TAX FORUM 2016 | Recent Tax Changes and Follow-Up to the White Book Recommendations
Speaker: Mr. Anthony Galliano, Group CEO, Cambodian Investment Management and Chairman of EuroCham Taxation Committee
Mr. Galliano's presentation was centered on three key issues:
Recent changes in tax regulations that impact taxpayers (2015/2016)
EuroCham White Book policy recommendations and GDT responses
New EuroCham initiatives
He began by saying there is more regulation and better tax enforcement than there ever has been in Cambodia. He said procedural changes and an increasingly skilled and professional tax department were responsible for this. He went on to praise the GDT’s 2016 Law on Financial Management saying the new law was beneficial in the following ways:
It eliminated the Simplified and Estimated tax regimes in Cambodia, leaving only the real regime in existence
It increased the governments tax base significantly
It eliminated the competitive advantage Estimated Regime Taxpayers have in relation to Real Regime Taxpayers
It has increased the efficiency of the GDT and its Tax Branches
After describing the benefits of the law, Mr. Galliano broke down the main points of the law, which of course outlined how tax payers are going to be categorized in the future. Small, medium and large enterprises are now categorized in the following ways: .
Small Taxpayers:
Have annual taxable turnover from Khmer Riel (“KHR”) 250 million (USD62.5k) to KHR700 million (USD175k).
Have taxable turnover, in any period of three consecutive calendar months (within this tax year), exceeding 60 million KHR (USD15k).
Have expected taxable turnover of 60 million KHR (USD15k) or more in the next three consecutive months.
Participate in any bidding, quotation or survey for the supply of goods and services including duties.
Medium Taxpayers:
Have annual turnover from KHR700 million (USD175k) to KHR 2,000 million (USD500k)
Is a legal entity registered with a competent institution.
They are often sub-national government institutions, associations and non-governmental organizations.
Large Taxpayers:
Have annual turnover over KH 2,000 million (USD500k).
Is a branch of a foreign company or is a company with foreign branches
Has Qualified Investment Project (“QIP”) status according to the Council for the Development of Cambodia.
They are often government Institutions, diplomatic missions, foreign consulates, and international organizations.
Mr. Galliano then discussed the additional patent tax associated with the new law. He stated that additional patent tax would be paid if an enterprise carries out different types of businesses. This is because they will liable to a separate patent tax certificate for each activity. He also said that organizations with multiple branches, warehouses or businesses in different cities or provinces are also liable to additional patent tax. This is because a separate patent tax certificate for each location is now required.
Other aspects of the law pertaining to patent tax are listed below:
Large Taxpayers are required to pay KHR 3,000,000 (~USD750) for each additional patent tax certificate, if the enterprise carries out any branch, warehouse or business in different cities or provinces.
Taxpayers are obliged to display their valid patent tax certificates on their business premises.
Taxpayers who commence business within the first 6 months of the year shall pay patent tax in full while those that commence business in the last 6 months of the year shall pay half the patent tax fee.
After this, Mr. Galliano discussed PRAKAS no. 1820. MEF.Prk. The Prakas was created to provide guidance on simplified accounting requirements for small businesses operations. Small taxpayers are now required to maintain 3 simplified accounting books:
A Purchase Day Book - to record daily purchases
A Sales Day Book - to record transactions on the supply of goods or services.
An Inventory Book - to record beginning stock, purchases during the year and ending stock for enterprises that are supplying goods.
He then briefly discussed Sub-Decree, No. 03 SD, which involves “The Organisation and Functioning Of the Committee of Tax Arbitration”. The sub-decree seeks to improve the way the GDT deals with tax. The law is broken down in the following steps:
If a taxpayer is dissatisfied with their tax invoices they can send a protest letter to the GDT
The GDT has 60 working days of receiving the protest letter to respond
If the taxpayer is still dissatisfied with the GDT or GDCE’s resolution, they have another 30 days to send a protest letter to the CTW
It is important to note that an appeal to the court does not prevent the implementation of a resolution by the CTA. The taxpayer “must deposit in the national treasury an amount of money equal to the taxes, additional taxes and interest under dispute”
Mr. Galliano moved onto the final part of the presentation by discussing the EuroCham’s White Book recommendations and the GDT’s responses to them. He started by discussing EuroCham’s recommendations regarding Withholding Tax. He stated that the GDT and Eurocham had constructive dialogue on Eurocham’s recommendation to reconsider withholding tax on services to non-registered taxpayers and elimination of withholding tax on rent on a property that is owned by a registered company.
He then moved onto discussing EuroCham’s desire to see more specific guidelines outlining VAT exemptions for companies exporting services. After talking to the GDT, Mr. Galliano said the GDT were also making progress on a faster VAT refund process, with new systems coming into place next year.
After this, Mr. Galliano briefly discussed EuroCham’s proposal to set allowances for entertainment expenses, which the GDT were not receptive too at this time.
Q+A Session:
Q: I have a manufacturing factory in Sihanoukville and I am not paying VAT on the inputs. I import from China but am on the Cambodian inputs I use? This is affecting my business significantly as I am struggling to be price competitive. I have reached out to the GDT before but never got a response back. What should I do?
A: Great question, I unfortunately don’t have an answer for you at this moment in time but I am more than happy to talk to you more about this in the break.
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