Taxation and Accounting

1. Taxation System

The current taxation scheme of Cambodia is regulated by the Law on the Amendment to the Law on Taxation of 2003 (2003 Law on Taxation).

The assessment of the Tax on Profit shall be made according to the taxation system of the real regime, simplified regime or estimated regime. The tax payers’ regime shall be determined according to the form of the company, type of business activities and the level of turnover (Article 4, Law on Taxation).

2. Forms of tax and Current Tax Rate

The following table shows the current taxes levied in Cambodia, a brief explanation of them and their rates. For details of each tax, please refer to the Articles and/or Chapters of “2003 Amended Law on Taxation”, which is specified next to the name of tax in the table.

Tax Scheme of Cambodia

Tax	Rates
Profit Tax (Article 1 – 23, Chapter 1)
For legal person	20% (unless investment incentive rate of 9% or 0% are applied)
Oil and natural gas production sharing contract and the exploitation of natural resource including timber, ore, gold, and precious stones.	30%
Advance Tax on Dividend Distributions (Additional Profit Tax shall be paid upon the distribution of retained earnings or annual profit after tax if a firm distributes retained earnings or profit the in the amount of:	20/100: QIP of 0% Tax Rate 11/91: QIP of 9% Tax Rate 0: Firms of 20% Tax Rate
Minimum Tax (Article 24, Chapter 1)
To be applied only for the real regime, except QIPIf the profit tax amount exceeds 1% of annual turnover, the taxpayer pays only the tax on profit.	1% of annual turnover
Withholding Tax (Article 25 – 28, Chapter 1)
Income received by individuals for services such as management, consulting, etc. Payment of royalties for intangibles and interests in mineral resourcesPayment of interest by a resident taxpayer carrying on business, other than domestic banks or financial institutions	15%
Income from the rental of movable or immovable property	10%
Interest payment by domestic banks to residents with fixed term deposit account	6%
Interest payment by domestic banks to residents with non-fixed term deposit account	4%
Payment to non-residents : Interest, royalties, rent and other income connected with the use of property, dividends, payment for management or technical services	14%
Tax on Salary (Article 40 – 54, Chapter 2)
To be withheld monthly by employers0 Riels – 500,000 Riels (Approx. USD 125 or less) 500,001 Riels – 1,250,000 Riels (Over 125 – 312.5) 1,250,001 Riels – 8,500,000 Riels (Over 312.5 – 2,215) 8,500,001 Riels – 12,500,000 Riels (2,215 – 3,125) Over 12,500,000 Riels (Over 3,125) For fringe benefits Non-residents	0% 5% 10% 15% 20% 20% on market value Flat rate of 20%
Value Added Tax (Article 55 – 84, Chapter 3)
Taxable person: Any person subject to the real regime system Registration: All companies must complete registration for VAT before commencing business. Others must register within 30 days after their taxable turnover for the preceding consecutive three months exceeds; – 125 million Riel for goods – 60 million Riel for services Taxable supply: – Supply of goods or services by a taxable person in Cambodia – Appropriation of goods for his own use by a taxable person – Making of a gift or supply at below cost of goods or services – Import of goods into Cambodia Standard tax rate Tax rate for the goods exported from Cambodia and services executed outside of Cambodia Input tax credit is deductible against the output tax amount. Monthly filing: The VAT declaration must be submitted on or before the 20^th day of the following month.	10% 0%
Other taxes (Article 85, Chapter 4)
Specific Tax on Certain Merchandise and ServicesTickets for local and international air transportation Local and international telecommunication Beverage Tobacco, entertainment, large automobile, motorcycles from 125 cc upwards Petroleum products, automobile more than 2,000 cc	10% 3% 20% 10% 30%
Property Transfer TaxFor the transference of ownership of real property and certain types of vehicles as a result of direct transfer or a contribution of share capital to an enterprise Prohibited to issue certificates of ownership of property until the Property Transfer Tax has been paid.	4% on transfer value
Tax on Unused LandCommittee for Evaluation of Undeveloped Land, in cooperation with municipal and provincial authorities, decides whether a plot is “unused” or not and the amount of tax liability.	2% on the assessed value of unused land
Patent TaxFor annual business registration If the type of business is different or located in different provinces/ municipalities shall be required to pay in accordance with respective type of business and provinces/ municipalities separately (Notice # 002.MEF on Obligation of Patent Tax Payment, January 19, 2007).	Approx. USD300-
Property Tax (Exempt for agricultural land, To be levied on property with value exceeding 100 million Riels)	0.1% of the evaluated value
Import Duty	Varies (4 bands – 0, 7, 15 and 35%)
Export Duty	Varies (Mostly 10%)

3. Tax Treaty

Accounting principles

Cambodia joined in the ASEAN Federation of Accountants (AFA) at the 76^th AFA Council meeting in Yangon, Myanmar on the 11^th January 2003. Although it has not widely known, the majority of ASEAN members have observed and complied with the International Accounting Standards Committee’s standards. The Cambodian government also inaugurated in early 2003 the process for full implementation of a single set of high-quality accounting standards for both domestic and cross-border financial reporting.

The “Law on Corporate Accounting, Audit and Accounting Profession” was enacted in July 2002, followed by the “Sub-Decree on the Kampuchea Institute of Certified Public Accountants and Auditors (KICPAA)” and the “Sub-Decree on the functioning of the National Accounting Council (NAC)” was issued in 2003. NAC is a regulatory body of the Ministry of Economy and Finance essentially dealing with the examination and revision of Cambodian Accounting Standards (CASs) and accounting regulations. KICPAA is a professional accounting body overseeing the organization and quality assurance of the private accounting profession.

The Law aims to determine the organization, management and function of accounting system based on international accounting standards for enterprises as follows.

All enterprises, whether natural or legal entities, are required to keep books and accounts and have them audited in accordance with the terms and conditions provided for under this Law (Article 3).

The financial statements shall include the balance sheet, the income statement, the cash flow statement and explanatory notes. They shall be considered as an integral part of the financial statements (Article 8).

The accounting records shall be prepared in the Khmer language and expressed in Riels. Enterprises carrying out business with foreign countries or which are subsidiaries of foreign companies may be authorized to prepare accounting records in English and/or in a currency other than Riels along with the accounting records in the Khmer language and Khmer Riels (Article 9).

The duration of the accounting period shall be twelve months. The accounting period shall begin on the first day of January and end on the 31^st day of December of the same year. As for the newly established enterprises, the annual financial reporting for the first fiscal year could start from the date of its formation and end on the date of the 31^st day of December of the next year (Article 10).

The financial statements shall be prepared within three months following the closure of the financial year (Article 11).

The financial statements and the corresponding ledgers and documentary evidence shall be kept for at least ten years (Article 12).

All enterprises, whether natural or legal entities, shall submit their accounts to be audited by an independent auditor in the event that their turnover, and/or balance sheet total, and/or number of employees are above the limits set by by Prakas #643 of MEF of July 26, 2007 (Article 16).

15 Cambodian Accounting Standards (CASs), based on International Accounting Standards, and 10 Cambodian Standards on Auditing (CSAs) were first approved by the NAC on the 11^th April 2003. On March 24, 2008, the “Prakas #221 on the Implementation of Cambodian Accounting Standards – (CASs) and Cambodian Financial Reporting Standards – (CFRSs)” was issued to update such old CASs and currently 18 CASs and 2 CFRSs are being in use as shown in below table. Furthermore, the International Financial Reporting Standards (IFRS) for SMEs is now being planned to be implemented in 2010.

Cambodian Accounting and Auditing Standards

15 Cambodian Accounting Standards (CAS)	10 Cambodian Standards of Auditing (CSA)
Presentation of Financial Statements Inventories Cash Flow Statements Accounting Policies, Changes in Accounting Estimates and Errors Events After the Balance Sheet Date Construction Contracts Income Taxes Property, Plant and Equipment Leases Revenue The Effects of Changes in Foreign Currency Rates Borrowing Costs Related Party Disclosures Consolidated and Separate Financial Statements Provisions, Contingent Liabilities and Contingent Asset Intangible Assets Investment Property Agriculture	Objective and General Principles Governing and Audit of Financial Statements Term of Audit Engagements Documentation Fraud and Error Planning Audit Materiality Audit Evidence Subsequent Events Going Concern The Auditor’s Report on Financial Statements
	2 Financial Reporting Standards (CFRS)
	Insurance Contracts Financial Instruments: Disclosures

Source: The National Accounting Council

4. Accounting Principles

The Law aims to determine the organization, management and function of accounting system based on international accounting standards for enterprises, either natural person or legal entities; stipulates the contents of financial statements in Articles 8 to 13; and requests a corporate audit be made by the Certified Public Accountants and Auditors when the turnover and/or balance sheet total, and/or number of employees are above the limit set by Prakas #643 of MEF of July 26, 2007.

15 Cambodian Accounting Standards (CASs), based on International Accounting Standards, and 10 Cambodian Standards on Auditing (CSAs) were first approved by the NAC on the 11^th April 2003. On March 24, 2008, the “Prakas #221 on the Implementation of Cambodian Accounting Standards – (CASs) and Cambodian Financial Reporting Standards – (CFRSs)” was issued to update such old CASs and currently 18 CASs and 2 CFRSs are being in use as shown in the following table. Furthermore, the International Financial Reporting Standards (IFRS) for SMEs is now being planned to be implemented in 2010.

Cambodian Accounting and Auditing Standards

15 Cambodian Accounting Standards (CAS)	10 Cambodian Standards of Auditing (CSA)
Presentation of Financial Statements Inventories Cash Flow Statements Accounting Policies, Changes in Accounting Estimates and Errors Events After the Balance Sheet Date Construction Contracts Income Taxes Property, Plant and Equipment Leases Revenue The Effects of Changes in Foreign Currency Rates Borrowing Costs Related Party Disclosures Consolidated and Separate Financial Statements Provisions, Contingent Liabilities and Contingent Asset Intangible Assets Investment Property Agriculture	Objective and General Principles Governing and Audit of Financial Statements Term of Audit Engagements Documentation Fraud and Error Planning Audit Materiality Audit Evidence Subsequent Events Going Concern The Auditor’s Report on Financial Statements
	2 Financial Reporting Standards (CFRS)
	Insurance Contracts Financial Instruments: Disclosures

Source: The National Accounting Council

5. Audit of corporate account

All enterprises in Cambodia, whether natural or legal entities, Cambodian or foreign, which fall in any two of the 3 categories below, shall have an obligation to submit their financial statements of respective financial year to independent auditors, who have been registered with KICPAA, for audit. All QIPs shall have the same obligation as well. (Prakas #643.MEF on Obligation to Submit Financial Statements to be Audited Corporate Account)

– to have an annual turnover of 3,000,000,000 Riel upward;

– to have total assets of 2,000,000,000 Riel upward pursuant to average price of assets available in the required year for audit;

– to have employees from 100 people upward pursuant to a number of average employees available in the required year for audit

Source : Council for the Development of Cambodia