DFDL Cambodia

This year marks the fifth anniversary of the introduction of the transfer pricing regime in Cambodia. Recent changes in local transfer pricing regulations, tax audit practices, and documentation mean that increased attention to tax audit risks associated with related party transactions is required.

General Overview of Transfer Pricing Regulations in Cambodia

1. What transactions fall under Cambodia’s transfer pricing regime?

A self-assessment taxpayer in Cambodia that enters into a related party transaction will fall under the scope of Cambodia’s transfer pricing regime. Two enterprises are considered related if:

  • There is commonality arising from family connections; or
  • One enterprise directly or indirectly possesses at least 20% of the dividend in the direct capital of the other enterprise or has voting rights in the taxpayer’s Board of Directors; or
  • A third-party enterprise or an individual possesses directly or indirectly at least 20% of the dividend in the direct capital of both enterprises or has voting rights in the Board of Directors of both enterprises

Cambodia’s transfer pricing regime applies to both cross-border and domestic related party transactions. The most common types of related party transactions include loans, the purchase and sale of finished goods, raw materials purchases, leases, royalty expenses and technical and management service expenses.

2. Who is the enforcing regulatory body for transfer pricing in Cambodia?

The tax authority, the General Department of Taxation, is responsible for transfer pricing audits. Based on the current practice, transfer pricing assessments may be addressed by the Large Taxpayer Department or Tax Branch under a Limited Tax Audit or by the Enterprise Audit Department of the General Department of Taxation under a Comprehensive Tax Audit. The Transfer Pricing Bureau falls under the umbrella of the Enterprise Audit Department.

3. What is/are the primary domestic regulations in Cambodia?

Article 18 of the Law on Taxation sets out the basic tenets of Cambodia’s transfer pricing regime, which allows the General Department of Taxation to reallocate income, deductions, or other benefits among related parties where it is deemed that an arrangement has been established to avoid the application of taxes.

In October 2017, Prakas 986 introduced a comprehensive domestic transfer pricing framework for Cambodia. Prakas 986 sets out the documentary requirements and methodologies to be followed by taxpayers in Cambodia who have related party transactions.

Have there been any recent changes impacting transfer pricing/related party transactions?

Instruction 10979 was issued on 25 May 2022 becoming effective immediately. Instruction 10979 outlines criteria for a potential exemption to the “Arm’s Length Principle” with respect to inbound and domestic Cambodian related party loans and short duration advances, including the supporting documentation required to potentially be entitled to the exemption. Read more here

4. Does Cambodia utilize OECD Guidelines?

While Cambodia is not a member of the OECD, Prakas 986 is generally consistent with OECD guidance.

5. Has Cambodia implemented BEPS Action 13 within its domestic regulations or transfer pricing guidelines?

Cambodia currently only requires Local File Transfer Pricing Documentation under its domestic regulations and transfer pricing guidelines. Prakas 986 is generally consistent with OECD BEPS Action 13, as it pertains to Local File Transfer Pricing Documentation.

Transfer Pricing Documentation Requirements in Cambodia

6. Since when is transfer pricing documentation a requirement in Cambodia?

Prakas 986 was issued on 10 October 2017. Generally, such a regulation becomes effective immediately in Cambodia. In this case, however it has been verbally communicated in public by the General Department of Taxation that transfer pricing documentation is expected for all financial periods from 1 January 2018.

7. How often does Local File Transfer Pricing Documentation required to be completed in Cambodia?

Local File Transfer Pricing Documentation should be prepared annually and be available upon request by the General Department of Taxation.

8. Does each entity within a group in Cambodia require Local File Transfer Pricing Documentation annually?

Yes, each entity in Cambodia with related party transactions should prepare and retain Local File Transfer Pricing Documentation annually. There is no exception allowing group preparation.

9. Does a local branch of a foreign company require Local File Transfer Pricing Documentation in Cambodia annually?

Yes, local branches of foreign companies are subject to the same requirements as other taxpayers if they have related party transactions.

10. Is there an exception for Cambodia for Small/Medium Enterprises?

There is no exception for Small/Medium Enterprise (SMEs) at this particular point. In practice, SMEs are regularly scrutinized on related party transactions during tax audits.

11. Does the Local File Transfer Pricing Documentation require preparation in the Khmer language?

Currently Transfer Pricing Documentation is prepared and submitted in English language only. This is accepted by the General Department of Taxation. In practice tax auditors may request an extract of a transfer pricing report to be translated to the Khmer language.

12. Are there any other transfer pricing documentation requirements in Cambodia?

Yes, there is an annual requirement to submit an “annex” with a taxpayer’s annual “Tax on Income Return,” detailing each related party transacted with, related party transaction type, and the Khmer riel value in the period the Tax on Income Return is prepared for. A taxpayer is also required to indicate in the Annex whether or not contemporaneous transfer pricing documentation has been prepared to support the related party transactions.

13. Does every single transaction require benchmarking or may the whole of entity benchmarking approach be used?

Generally, if a taxpayer has Local File Transfer Pricing Documentation whereby either their significant related party transactions have been subject to a benchmark analysis or a “whole of entity” benchmark analysis has been completed, then the documentation will be considered compliant. However, as always, the level and relevancy of the analysis will determine the level of tax audit defense of the Local File Transfer Pricing Documentation.

14. Are any transactions, which are subject to safe harbor exemptions, thus not requiring economic/benchmarking analyses, in line with the Arm’s Length Principle outlined in Prakas 986?

Theoretically, loans made to a Cambodian taxpayer qualify for an exemption under Instruction 10979 from 25 May 2022 onwards. Practice in this respect is still developing, so it is not yet possible to determine whether this will apply to loans executed prior to 25 May 2022 or only loans executed on or from this date.

There are no other safe harbor exemptions.

15. Does Cambodia’s domestic transfer pricing regulations allow for Advance Pricing Agreements (APA)?

An APA is an agreement between a taxpayer and tax authority determining the transfer pricing methodology for pricing the taxpayer’s international transactions for future years. The methodology is to be applied for a certain period based on the fulfillment of certain terms and conditions (called critical assumptions).

At this point in time Cambodia’s domestic transfer pricing regulations do not allow for APA’s.

What our transfer pricing team can do for you:

Compliance: Prepare Cambodian Local File Transfer Pricing Documentation including international standard benchmarking analysis.

Defense: Advise and pro-actively prepare Local File Transfer Pricing Documentation that give optimal tax audit defense in the context of Cambodia.

Audit Assistance: Extensive experience assisting with transfer pricing related tax audits and obtaining favorable outcomes, utilizing our extensive local market knowledge, local regulations, and international guidelines.

Strategy: Analyze your supply chain and intercompany transactions, such as sales of goods, the provision of services, provision of financial instruments and transfers of intangible property.

Advisory: All aspects of transfer pricing advisory as it pertains to Cambodia.

Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

Contact us


Clint O'Connell
Head of Cambodia Tax Practice Group


Kieron John Gaffney
Transfer Pricing Director

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