Cambodia: Tax incentives for SMEs’ voluntary registration during year 2017 and 2018

Sub-Decree No.17 ANKr.BK (“Sub-Decree No.17”), issued by Royal Government of Cambodia on 7 February 2017, stipulated a clear objective of creating a transparent and equitable tax system by encouraging all businesses to register for tax. 

Under Sub-Decree No.17, SMEs that voluntarily registered themselves with General Tax Department (“GDT”) during 2017 and 2018 will be provided: 

1) Two-Year Tax Exemption The two-year tax exemption on Tax on Profit commences from the year in which the SME first generates revenue, or from the year of tax registration should the SME have earned revenue prior to the date of tax registration, whichever comes first; 

2) Minimum Tax and Prepayment of Profit Tax Exemption: During the two-year exemption, the annual minimum tax of 1% and the monthly prepayment of profit tax of 1% will also be waived. 

In the year following the end of the Two-Year Tax Exemption period, the SMEs will be subjected back to the standard rates on profit tax (normally at 20% for most industries), annual minimum tax at 1% and the monthly prepayment of profit tax of 1% in accordance with the regulations provided in the Law on Taxation. 

SMEs that registered with the GDT must submit and declare their annual tax on profit return during the two-year tax exemption period and declare and pay any other taxes as required by law. 

A Small or Medium Taxpayer is defined as follows: 

• Small Taxpayers refer to: 

(i) having an annual taxable turnover of KHR250 million to KHR700 million (approximately USD62,500 to USD 75,000); 

Note: General Tax Department has not mentioned or issued any Prakas regarding the treatment of tax payer under KHR250 million. 

However, GDT may accept any tax payer to register as small tax payer even their annual taxable turnover is below KHR250 million. 

(ii) having a taxable turnover, in any three consecutive months within one taxation year exceeding KHR60 million (approximately USD15,000); and 

• Medium taxpayers refer to: 

(i) having an annual taxable turnover of KHR700 million to KHR2 billion (approximately USD175,000 to USD500,000). 

The above tax exemptions are not applicable to SMEs that are already registered with GDT prior to 2017. SMEs that are compelled to register or are unilaterally registered by the GDT will also not be entitled to this tax exemption. 

Official Licensing of Tax Service Agent 

In view to enforce tax collection and improve the level of compliance, effective 1 January 2017, full implementation of “Prakas 455 on professional tax service agent” issued by the Ministry of Economy and Finance dated on 12 April 2013 and “Notification 17509” issued by General Tax Department (“GDT”) dated on 18 October 2016. 

Any person or firm who are providing tax-related services to clients shall hold a Tax Service Agent license approved by the GDT. The license is valid for 2 years. 

Firms without a Tax Service Agent license will not be allowed to provide tax services, or act as a taxpayer representative. Taxpayers who engage unlicensed firm will be subject to a fine of KHR 5 million (approximate USD 1,250).

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