The General Department of Taxation (“GDT”) issued Notification no. 4577 GDT on the 9th of March 2022 (“Notification 4577”) which delays the implementation of Prakas 346 MEF.P on Capital Gains Tax (“Prakas 346”) to 1 January 2024.
 
Previously Instruction 24094 issued by the GDT on the 9th of October 2020 (“Instruction 24094”) had postponed the implementation of Prakas 346 to 1 January 2022.

The delay was in response to a request that was made by the Ministry of Economy and Finance and in accordance with the approval from the Cambodian Prime Minister in late February 2022. The approval was in sync with the recommendations in the Royal Government “Strategic Framework and Programs for Economic Recovery in the Context of Living with the COVID-19 in a New Normal 2021-2023” that was issued in late December 2021.

This delay will be welcomed by the real estate industry in Cambodia as Prakas 346 was primarily targeted at individuals and non-resident entities who buy and sell real estate in Cambodia. To find out more about the scope and application of Prakas 346 please refer to our earlier update here.
 
One of the clarifications needed regarding the scope of Prakas 346 is with respect to the transfer of shares in Cambodian entities. Based on recent tax audit activity and practice from the GDT it appears that Prakas 346 may only apply to the transfer of shares in listed companies in Cambodia and that gains made on the transfer of shares in a Cambodian company by a non-resident shareholder may need to be paid and declared by the Cambodian company, on behalf of the shareholder, based on an amended provision in the Law on Taxation dating back to 2007.
 
Consequently, those shareholders in Cambodian entities looking to apply the further delay in the application of Prakas 346 to the transfer of their shares may face challenges in future tax audits.
 
DFDL will be providing a more detailed analysis of this development in the near future.