The Cambodian government has announced a series of significant tax incentives and reiterated that it will neither create new taxes nor increase existing ones, underscoring its commitment to economic growth and private sector collaboration. These changes were outlined during the 19th Government-Private Sector Forum held at the Peace Palace on November the 13th 2023, which saw the participation of various private sectors, foreign chambers of commerce, and ambassadors to Cambodia.

Prime Minister Hun Manet, addressing the forum, emphasized the government's intention to foster a collaborative process with the private sector from the onset of its mandate. This approach aims to align with Cambodia's collective ambition and vision to become a high-income country by 2050.

Key highlights from the government's recent press release include:

1. Continuation of Capital Gains Tax Delay: The implementation of Capital Gains Tax on Capital, defined as immovable property, finance leases, investment assets, goodwill, intellectual property, and foreign currency, is further postponed until the end of 2024.
    
2. ACAR penalties: The Accounting and Auditing Regulator has been asked to revisit how it has applied penalties to those non-audited enterprises who have not been able to meet their financial statements filing requirement (introduced in 2022). Those non-audited enterprises now have until the end of February 2024 to meet their requirements. In addition, ACAR has been asked to be more circumspect as to how it applies interim penalties and more pro-active in disseminating information about compliance requirements to the wider public.
    
3. Stamp Duty Exemptions Extended: The exemption on stamp duty for the transfer of ownership of buildings in Borey’s (gated communities) valued under USD 70,000 will continue until the end of 2024. Additionally, for purchases of such properties, USD 70,000 can be deducted from the stamp tax base if the purchase prices exceed USD 70,000.
    
4. Tax on Immovable Property: Owners can now register and pay taxes on immovable property that was not previously registered. Penalties and interest rates on the tax on immovable property will be waived until the end of June 2024. However, this does not apply to taxes already paid.
   
   In addition, taxes and administrative penalties arising from submitted immovable property tax declarations made in error are exempted until the end of 2023.
    
5. Clarification on Unused Land Tax: The government will provide further clarification and incentives regarding this tax from 2025. Recent indications seem to be that the RGC is looking to tax unused land that exceeds 5 hectares or more in size.
    
6. Agricultural Sector Tax Incentives: Prakas 252 that was introduced in 2019 to provide VAT, Minimum Tax and WHT Tax incentives to agricultural enterprises producing rice, corn, bean, pepper, cassava, cashew nuts and rubber for domestic supply and/or export is extended until the end of 2025. Those eligible for these incentives now also include agricultural enterprises producing Logan fruit, Mango, Aquaculture, animal husbandry and local palm oil products (as raw material for animal feed). Enterprises must meet specific conditions and provide necessary documentation to the General Department of Taxation (GDT) to qualify.
   
   In addition, those agricultural enterprises outlined above continue to enjoy an exemption from the monthly Pre-payment of Tax on Income (PTOI) until the end of 2025.
    
7. Qualified Investment Project (QIP) Incentives: Under the new Law on Investment and implementing Sub-decree a QIP must provide evidence of external audited financial statements to be exempted from Minimum Tax and PTOI. For those QIP’s in their first year the external audited financial statements do not need to be produced until June of the following year to be eligible for the incentives.
   
   The PTOI suspension continues until the end of 2025 for QIP enterprises that produce garment logos, gloves, socks, towels, pillowcases, duvet covers, bed sheets etc. provided tax compliance requirements are met.
    
8. Voluntary Disclosure Incentives: The current voluntary disclosure incentives brought in under Prakas 217 in 2022 will expire by June 2024.
    
9. Tax Administration Reform: The government aims to establish clear standards and transparency in tax implementation, putting in place standard operating procedures for tax officers to adhere to.
    
10. Customs Processing Fee Exemption: For imported or exported goods valued below USD 1,000 and a reduced custom fee for goods valued under this threshold.
     
11. Electronic System for Cargo Declaration: Set to be implemented from January 1, 2024.
     
12. Visit Siem Reap 2024 tourism promotion initiative: To encourage the recovery of the tourism sector in Siem Reap monthly tax exemptions (excluding VAT) for hotels, guesthouses, and travel agencies from October 2023 until 1 April 2024, in addition to an exemption from Tax on Income for the 2023 tax year. Siem Reap tourism business will not be subject to tax audits for the tax years 2020 to 2023 with the same applying to their Phnom Penh, Sihanoukville, Kep, and Kampot counterparts for the 2020 to 2022 tax years.

These reforms and incentives are part of the government's broader strategy to stimulate economic growth and attract investment. The extension of tax incentives, particularly in sectors like agriculture and tourism, reflects the government's acknowledgment of these industries' significant roles in Cambodia's economy.

The Cambodian government's latest tax reforms and incentives, signal a proactive approach to economic development and a strong commitment to fostering a supportive environment for business growth and investment. This collaborative effort between the government and private sector is pivotal in steering Cambodia towards its 2050 vision.
 

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.

Vattanakpagna Chhun
Senior Accounting Manager
vattanakpagna.chhun@dfdl.com