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Here’s a range of info about legal and accounting services in Cambodia, including company registration, due diligence, dispute resolution, tax compliance and services such as consulting and financial analysis.

If you still can’t find you’re answer here, just ask us at B2B and we’ll point you in the right direction.

  • Cambodia’s legal system has rapidly evolved since the country’s democratic election in 1993 and is now a member of The World Trade Organisation (WTO) and ASEAN.
  • Cambodia was one of the earlier countries to adopt the International Financial Reporting Standards (IFRS), effective from 2012.
  • Cambodian laws are often a mix of those from foreign countries, including UK, USA, Japan and France and are constantly being revised, mended, and new ones introduced.
  • Members of the Cambodian Bar, regardless of citizenship, are the only people allowed to practice law in Cambodia.
  • This means the few international business advisory firms in Cambodia have some foreign lawyers who can act as advisors but not represent clients in court.
  • Those members registered with the Cambodian Bar offer the same services as you would expect internationally, including due diligence, contract negotiation and intellectual property advice.
  • Laws and legal requirements are issued in a number of ways including: laws adopted by the National Assembly, royal decrees issued by the monarchy, sub-decrees and ministerial orders (known in Khmer as prakas). Given their proliferation, it can sometimes be confusing to determine which proclamation, law or prakas supersedes the others. Ultimately legal counsel should be sought for clarification.
  • Increasingly, law in Cambodia is being drafted with a focus on enforcement and achieving immediate compliance. This is a crucial change in ethos.
  • English will be the common language of ASEAN therefore contracts will increasingly be written in English, and in future arbitrations including internationals may be in English also.
  • Cambodia has higher level of English than its neighbours, and may benefit from this regional conversion.
  • Meanwhile, countries with traditionally strong domestic markets but weaknesses in English language education, may need to increase their English literacy levels if they wish to really thrive in ASEAN economy.
  • Economically, Cambodia has already allowed such free investment for foreigners, meaning ASEAN offers nothing that special in Cambodia compared to its most economically similar neighbours.
  • The biggest changes happening now are not so much in the law as the practical application of laws already on the books. These things have investors scurrying to accountants and lawyers for clarifications.
  • Cambodia has introduced some mechanisms to help SMEs (small to medium enterprises), particularly with regard to getting finance. The Securities and Exchange Commission of Cambodia (SECC) is also working on an amendment of regulations in order to let SMEs get access to finance via the stock market. 
  • Cambodia has also recently taken a step in the right direction by using the International Financial Reporting Standards (IFRS). Cambodia is one of 90 countries to have fully adopted it to date.
  • With the integration of AEC we can expect great changes for IPR, Banking, Taxation and Corporate law. Cambodia is making all its efforts to assist – and make changes pertaining to – business successful on integration. Recently signing for MOU with Singapore on an industrial patent is one such example.
  • A new Construction Law will enter into force in 2015, reflecting a recent boom in the Cambodian real estate, construction and development industry.
  • After the draft of the framework for the Construction Law is done, the Ministry of Land Management is now defining the specific details and taking into consideration feedback from the private sector in doing so. The idea is for the new construction law to be submitted to Parliament only once the necessary implementing regulations are also ready, ensuring immediate implementation.
  • The new law will not have retroactive effect, so the new standards of construction will only apply to new buildings.
  • The Cambodian Traffic Law are undergoing a revamp this year thanks to the new Traffic Law,promulgated in January 2015 (replacing its 2007 law predecessor), and a recently announced Sub-Decree on the Provisional Penalties for Traffic Law Violations dated 08 July 2015. This new legislation is a fundamental pillar of the National Road Safety Committee’s boarder strategy to increase safety on Cambodia’s roads and to maintain traffic order.
  • While the new Traffic Law establishes stricter road safety rules, notably with respect to the use of helmets and seatbelts by vehicle occupants, it is the abovementioned Sub-Decree that will impose significantly heavier fines for such offences. It is important to note that, while the new Traffic Law is currently in effect, the Sub-Decree is purported to come into effect on 1 January 2016, following which the penalty for not wearing a seatbelt in a car will increase from 5,000 to 25,000 riel (USD 6.25) and the penalty for not wearing a helmet on a motorbike, as a driver, will increase from 3,000 to 15,000 riel (USD 3.25).
  • Other notable provisions of the new Traffic law include the prohibition of driving while using a mobile phone without hands-free accessories, a limitation on the number of passengers on a motorbike to an adult drive, adult passenger and a child and the introduction of criminal responsibility under the Criminal Code for legal persons with respect to individuals who drive without care and attention or in violation of certain obligations prescribed by the new Traffic Law that results in the death of others. Furthermore, the maximum penalty for driving under the influence under the new Traffic Law has quadrupled to USD 1,000, with the minimum prison sentence for the offence increasing from six days to one month. Under the Sub-Decree, where offenders of the new Traffic Law have failed to pay fines within 60 days, the fine imposed shall triple in its amount. If not paid within 90 days, the offender may be prosecuted in court by the competent authorities.
  • A staggered enactment of the new regulation is being used to allow a pre-compliance time lapse for the public to learn the most important new regulations as they enter into force, and the reasons for those new regulations.
  • The Ministry of Public Works and Transport are currently undertaking this educational exercise through TV advertising campaigns.
  • Foreigners living in Cambodia are expected to follow local road laws, and increasingly fines and other penalties such as impoundment (and potentially imprisonment) will be incurred for noncompliance.
  • Be wary of police ‘taking the law into their own hands’ as such, however.
  • Contract laws have drastically improved since 2006 when a series of laws were introduced, including the Criminal Code and Civil Code.
  • To prevent problems occurring when a dispute arises, it is advised contracts include an appointed mediator and/or arbitration clauses.
  • Preferred arbitration centres outside local Cambodian jurisdiction are Hong Kong or Singapore.
  • If a contract is breached, the case must be heard in the courts of Cambodia unless there is an arbitration clause and pursuant to the “New York Convention” and the Law on Commercial Arbitration (2006) the courts must refer the case to Arbitration.
  • Protecting intellectual property is an essential requirement for many businesses and in the last decade laws have been developed in this area.
  • These come in four main forms: Trademarks, Copyright, Patents and Geographical Indication (GI).
  • Trademarks offer protection over trade names and devices and prevent others from using the same or confusingly similar marks.
  • Copyright covers any original work of authorship, such as music, books and art and has automatic protection from when it was created.
  • It does not need to be registered but ownership must be proved if an infringement issue arises.
  • Patents can be applied for on original ideas and inventions and GI are product names that relate to a specific region, such as Kampot pepper.
  • Cambodia has made great strides in recent years to deal with corruption, primarily through the establishment of the Anti-Corruption Law and the Anti-Corruption Unit.
  • The main focus of the unit is internal to the government and its ministries and has had great success in rooting out the practice.
  • Regardless of the industry, you will still be bound by foreign corruption, bribery and even anti-terrorism legislation. The vast majority of money transferred around the world moves through the US and UK at some point and in doing so becomes subject to such legislation. Citizens of these countries, businesses and organisations registered in them are still subject to the laws of their nation, regardless of their place of residence or business.
  • The British anti-bribery law is particularly strong. British citizens are subject to the law and the penalties that will be incurred by violating it, as is the entirety of the company’s supply-chain.
  • The United States’ Foreign Corrupt Practices Act (FCPA) is only concerned with interactions with foreign governments. It does not prohibit the payment of facilitation fees in certain circumstances. A facilitation fee is one paid to change the time period in which something will be processed.
  • Cambodian law, however, prohibits the payment of facilitation fees.
  • In 2013, for example, nine ministries published a list of their official processing fees for various services, which can be found by visiting the relevant ministry website.
  • Cambodia’s tax system has been undergoing a huge shake-up ahead of joining the ASEAN Economic Community 2015.
  • During the last 12 months, the GDT has been actively clamping down on tax evaders while simplifying the tax collection system and making it more transparent.
  • In late 2013, a five-year plan was given the nod by the Ministry of Economics and Finance.
  • It outlines a series of priorities, including a pay rise for public servants and increased spending on education, health and infrastructure.
  • It is hoped this will be funded by the extra revenue raked in once the tax reforms take place.
  • It’s also important because that’s how a company can demonstrate transparency. It also helps foreign firms if they want to apply for a loan. A bank will always ask for audited accounts.
  • Thus, if they can be produced, it helps a company show their transparency and will help induce a loan agreement.
  • It’s strongly recommended that you carry out your due diligence regarding the legitimacy of any party you choose to do business with, any property or official documents involved in your business transactions, and also in guaranteeing the qualifications of the legal representation you receive.
  • It is not uncommon for people to misrepresent themselves in Cambodia.
  • The Bar Association of the Kingdom of Cambodia (BAKC) is the only body able to register lawyers in Cambodia.
  • On their website, www.bakc.org.kh, any user can search the list of lawyers registered on the Cambodian Bar Association’s roll, and likewise any registered legal office.
  • According to Article Two of the Bar Association’s regulations, only a registered bar member can practice law in Cambodia.
  • This means a foreign lawyer cannot practice law in Cambodia.
  • They can, however, act as a legal advisor while working for a legal firm registered with the Cambodian bar.
  • A freelance foreign legal advisor is not possible – you must be acting under the umbrella of a Cambodian bar registered legal firm.
  • Article 6 states, however, that a foreign lawyer can be admitted to the Cambodian Bar only if that person’s own nation would allow a Cambodian lawyer to join their own national bar. This is according to a principle of reciprocity. The Cambodian Bar consulate can grant a foreigner admission to the bar only on these grounds. While it has yet to occur, the Bar Association is currently processing such a request with the Parisian Bar Association.

Law and Accounting Top Tips

B2B call on our panel of experts to share what they have learnt about law and accounting in Cambodia.

  • Keep your books in order and making sure your business stays within the remit of the law.
  • This includes ensuring all elements of the business are registered correctly and with the right ministries, and proper contracts and legal documents are in place.
  • Get the help of an accredited accountant to ensure taxes are being properly paid to avoid hefty fines from the Tax Authority in the future.
  • Remain ready for a visit from the tax man.
  • The GDT is undergoing tax audits on many foreign businesses as part of its drive to overhaul the system.
  • There are two types of tax audit – limited and desk, which looks at more comprehensive issues.
  • To avoid hefty fines, it is advised that books, invoices and receipts are kept in order at all times.
  • Law and accounting can be complicated on home turf let alone when you’re in a foreign land.
  • This is why it’s advisable that you leave it all to the experts.
  • As Cambodia develops expediently laws and regulations are constantly changing it therefore becomes essential that you have someone to keep you in the know.

Alternative Dispute Resolution in Cambodia

Here’s how to settle disputes outside the courts in Cambodia.

There are currently two main forms of dispute resolution in Cambodia: the courts and alternative dispute resolution mechanism, which includes mediation and arbitration.

Also, find out about the Arbitration Council; a new institution aimed at mediating and reducing labour disputes in Cambodia.

  • There are currently two main forms of dispute resolution in Cambodia available for commercial purposes: the courts and alternative dispute resolution mechanisms.
  • The courts continue to play a major role in resolving commercial disputes in Cambodia but can often be a costly and lengthy process.
  • Cambodia has three levels of court: Provincial or Municipal court, Appeals Court, and the Supreme Court.
  • Any decision made by the Judge of a lower court can be appealed to a higher court.
  • Commercial arbitration is new to Cambodia but there have been several of cases filed to institutional arbitration centres such as the ones in Hong Kong and Singapore.
  • Awards in commercial arbitration are not always published in Cambodia and so arbitration provides some privacy to companies.
  • 54 members have been selected and trained since 2010 by experts from Singapore International Arbitration Centre (SIAC) and Singapore Institute of Arbitrators (SIarb) and 43 arbitrators successfully passed the qualification exams, with 9 of those passing the SIarb’s International Entry Course, which qualifies them to be members of the SIarb.
  • In January 2013, seven executive board members were elected, along with a president, vice-president and treasury.
  • In July, the General Assembly adopted the Internal Rules for the NCAC, the Rules for Arbitration and the budget and financial policy. The NCAC is currently raising funds to renovate the building donated for the centre.
  • Arbitration cases can be heard by one to three arbitrators – one is selected by each party and the third by the two pre-selected arbitrators.
  • There will be no restriction in assigning foreign arbitrators at the NCAC, as long as they are internationally recognised arbitrators with relevant experience.
  • In April 2015, the NCAC met to adopt a code of ethics.
  • While technically possible for an international business to conduct arbitration according to the current Rules of Arbitration, due to an ongoing lack of funding, the NCAC have only initially been accepting applications for arbitration from local parties.
  • Yet, as of 2015 it has still not heard a single case.
  • International companies are not yet able to apply for arbitration.
  • The Arbitration Council in Cambodia is a national body responsible for resolving collective labour disputes.
  • The Arbitration Council was launched in 2003 with the support of the Ministry of Labour, unions and business community. Since its inception, the council has heard more than 2000 cases.
  • Cases come from a variety of industries across Cambodia, including garment and footwear, hospitality, construction and agriculture sectors.
  • Traditionally, cases from non-garment sectors account for 10% of the total case load. However, this landscape is changing. In 2013, it had grown to approximately 16%.
  • Periodic independent studies reveal that the Arbitration Council is a corruption-free institution, highly trusted by both businesses and trade unions for its professional services, which are rare in an emerging market environment like Cambodia.
  • Unlike the National Arbitration Centre, the Arbitration Council is a national tribunal that focuses on mediating and arbitrating ‘collective labour disputes’ involving a group of employees and their employer, rather than commercial disputes.
  • The Council is independent from the government but works alongside relevant ministries.
  • Labour disputes are natural occurrences in the relationship between employers and their employees, triggered by pay and employment benefits, activities of trade unions, discipline and termination matters, labour rights of women, occupational safety and health or other working conditions.
  • If not properly addressed, they are likely to cause disruption to the company’s production, which could take the form of strike action.
  • As an independent and credible third party, the Council bridges the divide between both parties and decides on their dispute if they fail to reach a settlement among themselves.
  • When a labour dispute occurs, both parties normally attempt to resolve it themselves. If they cannot reach an agreement, one of them can submit the dispute to the Ministry of Labour for conciliation, which takes approximately 15 days. If the Ministry cannot conciliate the dispute and consider it a collective one, it will forward the case to the Arbitration Council.
  • The process at the Arbitration Council is efficient and cost-free.
  • Under Article 316 of the Labour Law, the procedure for conciliation and arbitration shall be carried out free of charge. Also pursuant to the articles of the Labour Law, the Council maintains its timeliness in dispute resolution process. After the case is registered, within three days a panel of three arbitrators is set up. The Council has 30 professional arbitrators on three different lists: 10 each on ‘employer’, ‘employee’ and ‘ministry’ lists – and each chosen specifically for their expertise in employment relations and their high integrity.
  • When a case is registered, employer parties select one arbitrator from the ‘employer’ list, while employee parties also choose one from the ‘employee’ list.
  • Both selected arbitrators will then choose a third arbitrator from the neutral roaster to chair the panel.
  • At the beginning of the hearing, arbitrators on the application panel ask parties whether they want want the arbitral award to be binding, which means they have to comply and agree to be bound by the arbitral award. Alternatively, they can choose the non-binding option, which is more popular. if one party chooses the non-binding option, the other parties have to follow – you need two parties in agreement to make it binding. In 72% of all cases resolved, parties comply with the decision.
  • The panel then convene a hearing where both parties are given the chance to present their case. Generally, within 15 working days after it is formed, the arbitration panel issues a ruling in the form of a reasoned arbitration award. Parties can agree to extend the 15 days to 20 or 25 days, if there are many issues in that particular case. The average period in which a case is resolved is 18 days.
  • Data from the Garment Manufacturers Association shows in 2011 there were 34 strikes in the garment and footwear sector. In 2012, the figure rose to 121 and then to 147 in 2013.
  • The garment and footwear industry remains the majority user of the Arbitration Council services making up 90% of disputes; however, it is also one of the three most significant pillars of the Cambodian economy, so it is unsurprising that disputes arise. However, that figure was down to 77% for the first 7 months of 2015, as other sectors – non garment and footwear, construction, the hotel industry, gas companies, security, electricity, cement production, transportation and even radio stations – were bringing more cases to the council.
  • A common issue brought in dispute cases can be divided into two categories: a dispute about rights under the labour law contract or a collective bargaining agreement, with one party demanding the other party to respect what it says in those documents.
  • The other type of dispute is called an interest dispute. Common interest disputes that come to the arbitration council includes overtime meal allowance. One party, particularly employees, demand an increase of the attendance bonus and lunch allowance. The most common kinds of disputes and issues are related to wages.
  • Yet, strikes continue to happen, and so do incidents of non-compliance with labour standards by companies.
  • Addressing these problems will need structural adjustments to the way labour law is enforced. This tells us there is more work to be done beyond pure arbitration. There should be more complementary actions taken with regards to prevention of labour disputes as well.
  • To further the goal of labour dispute prevention, the Arbitration Council Foundation is in the process of introducing two additional services for businesses and their employees.
  • A specialised training program in workplace dispute prevention and resolution skills aims to give employers and employees better skills in communication and negotiation, understanding labour disputes, instituting practical workplace grievance procedure, and finding better ways to resolve them.
  • A private mediation service will also be introduced. This focuses on resolving individual labour disputes or disputes parties wish to settle in private. Up to 30% of those cases are settled through conciliation.
  • The option of the Council means that the labour movement doesn’t have to go to court, and go through three levels of litigation, which can take a long time. If they come to the council, after 18 days they have to issue the arbitration award which tells the parties what to do. This kind of quick resolution helps parties to go back to work quickly.
  • The arbitration council can also issue strikers with a interim return to work order, requesting the employees to return to work within 48 hours if they want the arbitration to resolve the dispute. This order has a high rate of compliance.

Intellectual Property Protections (IPP) in Cambodia

IPP laws continue to be strengthened, and training and education offered to enforcers, traders and the public in Cambodia.

Firms are advised to take advantage of the laws now available, whether it be to protect a trade name, invention, design or creative work.

  • Trademarks are registered with the Department of Intellectual Property Rights, which forms part of the Ministry of Commerce.
  • Registration can either be done directly or if the applicant is not in Cambodia, by appointing a legal representative, who is given power of attorney.
  • Registration takes between three and six months and is valid for 10 years.
  • Currently if you want to protect your trademark you must register it in Cambodia.
  • However, Cambodia will sign up to the “Madrid Protocol” in 2015. This means if a trademark is registered internally, it will be recognised in Cambodia.
  • It is recommended that work is voluntarily registered with the Ministry of Culture and Fine Arts in case copyright infringement occurs and judicial action is launched, when it is upon the claimant to prove ownership.
  • Copyright infringement is a criminal offence and offenders face a fine and imprisonment.
  • Patents are covered by the Law on Patents, Utility Models and Industrial Designs (2003), which seeks to protect technical aspects of inventions.
  • The first Patent was created recently in Cambodia.
  • Any new patents must be registered with the Department of Industrial Property at the Ministry of Industry, Mines and Energy, who check for originality.
  • The GI Law was implemented on 30 January 2014 in Cambodia, but obtaining a GI status is not an easy process.
  • Producers must first form an association to clearly define the product’s characteristics and lay out a unique set of rules regarding the cultivation of the product within the designated area.
  • An external body must then step in to certify the quality of the resulting product.
  • To register a GI with the Ministry of Commerce, producers must be able to prove their goods stand out from others in the market.
  • The WTO’s GI status authenticates for buyers and consumers that a product is produced in a specific geographical area, and this represents an assurance of its quality.
  • Increasingly, Cambodian consumers are demanding products specifically from certain areas of the country.
  • For example, Battambang oranges can fetch a higher market price, if the registered GI Indicator is on display. If the indicator is not on display, consumers generally assume the product could be misrepresented and are not willing to pay higher prices. In addition, international markets are increasingly asking to see GI indicators for products such as Kampot Pepper. Protection lasts for 10 years and can be renewed.
  • Kampot pepper and Kampong Speu palm sugar are the only Cambodian products to hold the status thus far. Yet they have both seen a boost in demand since gaining GI recognition.
  • Feasibility studies on achieving Geographical Indication status for Thma Koul rice, Kampot durian and Cambodian golden silk have been completed, officials from the Ministry of Commerce said in March 2015 following reports from experts from the UN Conference on Trade and Development in three Cambodian provinces.

Work Permits in Cambodia

Here’s what’s up with the new work permit regulations.

  • Under the 1997 Labour Law (as amended) and the 1994 Immigration Law, foreigners who wish to work in Cambodia are required to have a valid E visa issued by the Cambodian embassy, consulate or immigration authorities at the port of entry.
  • The most recent laws that formally govern work permits are Prakas No. 195, 20 August 2014, “On Work Permits and Employment Cards for Foreigners”; and  Prakas No. 196, 20 August 2014, “On Employment of Foreign Labor”.
  • Employees must have a work permit and an employment card issued by the Ministry of Labour and Vocational Training.
  • The process demands that business owners first must register their company.
  • When registering a business in Cambodia, the Company must make a “Declaration of Opening a Business” in writing and deliver it either to the Ministry of Labour and Vocational Training for companies with more than 100 employees or to the Department of Labour and Vocational Training for 100 employees and less.
  • Having done this, the company must register all of its staff with the DOL. Don’t forget, this includes both foreign and Khmer staff.
  • If the Company wishes to use foreigners as employees, the Company must request a permit for employment of foreign labor (Quota).
  • This is done by both a Request Form and a Request Table, for use of foreign workforce.
  • If the rate of foreign labor exceeds 10 percent of the total employees, a request letter must be sent which thoroughly and clearly explains the positions in excess of the quota and the specialty and professional skills of each of these foreign workers.  A penalty payment normally applies for each worker in excess of the quota.
  • Foreigners are issued a Foreign Work Permit and Foreign Employment card.
  • Although by law the Company is required to make a declaration in writing each time an employee is hired or dismissed, in practice the Company should register new employees as they are hired and provide the work book and card to departing employees.
  • Labour Inspectors routinely update the company’s labour records for incoming and outgoing employees when the company is audited.
  • Once the company and staff are registered, workbooks will be issued for all staff. After registration, however, the Department of Labour can request staff status updates.
  • As part of this process, the DOL ask for extensive details about employees listed for a company, including foreigner quotas, and expect this information to be updated every time the employees of a business change.
  • This may be a somewhat expensive process, especially if you employ a large number of staff at your company, and if your registration is long overdue.
  • While this was once an unenforced law, Government inspectors have now begun foreign labour inspection at workplaces in order to fully enforce the law, including a comprehensive review of the declaration of personnel and its updates, quota approval for foreign labour usage, employment contracts for foreigners, employment cards and work permits, valid passports, valid visas of the appropriate type, and foreign workers themselves.
  • Non-compliance can lead to a fine and/or imprisonment. In order to get a business visa now, one also needs to be able to show a valid work permit.
  • A work permit costs 400,000 riel, or about $100 and must be bought separately from a work visa.
  • Work permits are issued by the Cambodian Ministry of Labour and are valid for one year.
  • The obligation is on the employer to register employees, arrange work permits and even withhold and pay their own income taxes.
  • The same is true for contracts with freelancers or consultants, which are subject to a withholding tax of 15%.

Accountancy Firms and Practice in Cambodia

There are a range of Accountancy Firms in Cambodia who can handle a variety of accounting services for business.

Tax services are a significant component of the services provided by accountancy firms. These include compliance, risk management, structuring and transfer pricing. The firms also provide audit or assurance and advisory services for their clients.

For more info on Accountancy Firms and practice in Cambodia, read on…

  • There are several international accountancy firms operating in Cambodia including KPMG, PriceWaterhouseCoopers, BDO and Grant Thornton.
  • Smaller firms such as Premier Consulting and CamATC provide tax compliance and bookkeeping services for their clients.
  • These firms usually belong to international accountancy networks, though membership of these global networks does not provide indemnity in cases of negligence.
  • Cambodia’s tax system is undergoing a huge overhaul ahead of the ASEAN Economic Community 2015.
  • The GDT has been working hard over the last 12 months to clamp down on tax evaders, make the tax collection system more transparent and improve the services it offers. The move aims to bring the country in line with expected standards for ASEAN members.
  • Prakas No. 1139 on Tax Registration was issued by the Ministry of Economy and Finance on the 9th October 2014. Its scope covers all legal entities, business partnerships, sole proprietorships and individuals performing economic activities in Cambodia.  Prakas 1139 sets out (among other things) the documents that must be submitted to, and conditions required to be met, by entities registering with the General Department of Taxation (“GDT”).
  • The reason it has caused so much controversy among the private sector is because of the breadth of information required by the GDT for registration and the impracticalities of compliance with its requirements for foreign businesses.  For instance, one of the requirements for tax registration is that the chairman of the board of directors must physically present themselves at the GDT to have their photograph taken and fingerprints scanned.
  • Prakas 1139 also requires all enterprises that registered with the GDT prior to 1 November 2014 to re-register and to submit all the documents required by Prakas 1139 in order to do so.  Given that the documentation required to be submitted under Prakas 1139 is beyond the scope of that previously required, this is causing a significant administrative burden on the private sector and there is concern that the information requirements of the GDT are too onerous and arguably unnecessary for the purpose of simply registering as a tax payer.
  • In addition to Prakas 1139, the GDT issued notification No. 286 on 9 January 2015 clarifying that in order to obtain Patent Tax for the year 2015 the updated requested information based on Prakas 1139 needs to be submitted before a new Patent Tax Certificate for 2015 could be issued to enterprises in Cambodia.
  •  On 2 June 2015 the GDT issued Notification No. 3435 (Notification 3435) inviting all taxpayers to settle their tax debts by 30 June 2015.  Notification 3435 alerts all owners and directors of entities to pay their outstanding tax liabilities with the GDT, with the risk of being publicly named and shamed for failure to do so.  It also notes that the GDT has previously observed that while some entities have settled their tax debts with the GDT following issuance of a reminder notice to do so, others have not.  Notification 3435 is yet another example of the tightening of the tax laws and regulations by the GDT who are actively clamping down on entities which have not fulfilled their tax obligations.
  • Calculation of deductions available for resident tax payers on their tax on salary: Upon submission of evidence of a resident taxpayers family situation, any resident employee is allowed a deduction of KHR75,000 per month (approximately USD 19) for (i) any minor dependent children per child; and (ii) a spouse whose sole occupation is that of housewife/househusband.  A “minor dependent” is one who is under 14 years of age (in which case a birth certificate is required to be adduced as evidence) and/or one who is between 14-25 years of age and in full time education (in which case a school certificate needs to be adduced as evidence). If both a minor dependent’s parents’ salaries are taxable, only one of the parents’ salaries is eligible for the deduction.
  • In the case of withholding tax, income payments for the performance of services when the recipient has been registered under the real regime and VAT system of taxation are exempt.  However, issues can arise in the case of mixed supplies – often a payment is made for something that contains both taxable and non-taxable supplies from a withholding tax perspective.  For example, a computer bundled with a valuable pre-installed software program is both a good (the computer itself) and a license payment (for the use of the software).  Under Cambodian law, withholding tax is only payable on the portion of the payment attributable to the withholding tax-qualifying expense.  Therefore, in the example given, the computer should not be subject to withholding tax but the software licence should.  This can complicate the calculation of withholding tax due and withholding agents should be aware of the distinction where mixed supplies are involved.
  • In late 2013, a five-year plan was given the nod by the Ministry of Economics and Finance. Currently, the strategy is with the Cabinet for final approval before being implemented. In the strategy, Prime Minister Hun Sen outlines a series of priorities, including a pay rise for public servants and increased spending on education, health and infrastructure. It is hoped this will be funded by the extra revenue raked in once the tax reforms take place.
  • As part of the plan, Cambodia has a target that between 2013 and 2015, the amount of tax, customs revenue and general tax should make up 0.5% of the country’s GDP. Other measures include introducing systems and data centres to enable agencies to cross reference information, making it easier to track down tax dodgers.
  • The Government is mooting plans to introduce a computer system to speed up processes as well as potentially overhauling the tax brackets and it has pledged to strengthen the implementation of excise tax, especially on alcohol and tobacco.
  • By law, if a Cambodian based company fulfils two or more of the following three criteria, they must have their financial statements audited by a registered external auditor.
  • This must be completed within six months after the end of the financial year.
  • The first prerequisite is if revenue of that business is more than $750,000 annually; Secondly, if the value of total assets of the business is more than $500,000; And, thirdly, if the company employs more than 100 members of staff.
  • There are three types of audit in Cambodia: a desk audit; a limited audit; and a comprehensive audit.
  • Desk audits merely re-examine information already submitted to the General Department of Taxation (GDT) and involve no visit from tax auditors.
  • Limited audits are more in-depth than desk audits, with the option of tax auditors going to the company’s premises to examine additional documents.
  • Comprehensive audits are more thorough than the other two and may uncover potential tax exposures through examination of any area of the business.
  • Desk audits and limited audits are carried out by the local Khan (district) branch of the GDT.If the business is classified as a “Large Taxpayer” both desk audits and limited audits are carried out by the Department of Large Taxpayers (DLT). Large taxpayers include Qualified Investment Projects, branches of foreign enterprises or multi-national companies, and any other enterprise with annual turnover in excess of  KHR1,000M (around $250,000). All comprehensive audits are carried out by the Department of Enterprise Audit (DEA).
  • If taxes have been underpaid, a notice of tax reassessment is issued outlining the outstanding sum, plus a penalty of up to 40 percent on the owed sum and interest of two percent per month.
  • Businesses have 30 days to appeal and provide evidence for the tax authority to evaluate.
  • Accounting software packages are becoming increasingly popular as companies get to grips with the digital world.
  • The first stage is recording transactions on Accounting Software Systems. Several packages are used, traditionally on desktop PCs the current market leader is QuickBooks. Other options are Sage 50 (formerly Peachtree) and local software Conical Hat. Large companies typically use more complex software.
  • Once transactions are recorded, management accounting analysis should follow. Using charts & tools to visually display data is paramount in facilitating management to make important business decisions for large and small businesses alike, such as new product launches, pricing and cost cutting.
  • All companies must register with the Cambodian Ministry of Commerce in order to conduct business. The appropriate license or licenses then need to be obtained from the relevant individual ministry.
  • In Cambodia, all companies are required to comply with Cambodia International Financial Reporting Standards (CIFRS) which is fully adopted from International Financial Reporting Standard (IFRS). The National Accounting Council, is working in developing and improving the accounting standard in Cambodia by complying with IFRS, but the implementation of this is being done slowly and will be completed gradually due course.
  • As the integration of ASEAN in future, complying with the IFRS would be necessary, as almost all of the countries in the world have decided or are planning to implement IFRS so that international companies can do business easily globally.
  • Foreign investment companies should consider registering with the Council for Development of Cambodia to apply for taxation and economic concessions.
  • The National Bank of Cambodia regulates the banking and finance sector, while the Securities and Exchange Commission of Cambodia (SECC) regulates financial service providers operating in the country.
  • Practicing accountants must register with Kampuchea Institute of Certified Public Accountants and Auditors (KICPAA), and lawyers with the Bar Association of the Kingdom of Cambodia. Members of KICPAA can use the design-nation Certified Public Accountant (CPA). Currently, only listed companies with SECC are required to comply with the standard, while it is up to the shareholder of the company to decide the requirements for the accounting standard to be used.
  • Cambodia’s National Accounting Council regulates the accounting and auditing standards as well as the financial reporting requirements of local businesses.
  • The association for accountants is the Association of Certified Chartered Accountants (ACCA).
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