Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment” rules that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in every jurisdiction where it has customers that are not taxable persons. In Cambodia, no services are subject to the “use and enjoyment” provisions.
Transfer of a going concern. Normally, the sale of the assets of a VAT-registered business will be subject to VAT at the appropriate rate. However, a transfer of a business as a going concern (TOGC) may be outside the scope of the tax under certain conditions. A TOGC is the sale of a business or part of a business capable of separate operation, including assets. Where the sale meets the conditions, the supply is treated as outside the scope of VAT. In Cambodia, a TOGC is treated as outside the scope of VAT where the following conditions are met:
• The business must be transferred from one person to another to continue its activities under the new ownership.
• The taxable person transferring the business must notify the tax authorities of the transfer of the business within 15 days of the date of the transfer.
• The recipient of the business must be registered for VAT as a taxable person at the time the business is acquired and must account for tax on the stock and assets acquired at the time of their supply.
• The recipient of the business must retain the tax records related to the business transferred for a period of 10 years.
Transactions between related parties. In Cambodia, for a transaction between related parties the value for VAT purposes is calculated by redetermination by the tax authorities.
Under the VAT regulations, the term “related” in relation to a person means the following:
• A person who owns 20% of more in value or voting power in equity interests in the person under consideration
• Having common management or directors with the person
• A member of the family or spouse or a member of the family of the spouse of the person
• An entity that has purchased 30% or more of the person’s total output in any three consecutive months
The term “person” means any person or group of persons engaged in business and any other person who is related to the person.
In addition to the above, Cambodia introduced transfer pricing rule under which the term “related party” refers to:
• A member of the taxable person’s family
• An enterprise that controls or is controlled by, or is under common control with, the taxable person; the term “control” means the ownership of 20% or more in the value or voting power of the equity interests in the enterprise or voting power in the enterprise’s board of directors; to determine the degree of control for a taxable person who is a physical person, all equity interest owned by the taxable person and those owned direct or indirect by its spouse shall be included
C. Who is liable
A VAT taxable person is any person subject to the self-assessment regime of taxation who makes taxable supplies in Cambodia. Self-assessment taxpayers who provide taxable supplies are required to register for VAT and charge VAT on taxable supplies. A taxable person, under the self-assessment tax regime as identified below, that is making taxable supplies is required to register with the General Department of Taxation (GDT).
In addition, the tax authority published Prakas No. 542 MEF.PrK on 8 September 2021, outlining details on the procedures for the implementation of the e-commerce rules outlined in Sub-Decree No. 65. The VAT registration thresholds for a nonresident e-commerce provider, under the selfdeclaration scheme, is an annual turnover of KHR250 million or expected turnover exceeding KHR60 million within any three consecutive months in the current year.
Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Cambodia. However, the same rules outlined above for e-commerce are also applicable if they are considered digital goods under an electronic commercial platform.
Registration procedures. Companies must register electronically through the online registration system. The following information and documents must be submitted through the online registration system:
• Reserve the company name in the system
• Copy of the passport of all shareholders (if individual)/shareholder representatives (if shareholder is legal entity), chairman and directors of the new company
• Photo (35mm*45mm) of all shareholders/representatives with a white background
• Phone numbers, addresses and email addresses of all shareholders/representatives
• Company information (i.e., address, phone numbers, main business activities, total employees, etc.)
• Land title or rental contract of the new company office address
• Property tax receipt of the new company office address or the confirmation letter from the company if the property is not subject to property tax
• Memorandum and Articles of Association (M&A) of new company
• Power of attorney
• Copy of the certificate of incorporation (COI) and M&A of shareholders, company’s tax identification number of each shareholder, scan of original latest patent tax certificate and VAT of local shareholder, shareholder’s resolution and bank letter
Upon submission of the above required information and documents, the company will receive a VAT certificate, patent tax certification and tax obligation letter from the GDT within 7 to 10 working days from when the company is successfully registered.
Deregistration. To deregister from VAT, taxable persons can submit an application letter to the GDT. The GDT also has the right to cancel a registration of taxable persons who have not declared taxable supplies over a period of three continuous months and in respect of whom the GDT is satisfied that they are neither required nor entitled to be registered for VAT.
Changes to VAT registration details. A taxable person must notify the GDT when there is a change in the company’s name, address, business activities or a change of shareholders. Such notification must be done by completing the information form as provided in the tax update form 101 to the National Tax School (NTS) within 15 working days from the date the change took place. The taxable person will then receive an approval from the NTS within 7 to 10 working days from the date the form was provided.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT (including zero rate).
The VAT rates are:
• Standard rate: 10%
• Zero-rate: 0%
Leased assets. The time of supply rule for the supply of goods under a hire purchase agreement or finance lease is the date the goods are delivered, whether at the time of delivery it is characterized as a transfer of the right to use or disposal of a tangible fixed asset.
Imported goods. The time of supply for the supply of imported goods is the time at which the importer must file a declaration to the customs administration according to the regulations in force and the customs duty and other import charges are paid.
Other supplies. Own use. For the supply of goods that are applied to own use, the time of supply is the time at which the goods are first applied to own use.
Gifts For the supply of goods or services by way of a gift, the time of supply is the time at which the goods are delivered or performance of the services is completed.
F. Recovery of VAT by taxable persons
A taxable person may recover input tax, which is VAT charged on taxable goods and services supplied to it for business purposes, to the extent that costs corresponding to the input tax are for taxable supplies (or imports of goods).
A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made. If the input tax exceeds output tax due, this excess tax can be claimed as a refund.
A valid standard tax invoice or customs document must generally accompany a claim for input tax.
The time limit for a taxable person to reclaim input tax in Cambodia is within the month it happens.
Nondeductible input tax. In general, input tax may not be recovered on purchases of goods and services that are not used for business purposes (e.g., goods acquired for private use). A taxable person must obtain a valid VAT invoice for input tax deduction. If the taxable person fails to obtain a valid VAT invoice, a VAT input credit may not be allowed, and the unrecovered input tax is also not allowed as a deductible expense for annual corporate income tax calculations.
Examples of items for which input tax is nondeductible
• Input tax without a valid VAT invoice
• Input tax from topping up an employee’s personal mobile phone balance
Examples of items for which input tax is deductible (if related to taxable business use)
• Input tax from purchases of petroleum products (for non-petroleum business)
• Input tax from entertainment expenses (for businesses not involved with such entertainment)
Partial exemption. Where a taxable person makes taxable and nontaxable supplies, the input tax should be proportioned to reflect the percentage of taxable supplies,to calculate the amount of input tax that can be recoverable.
To calculate the appropriate input tax to be recovered, the taxable person must use the following formula:
A x B/C
• A is the total amount of input tax for the period.
• B is the total value of taxable supplies exclusive of VAT made by the taxable person during the period.
• C is the total value of taxable and nontaxable supplies exclusive of VAT made by the taxable person during the period.
A taxable person must provide the following supporting documents to claim VAT at the zero-rate:
• An agreement that clearly states service fee, type of service and location where the services are to be performed
• Documents showing payments remitted outside of Cambodia to a bank in Cambodia
• An original invoice and related accounting records
Foreign currency invoices. The GDT requires all taxable persons in the self-assessment regime in Cambodia (see Section C. Who is liable) to apply the total amount in the domestic currency, which is the Cambodian riel (KHR), on invoices that are issued to customers where the items and VAT amounts can be in either KHR or United States dollars (USD). When using KHR on their invoices, taxable persons should refer to the daily official exchange rate issued by the National Bank of Cambodia (NBC) to convert from USD to KHR.
Supplies to nontaxable persons. Taxable persons must issue a commercial invoice to customers who are not registered for VAT or overseas customers. See the subsection VAT invoices above for more detail on commercial invoices.
Records. In Cambodia, examples of what records must be held for VAT purposes include any records related to VAT, including invoices must be held by taxable persons. This is what is done in practice because in the VAT law there is no explicit list of the type of records that must be held. Taxable persons must use sequential numbers on their invoices for a whole year and archive them for 10 years for the purposes of taxation.
An original invoice, especially the tax invoice, should be provided to customers to enable them to claim input tax credit from the GDT while the supplier can maintain a copy.
In Cambodia, VAT books and records can be kept outside the country. While there is no rule on where the VAT books and records must be held (i.e., inside or outside the country), in practice it can be either as long as records are made available if requested by the tax authorities.
Record retention period. Records must be held for 10 years.
Electronic archiving. Electronic archiving is allowed in Cambodia. However, there are no specific rules on electronic archiving. In practice, taxable persons can keep or archive hard files at a third-party warehouse and keep soft files in the company’s drive.
I. Returns and payment
Periodic returns. The filing frequency for all taxable persons in Cambodia is monthly. VAT returns must be signed by authorized person and affixed with the company’s stamp and filed with the GDT manually by the 20th of the following month. However, the company can file the VAT return electronically (via the e-filing system) by the 25th of the following month.
Periodic payments. The VAT payable, if any, must be settled by the same date as the filing deadline of VAT return, i.e., by the 20th of following month for paper filing and the 25th for e-filing. Generally, payments of VAT due are made electronically online, via the website of the tax authorities (i.e., internet banking or bank transfer). However, this is not mandatory, and a taxable person can still pay VAT due manually (i.e., in person).
Electronic filing. Electronic filing is allowed in Cambodia, but not mandatory. Medium and large taxpayers can file returns via e-filing either by purchasing a desktop app or online (https://www. tax.gov.kh/km/e-service). Small taxpayers can use the GDT tax prefiling app and they can make their tax payments via e-payment online.
Payments on account. Payments on account are not required in Cambodia.
Special schemes. No special schemes are available in Cambodia.