Tax Forum 2016 | Key tax issues for small taxpayers
Speaker: Ms. Chhiv Kimsroy, Director of Tax and Advisory Services, Deloitte, and Vice-Chairman of the EuroCham Taxation Committee. Ms. Chhiv Kimsroy started the presentation by introducing the idea of a Simplified Accounting Format (SAF).
She described the SAF as “a single entry accounting format that contains accounts to record daily business transactions, which is attached with invoices or documents clearly specifying income and expenses” According to her, the SAF would:
Encourage small taxpayers to comply with tax regulation
Encourage fair competition
Increase state revenue
Improve the way SME’s deal with tax issues
Ms. Kimsroy stressed the fact that the SAF is a single entry system rather than a double entry system and that it records income on a cash basis rather than an accrual basis. Under the SAF system, Ms. Kimsroy, also said that invoices are required upon supply and purchase, including invoices for returned goods and services.
Crucially, Ms. Kimsroy outlined the functions of the three books that SME’s are required to use under the new SAF system, which are listed below:
Purchase Day Book:
The purchase day book is responsible for recording the following expenses:
- Goods for sales or for supplying services
- Fixed assets
- Raw material
- Wages and salaries
- Other expenses
Sales Day Book:
- Record all daily transactions involved in supplying goods and services following each invoice if the selling price is high.
- Record as total daily sales when retail goods are on a single invoice or are a lower price.
- Record goods sold
- Calculates the historical cost of goods sold or used in the provision of services: (Beginning inventory + Purchases - Ending inventory)
After this, Ms. Kimsroy discussed issues related to tax compliance. She started by talking about PTOP or the Prepayment of Tax on Profit. She highlighted the fact that PTOP is currently calculated at a rate of 1% of turnover in Cambodia and that you have to file by the 15th of every month. She then outlined the different aspects of VAT, witholding tax and tax on salary that SME’s need to be increasingly aware of, which are listed below:
Value Added Tax (VAT):
- Taxpayers are allowed to credit 80% of VAT input to offset VAT output
- VAT input is allowed whether taxpayers have VAT invoices or not
- You cannot credit VAT input on: Gold, diamonds and valuable gemstones
Withholding Tax (WHT)
Taxpayers are exempted from having to pay withholding tax unless they are dealing with movable and immovable properties
Tax on Salary (TOS)
Taxpayers have the obligation to withhold and remit TOS and other taxes in accordance with relevant tax legislations
After this, Ms. Kimsroy spoke in some detail about Tax on Profit. She broke it down in the following way:
Minimum Tax (MT)
-MT is calculated at a rate of 1% of annual turnover and is inclusive of other taxes except VAT
-MT remit is possible when paying the annual TOP
Loss carried forward
- The loss incurred in any tax year cannot be carried forward to the next tax year.
- All expenses that the taxpayers incur in a tax year are for business purposes only.
Ms. Kimsroy continued the presentation by talking about taxpayer obligations, She made it clear that taxpayers need to responsible for registering with the tax authority, submitting their tax returns to the tax administration and properly recording their taxes using the SAF. She then said that if tax documentation is inaccurate then the GDT will use the company in questions monthly or annual income statement to determine the average income that arises from the supply of goods and services.
Q) Are both small and medium sized taxpayers eligible to pay 2% VAT tax?
A) Only small enterprises are eligible to pay 2% VAT tax and not medium sized ones.
Q) When do you think the SAF will be adopted by all small taxpayers?
A) I think the majority of small taxpayers will move away from the self declaration system within the next few years as the estimated tax regime is starting to lose its competitive advantage and large international companies are starting to move away from companies not in the real tax regime.