On the 3rd of January 2024 the General Department of Taxation (GDT) issued Instruction 180 on the granting of tax relief under a Double Tax Agreement (DTA). The key message outlined in Instruction 180 is that tax relief conferred under a DTA will be applicable for the entire calendar year in which the submission is made to the GDT provided that the submission is made in the same calendar year that the relief is being sought.

From a Cambodian perspective DTA tax relief typically takes the form of a reduction of the standard withholding tax rate of 14% to a reduced withholding tax rate of 10% for payments of interest, management and technical fees, royalties and dividends to non-residents (please note not all DTA’s that Cambodia is a signatory to apply this relief across the board).

Instruction 180 takes effect from the date of its signing i.e. 3 January 2024. During the Tax Working Group’s discussion with the GDT on the 4th of January 2024 a request was made to have Instruction 180 retrospectively apply to the 2023 tax year also (please note that this is subject to the final signed minutes of the meeting minutes and the formal response of the GDT).

Example:

Company A a Cambodian entity has a interest bearing loan with its Singaporean parent whereby interest is paid on a monthly basis which is in place from January 2024. Company A applies for and receives approval from the GDT for a withholding tax rate reduction from the standard 14% withholding tax to 10% withholding tax under the Cambodia – Singapore DTA.

Under Instruction 180 the reduced withholding tax rate provided under the DTA can be implemented from 1 January 2024.

Prior to the passing of Instruction 180 the relief conferred by a DTA was only able to be applied by a taxpayer once they had received the formal approval from the GDT of their DTA application.

From a implementation perspective we would advise taxpayers to wait until they have received formal approval from the GDT before applying the concessionary withholding tax rate under a DTA. Once formal approval has been obtained then the taxpayer can amend their earlier monthly tax returns, in the same year, to obtain a credit for the overpaid WHT.

In addition our recommendation to taxpayers would be to still submit your DTA applications to the GDT as soon as you can so that you have the surety of an approval. At the very least make sure that the application for DTA relief to the GDT is made in the same calendar year in which you wish the DTA relief to apply.

Please also be mindful that the approval provided by the GDT for DTA relief is only applicable for one (1) calendar year so if you have a loan or management agreement or royalty agreement that has a duration of more then one (1) year you will need to refresh the GDT approval on a annual basis.

Cambodia has signed DTAs with eleven (11) countries: Singapore, China, Brunei, Thailand, Vietnam, Indonesia, Hong Kong, Malaysia, the Republic of South Korea, Macau Special Administrative Region of the People's Republic of China and Turkey. Ten (10) of the DTAs are now in effect (with the exception of Turkey) as follows:



Active discussions are ongoing between Cambodia and other jurisdictions such as France, Japan, the UAE, and the remaining ASEAN countries to enter into new DTAs.

For assistance with DTA applications to the GDT please reach out to the authors or your regular DFDL contact.
 

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.