to come out of Prakas 496 below.

1. Scope

Prakas 496 reflects the recent abolishment in the Estimated Tax regime and restructure of the Real Regime by referring to the documentary requirements for small, medium and large taxpayers – please refer to our previous alert for more information on these new classes of real regime taxpayer here. However importantly its reach goes even further then the revised real regime – the Prakas applies to all legal persons who have either commenced economic activity or registered with the Ministry of Commerce or any other applicable Government entity in Cambodia – (based on the letter of the law the legal person must register within 15 working days from whichever event occurs first).

Economic activity is a defined term which is expressed as “the regular, continuous or occasional activity of a person, whether or not for profit, in the supply or intent to supply, goods or services to another person for the purpose of obtaining a benefit”.  Consequently the ambit of the requirement to register for tax goes further than the revised real regime of taxpayers and extends to all legal persons who undertake economic activities in Cambodia or have annual turnover below KHR250 million (USD62,5k), or turnover of any three consecutive months in the current calendar year below KHR60 million (USD15k).

The documentary and procedural requirements for legal persons are set out as per below:

  • Medium and Large Taxpayers
    1. Public institutions, diplomatic missions, foreign consulates, international organizations, technical cooperation agencies of other governments and political parties – click here;
    2. Sole Proprietorships and legal entities – click here;
    3. Associations and Organizations – click here.
  • Other Taxpayers
    1. Small Taxpayers or other legal persons – click here.
2. Requirement of Chairperson or Owner to present themselves

One of the main concerns with Prakas 1139 was the requirement that the chairperson of the board of directors or company owner be directly present at the tax administration to have their photo taken and fingerprints scanned.

Under Prakas 496 – a dispensation is provided to the chairperson/owner of foreign nationality who resides outside of Cambodia and cannot come to have their photo taken and finger prints scanned. Under that scenario a power of attorney may be awarded to a representative in the company’s board of directors to meet the requirements on behalf of the chairperson/owner.

Those chairpersons/owners who hold Cambodian nationality or hold foreign nationality but permanently reside in Cambodia are still required to be directly present to have their photo taken and fingerprints scanned.

3. Address

For the purpose of tax registration an address that is used which has no building (vacant land) or is in the process of being constructed and is not yet usable will not be allowed to be used for tax registration purposes unless approved by the GDT.

4. Change in Information

As well as paying registration fees taxpayers are also required to update their information with the GDT in the event any of the following have changed and pay fees where applicable:

  • Company name;
  • Address of head office, principal business or branch address, company warehouse;
  • Address of company owner, director or manager;
  • Legal form of the company;
  • Business objective;
  • Business transfer or termination;
  • Management composition;
  • Official in charge of tax affairs;
  • Company’s bank account number;
  • Contact number.

The taxpayer is required to submit their request to the GDT within 15 working days after the change of any information. The fees for tax registration and information updates are listed below.

Entity Type Tax Registration Fees Information Update – Fees
Khmer Riel USD Khmer Riel USD
Public institutions, diplomatic missions, foreign consulates, international organizations, technical cooperation agencies of other governments and political parties KHR 0 USD 0 KHR 0 USD 0
Small Taxpayers or Taxpayers below 250 million Riels annual turnover KHR 20,000 USD 5 KHR 10,000 USD 2.50
Medium & Large Taxpayers, associations and organizations KHR 400,000 USD 100 KHR 200,000 USD 50

*The same fees as charged for an information update will also be charged to those taxpayers who change information on their patent tax certificate, tax registration certificate, VAT registration certificate or that request a reprint of those documents. A fee of KHR5,000 will be charged to reprint a tax registration card.

5. Timeframes – Documents

Taxpayers may receive the decision of tax registration or company information update within 7–10 working days. After the tax registration the GDT will conduct an on-site inspection of the company to take a photo of the location and record GPS data.

The following formal documents will be delivered by the GDT:

  • Public institutions, diplomatic missions, foreign consulates, international organizations, technical cooperation agencies of other governments, political parties, associations and organizations, which do not operate a business:
    • Tax registration certificate and/or;
    • Tax registration card and/or;
    • Notification on filing tax returns.
  • Sole proprietorships, legal entities, associations and organizations, which operate a business:
    • VAT registration certificate and/or;
    • Tax registration card and/or;
    • Patent tax certificate and/or;
    • Notification on filing of tax returns.
  • Taxpayers with annual turnover below 250 million riels, or turnover of any three consecutive months of the current calendar year below 60 million riels
    • Certification of tax registration and/or;
    • Tax registration card.
6. Final Points

Finally the Prakas restates the previous regulations insofar as it acknowledges the ability of the GDT to unilaterally register a taxpayer who has not registered for tax as they should have and impose the effective start date as they set fit and appoint the representative to present themselves to the GDT for photos and fingerprint scanning. In additional the GDT can refuse a request for registration in the event that the applicant (chairperson, director, owner, shareholder, representatives) are involved in other entities that have tax arrears.

If a taxpayer fails to register or update its information in accordance with the Prakas they will be deemed to be obstructing the tax provisions and will be subject to a penalty as per the Law on Taxation. Under the Law on Taxation any person who commits an act of obstruction shall be liable to a fine from 5 million KHR to 10 million KHR and to imprisonment from 1 month to 1 year.

Please do not hesitate to contact us should you require assistance with the tax registration process or have any concerns on the above matters.

DFDL contact

Clint O’Connell
Head of Tax – Cambodia

*The information is provided 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.