The details of the E-Commerce VAT Tax Prakas have been outlined by Cambodian legal firm DFDL. In April 2021 Sub-decree No. 65 S.E on the Implementation of Valued Added Tax on E-Commerce (“Sub-decree 65”) was enacted and it will impact from September 2021.
DFDL outlines the “conditions and mechanism for the collection of VAT on the provision of digital products, services and e-commerce activity by non-resident entities to consumers in Cambodia.” Rumours of the new taxes affecting eCommerce started circulating in late 2020.
Overseas suppliers of digital goods and services to customers in Cambodia, without the need to have a brick and mortar office in-country, made it difficult to tax the transactions claimed by the authorities.
“Article 75(2) of the Law on Taxation provided the ability to the Cambodian Government to issue a Sub-decree to impose special conditions concerning the liability to collect, declare and pay VAT where the supplier of the taxable supply that is consumed in Cambodia is not engaged in business in Cambodia or where there are other obstacles relating to the collection of VAT from the supplier”, said DFDL.
Prakas 542 MEF.P on the Rules and Procedure for the Implementation of VAT on E-Commerce (“Prakas 542”) was passed on the 8th of September 2021 and as its name suggests it provides further detail on how Sub-decree 65 will be implemented.
Rules and Procedure for the Implementation of VAT on E-Commerce (“Prakas 542”)
- Since 8 September 2021, non-resident entities who provide digital goods/services or e-commerce activities to Cambodian consumers, and who expect to have sales of USD $15k or more before the end of the year, over three consecutive months, have 30 days to register for VAT with the General Department of Taxation (GDT) in Cambodia.
- From 2022, the same non-resident entities, that expect to have sales of USD $62.5k or more in 2022 (or future years), or expected sales in any calendar year of USD $15k or more for three consecutive months, will need to register for VAT within 30 days.
- Once registered for VAT, non-resident entities will need to invoice customers in Cambodia with respect to B2C and B2B transactions. The VAT registered non-residents will need to file monthly VAT declarations and pay the 10% VAT on B2C sales to the GDT (General Department of Taxation).
- Registered taxpayers who receive digital goods/services or e-commerce activities from a non-resident (B2B transaction), whether the non-resident has registered for VAT or not, will need to pay 10% VAT to the GDT on behalf of the non-resident under a VAT reverse charge mechanism.
Who is impacted?
DFDL claims parties primarily impacted by the updates are non-resident suppliers of digital goods, services and e-commerce activity (“Non-resident E-Supplier”) and importantly those registered taxpayers in Cambodia (“Taxable Person”) who transact with the aforementioned non-resident suppliers under a B2B transaction.
Failure to comply with these obligations could result in severe penalties.
We credit DFDL Cambodia with the information outlined in this article and a more detailed summary can be read here.