Tax Forum 2023: Panel Discussion on Cambodian Tax Incentives

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The Malaysian Business Chamber of Commerce (MBCC), with support from the General Department of Taxation (GDT), organised a Cambodian Tax Forum 2023 at the Sofitel Phnom Penh Phokeethra on September 6, 2023. 

During the forum, a special panel discussion was held with keynote speakers from the GDT, including Dr. Eng Ratana, Director of the Large Taxpayer Department, Dr. Seng Cheaseth, Director of the Department of Law, Tax Policy and International Tax Cooperation, Mr. Te Jeudi, Director of the Department of Enterprise Audit, and Mr. Traing Lay, Chief of the Bureau of the Enterprise Audit Department.

Watch B2B Cambodia’s highlights video for Tax Forum 2023:

The main focus of the discussion was on Qualified Investment Projects (QIPs) and their tax incentives. A QIP is an investment project that has received a Final Registration Certificate (FRC) from the Council for the Development of Cambodia (CDC) and these projects are entitled to receive fiscal and non-fiscal incentives.

Requesting Minimum Tax Exemption

Dr. Eng Ratana explained that QIPs still need to apply for tax exemption from the GDT in order to meet the requirements of independent auditors. However, he particularly stressed the importance of verifying the accuracy of audit reports. Even when a report indicates good compliance, other factors must also be considered.

The GDT is actively strengthening accounting records and enhancing compliance through the Accounting and Auditing Regulator. Dr. Ratana mentioned that some companies have reported losses for more than 10 years, but still receive an unqualified opinion. In general, an unqualified or qualified audit report signifies compliance, whereas a disclaimer or adverse report indicates issues with proper accounting practices.

Cambodian VAT Exemption Only For Production Of Locally Sourced Goods

Dr. Ratana clarified that while the zero-rated value-added tax (VAT) exemption has no time limit, Cambodian taxpayers must still apply for a certificate from the taxation department.

He further explained that not all local transactions are exempt from VAT; exemptions only apply if the goods are directly used in the production process. Construction materials, petroleum products, and other goods, if not directly involved in production, do not qualify for exemption.

Compliance Of Purchasers And Non-Compliance Of Suppliers

The panel stressed that purchasers should fulfil their tax obligations as stated in the law. However, if a supplier encounters issues with the GDT, the supplier must be held solely responsible, separate from the purchaser’s obligations. Nonetheless, the panel emphasised that compliant companies should exercise caution when selecting suppliers by requesting certificates to ensure proper registration.

Cambodian Businesses Engaging In Both CMT And FOB Activities

The panel discussed a scenario of a factory that could be involved in both self-production for export and production for others. In such cases, it is crucial for businesses to maintain separate accounting records: one set for Cut, Make, Trim (CMT) production, and another set for Free On Board (FOB) activities. 

Records can later be consolidated and submitted in the form of a single tax return to the GDT. However, it is important to note that such returns must be accompanied by two supporting documents: one for CMT production and another for FOB activities. Failure to maintain accurate accounting records may lead to the GDT auditor making an assessment based on their own observations.

Other topics the panel touched upon were the recent increase on beverage taxes in Cambodia, and the currently pending Public Lighting Tax.

Read More on Cambodia’s Taxation:

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