Tax Forum 2016 | Tax Disputes Process
Speaker: Mr. Vann Sinat, Tax Manager at Bun & Associates
Mr. Vann Sinat [VS] Tax Manager at Bun & Associates, talked attendees through 9 key points to be able to comfortably manage the Tax Dispute Process in Cambodia.
Recognizing that it can be frustrating to go through the process without knowing your legal rights, Mr. Sinat outlined the legal sources of the dispute mechanism (Law on Taxation 1997 and amended 2003, Prakas 1470 on Measure and Procedure on Tax Dispute Resolution (November 2015) and Sub-Decree on Organization and Functioning of the Tax Committee for Tax Dispute Resolution No.03 (January 2016).
He next detailed the types of audit that companies can be open to:
Desk audit. GDT cross-check reported statements against other available or requested sources of information and can send a tax reassessment notice which company is then free to dispute.
Limited audit. Tend to focus on a specific type of tax (eg. withholding tax) though there is possibility of expanding the audit.
Comprehensive audit. Implemented by a dedicated ‘Enterprise Audit Department’ (EAD), reviews all tax records over a given period of time. In practice is as close as you’re likely to get to a closed case, therefore some companies have begun to voluntarily request auditing by the EAD as they wish to avoid unexpected audits and reduce interest payable on reassessed tax.
According to Article 128, Companies can be subject to auditing by the GDT within 3 years of the date of submission of their tax returns, or within 10 years if there is any evidence of ‘obstruction’ (tax evasion).
A tax reassessment is only valid if preceded by a written notice delivered to the taxpayer (Article 95). This then triggers the following timelines:
If wishing to protest a notification of tax reassessment, the taxpayer has right to file a letter of protest to the GDT within 30 days.
Within 60 days of obtaining the letter of protest, the GDT must issue a new decision on the dispute.
Within 30 days of the GDT issuing its decision on the tax dispute, the taxpayer may file an appeal to the Committee of Tax Arbitration.
Not more than 60 days after the submission of the appeal, the Committee of Tax Arbitration must resolve the dispute.
Within 30 days of the Committee of Tax Arbitration issuing its decision on the tax dispute, the taxpayer may file an appeal to the court.
A template for the Letter of Protest is available from the GDT.
Finally, Mr. Vann Sinat detailed the additional fines that companies found to have been underreporting may be subject to:
An additional tax of 10% of the unpaid tax if that tax is not more than 10% of the total tax payment due [negligence], plus 2% interest per month since the date of submission
An additional tax of 25% if the unpaid tax is more than 10% of the total due [serious negligence], plus 2% interest per month since the date of submission
An additional tax of 40% if the company has failed to supply documents required for the tax audit and therefore triggered a unilateral reassessment by the GDT, plus 2% interest per month since the date of submission
In cases of deliberate tax evasion, criminal charges may also apply to the Director, Manager or Owner of the company.
[Comment from Antoine Fontaine]: The new committee for Tax Arbitration is a welcome development as it sits under the Ministry of Economy and Finance and therefore has independence from the GDT and avoids any possible conflict of interest. Recent cases reviewed by the Tax Litigation committee have worked well.
[Question from the audience]: Is there a maximum number of months for which the additional 2% interest penalty can be applied? For example, what if the reassessment relates to 15 years ago?
[A from VS]: This is a bit of grey area, in practice the interest payment applies for the months between the date of submission of tax returns and the notification from the GDT of reassessment. Of course there’s also the statute of limitations up to a maximum of ten years so that case of 15 years would be unlikely to apply.
[A from HEVP]: Do note that the Law on Taxation actually states that the reassessed tax value must be paid before commencing the tax dispute process – most companies who are subject to reassessment protest without paying the taxes due but this is against the provisions of the Law.