Cambodia

In Cambodia, employers face several tax obligations, including monthly tax declarations, annual income tax, patent tax, and contributions to the National Social Security Fund.

Employer Taxes

• Tax on Salary (TOS): Employers withhold TOS monthly from employee salaries based on a progressive rate. The rates are 0% for monthly salaries up to KHR 800,000, 5% for KHR 800,001 to KHR 1,125,000, 10% for KHR 1,125,001 to KHR 8,500,000, 15% for KHR 8,500,001 to KHR 12,500,000, and 20% for salaries exceeding KHR 12,500,000. Non-resident employees are taxed a flat 20% on Cambodian-sourced income. Monthly salary reports are due on the 15th of the following month.
• Tax on Fringe Benefits (ToFB): Fringe benefits, which might include housing, transportation, or meal allowances, are taxed at a flat rate of 20%.
• Annual Tax on Income (TOI): Annual income tax is due within three months of the year-end. Payment and e-filing are done through the General Department of Taxation (GDT).

National Social Security Fund (NSSF) Contributions

• Occupational Risk Contribution (ORC): Employers with eight or more employees contribute 0.8% of the employee's average monthly wage.
• Healthcare Contribution: Employers cover the full 2.6% (1.3% was previously paid by both the Employer and Employee) contribution towards healthcare based on the employee's average monthly salary.
• Pension Contributions: Both employers and employees contribute to the pension fund. The contribution rates are tiered and depend on how long they've been contributing to NSSF: 4% of the contributory wage, 2% from the employer and 2% from employee for first 5 years (1st stage), 8% for the following 5 years (2nd stage). This continues to increase in stages, with an increment every ten years.

Other Tax Obligations

• Patent Tax: Annual patent tax must be renewed by March 31st each year. The fee depends on the business classification under the self-assessment regime.
• Monthly Tax Declaration: Monthly tax declarations must be e-filed and paid to the GDT by the 25th of the following month.
• Tax on Property Inherited or Received as a Gift (ToIP): Due annually by September 30th. Applies to the recipient of the property. This tax becomes effective from January 1st, 2025.

Additional Compliance Requirements

• Companies with 100 or more employees must hire qualified disabled persons equivalent to 1% of their workforce, and report to Ministry of Labor and Vocational Training (MLVT) annually in January.
• Companies with more than 60 employees must conduct an annual apprenticeship training.
• Foreign worker permit renewals are due by March 31st. Applications for the foreign manpower quota (FMQ) are due by November 30th of the preceding year.

This information is current as of February 5, 2025, and might be subject to change. It is advisable to consult with a tax professional for the most up-to-date information and personalized guidance.

In Cambodia, employers deduct Tax on Salary (TOS) from employee wages monthly, based on a progressive tax system.

Tax on Salary (TOS)

TOS is calculated on an employee's gross monthly salary after deducting allowances for dependents and, in some cases, specific allowances for factory workers. The applicable tax rates are progressive, meaning higher earners pay a larger percentage of their income in tax.

TOS Rates and Brackets (Effective January 1, 2023)

• KHR 0 – 1,500,000: 0%
• KHR 1,500,001 – 2,000,000: 5%
• KHR 2,000,001 – 8,500,000: 10%
• KHR 8,500,001 – 12,500,000: 15%
• Over KHR 12,500,000: 20%

Allowances and Deductions

• Spouse/Dependent Child Allowance: KHR 150,000 per dependent (spouse or child under 14, or under 25 if a full-time student). Only one parent can claim the deduction for each child.
• Factory Worker Allowances: Additional allowances may be deducted as outlined in Circular No. 011 (October 6, 2016). Documentation supporting these deductions must be maintained.

Example: TOS Calculation

An employee earning KHR 10,000,000 monthly with a non-working spouse and one dependent child:

1. Total Allowance: KHR 150,000 x 2 = KHR 300,000
2. Taxable Salary: KHR 10,000,000 - KHR 300,000 = KHR 9,700,000
3. TOS: (KHR 9,700,000 x 15%) - KHR 600,000 (cumulative deduction threshold) = KHR 855,000

Non-Resident TOS

Non-resident employees are taxed at a flat rate of 20% on their Cambodian-sourced salary. This is a final tax.

Fringe Benefits Tax (FBT)

Fringe benefits provided to employees are taxed separately at a flat rate of 20%.

Other Considerations

• Payment Dates: If payday falls on a public holiday, wages must be paid the next business day.
• Record Keeping: Employers must retain documentation to verify all deductions and allowances applied in TOS calculations.
• Amendments to Tax Declarations: Tax relief on penalties for voluntary amendments to tax declarations for transactions before August 2024 is available if amendments are submitted by June 2025.

General Taxation in Cambodia

Cambodia's tax system is constantly evolving. Recent announcements include new incentives for businesses in various sectors such as real estate, agriculture, tourism, and education, for the period of 2024-2025. Additional updates include a revised stamp duty rate of 4% on real estate company share transfers and updated definitions of "salaries" and "wages" within the context of TOS. Further guidance on these developments has been released by the Ministry of Economy and Finance (MoEF). Staying informed about these changes is crucial for compliance.

In Cambodia, Value Added Tax (VAT) is levied on most goods and services at a standard rate of 10%.

VAT Registration

• Mandatory Registration: Businesses are required to register for VAT if their taxable turnover exceeds specified thresholds:
  • Goods: KHR 125 million (approximately USD 31,250) over three consecutive months.
  • Services: KHR 60 million (approximately USD 15,000) over three consecutive months.
  • Importers and exporters must register regardless of turnover.
• Voluntary Registration: Businesses with a lower turnover can register voluntarily.
• Non-Resident E-commerce Suppliers: Non-resident suppliers of digital goods and services must register if their annual turnover reaches KHR 250 million (approximately USD 62,500) or KHR 60 million (approximately USD 15,000) over any three consecutive months.

VAT Rates

• Standard Rate: 10% on most goods and services.
• Zero Rate: Applies to exports, certain international transport services, and supplies by Qualified Investment Projects (QIPs) to specific export-oriented industries.
• Exempt Supplies: Certain goods and services are exempt, including:
  • Public postal services
  • Medical and dental services
  • Electricity and water supply
  • State-owned public transport
  • Insurance and primary financial services
  • Unprocessed agricultural products
  • Education services

VAT Filing and Payment

• Filing Frequency: Monthly
• Deadline: By the 20th of the following month (manual filing) or the 25th (e-filing).
• Payment: In Cambodian Riel.

Examples of Exempt Goods and Services

• Medical and dental services
• Educational services
• Unprocessed agricultural products
• Public postal service

Other Indirect Taxes in Cambodia

• Specific Tax (SPT): A type of excise tax on specific goods and services. The rates and base vary depending on the product or service. For domestically produced goods the tax base is generally 90% of the invoice price before VAT and SPT. For imported goods, SPT is due on the cost, insurance, and freight (CIF) value plus customs duty.
• Accommodation Tax: 2% on accommodation services.
• Public Lighting Tax: 3% on alcohol and tobacco products.

Information is valid as of February 5, 2025, and may be subject to change.

Cambodia offers a range of tax incentives to attract investment and stimulate economic growth. As of February 5, 2025, these incentives target various sectors, including real estate, qualified investment projects (QIPs), small and medium-sized enterprises (SMEs), and the tourism industry.

Real Estate Incentives

• Stamp Duty Exemption: Transfers of Borey properties (gated communities) and condominiums valued up to USD 210,000 are fully exempt from stamp duty. Properties exceeding this value receive a USD 210,000 deduction from the taxable base. This applies to properties purchased before and during 2025, with transfers occurring in 2025. Second or subsequent property transfers receive a USD 70,000 deduction.
• Capital Gains Tax Deferral: The 20% capital gains tax on real estate owned by individuals is deferred until the end of 2025.
• Property Tax Exemption: Agricultural land actively used for cultivation or related structures is exempt from the 0.1% immovable property tax.

Qualified Investment Projects (QIPs)

• Income Tax Exemption: QIPs can benefit from income tax exemptions for three to nine years, depending on the nature of the investment. Following the exemption period, investors pay a reduced percentage of the total tax due (25% for two years, 50% for the following two years, and 75% for the next two years). QIPs are also exempt from prepayment tax, minimum tax (with independent audit), and export tax (unless otherwise required).
• Capital Expenditure Deduction: Alternatively, QIPs can opt for special depreciation on manufacturing assets instead of the income tax exemption.
• Import Duty and VAT Exemptions: QIPs may be eligible for exemptions on import duties and VAT for construction materials, production equipment, and raw materials. Additional VAT exemptions are available for locally sourced production inputs.

SME Incentives

• Tax Registration Incentives: Micro, small, and medium-sized enterprises (MSMEs) in specific sectors (wholesale, retail, repair; accommodation and food services; crafts; and agricultural communities) receive incentives for voluntarily registering for tax. Micro-enterprises are exempt from registration fees, while small and medium-sized enterprises may be exempt from patent tax, penalties, and some tax liabilities related to pre-registration non-compliance. These incentives are available for registrations occurring between specified periods.

Tourism Incentives

• Tax Exemptions and Credits: Tourism-related projects can benefit from tax exemptions and reductions. This includes monthly tax exemptions (excluding VAT and accommodation tax) and annual income tax exemptions.
• Audit and Penalty Relief: Some tourism businesses may qualify for audit exemptions and waivers on penalties for tax return amendments.

General Investment Incentives

Cambodia offers several general incentives to attract foreign investment, including 100% foreign ownership of companies, corporate tax holidays, reduced corporate tax rates, duty-free import of capital goods, and no restrictions on capital repatriation. Special Economic Zones (SEZs) offer additional incentives like tax holidays, zero-rate VAT, and import duty exemptions. Please be aware that this information is current as of February 5, 2025, and may be subject to change. Consulting with a tax professional is recommended for specific guidance.