Sub-decree 160 issued by the Royal Government of Cambodia on the 16 of July 2024 establishes a Special Tax Audit Unit (“STAU”) which has a status equivalent to a department with in the General Department of Taxation.

The stated objective behind the creation of the STAU is to provide a mechanism to promote and expedite there solution of taxpayer problems relating to the conduct of tax audits to improve the overall business environment and encourage investment into Cambodia.

A Silver Bullet?

It seems that the creation of the STAU is in response to feedback from the private sector in Cambodia regarding issues that some members have faced with the perceived difficulty with dealing with tax audits in Cambodia.

Substantively the STAU has the same standing as the Large Taxpayers Department and the Enterprise Audit Department that currently operate under the umbrella of the GDT to carry outdesk, limited and comprehensive tax audits on taxpayers.

Subject to the establishment of a commission it would seem that the STAU may have jurisdiction over those taxpayers that have Gold Tax Compliance status along with other enterprises that may meet the criteria implemented by the commission once in place.

Responsibilities

As stated in Sub-decree 160 the STAU will have the following key roles and responsibilities for taxpayers that fall under its jurisdiction:

-  Manage and conduct tax audits as per the laws, regulations and Standard
   Operating Procedures (SOP),

-  Review documents and risk analysis for a one-time tax audit without the need
   for the taxpayer to undergo a desk or limited tax audit,

-  Develop an annual audit plan based on the criteria set out in the tax audit SOP,

-  Carry out a tax audit at the request of a taxpayer,

-  Update taxpayers as to why they are subject to a tax audit,

-  Perform other tasks as assigned by the Director General of the GDT.

Who will be involved with the STAU?

The STAU will be led by an individual who has a rank equivalent to a Department Director in the GDT. There will also be appointed vice chiefs from within the network of the GDT and potentially officials who are outside of the GDT.

Final Comments

The creation of the STAU should be viewed in a positive light insofar as it has been established to try and expedite taxpayer tax audit issues that may, or could have been, stuck in the current tax disputes process.

The creation of the STAU follows on the back of the issuance of the Manual on Tax Audit Procedures for Tax Officers and Taxpayers by the GDT (Tax Audit SOP) that was issued in April 2024. The Tax Audit SOP was issued by the GDT to provide clarity and education to all taxpayers and tax officials on the tax audit process. On the 9th of July the GDT issued Notification 24145 advising all taxpayers that it will be conducting 3,006 on-site tax audits in 2024 based on the criteria and risk profile of taxpayers as set out in the Tax Audit SOP. Under the Tax Audit SOP as a general principle taxpayers can be audited at their location by the GDT only once every three (3) years.

Key to the success of the functioning of the STAU will be the mandate that it may have to deal with different classes of taxpayers i.e. not just gold compliance taxpayers, the technical competence and objectivity of its elected officials and the efficiency in which it deals with those cases that come before it.

In addition there needs to be clarity on the tax audit status of gold compliance taxpayers who under the Tax Audit SOP seem to be exempted from all tax audits for the two-year period that the gold compliance status is awarded, subject to the GDT discovering tax risk and/or irregularity, and the role of the STAU in carrying out a one-time tax audit for those taxpayers that fall under its jurisdiction – as stated in Sub-Decree 160.

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.

Clint O'Connell is a Partner and Managing Director of DFDL in Cambodia. Clint also serves as the Head of the Cambodia Tax and Customs Practice since 2018.

With over 17 years of experience in Cambodia, Clint is a well-respected figure in the country's business circles. His expertise and deep understanding of the Cambodian market are valued by a wide range of clients, including major international corporations and prominent local businesses.

His work focuses on Cambodian taxation and customs matters, assisting a broad range of clients. As tax issues are prevalent across DFDL's practice areas and sectors, Clint works closely with the corporate, mergers and acquisitions (M&A), real estate, and restructuring practices.

Clint's extensive experience includes tax and customs advisory, tax and customs disputes, tax due diligence and transfer pricing. His expertise is recognized by leading global directories such as International Tax Review, IFLR, Asialaw, Chambers and Legal 500, who rank him as a Highly Regarded and Distinguished Practitioner.

Clint also currently lectures at CamEd’s esteemed Advanced Cambodia Taxation course and has authored tax articles for the CamEd business review, and IBFD and has acted as a consultant for the ADB.