The Cambodia Ministry of Economy and Finance (MEF) has released guidelines on the application of value-added tax (VAT) on imported cigarettes for domestic sales or export.
The new guidelines were signed by His Excellency Aun Pornmoniroth, Deputy Prime Minister and Minister of Economy and Finance dated July 24, 2023, and it aims to strengthen the implementation of VAT to be transparent and consistent.
It advises all business owners who import or distribute cigarettes to apply Value Added Tax procedures in three steps:
- For cigarettes imported for domestic sales purposes, the enterprise shall apply the VAT like other taxable imported goods, with the collection of VAT at the rate of 10 per cent for all cigarette supplies in the Kingdom of Cambodia. VAT paid when importing or buying locally is allowed as an Income Tax Credit for deduction with VAT.
- For cigarettes imported for export purposes, the enterprise pays VAT only once at the time of importation (as in the past).
- Enterprises must file declarations and pay taxes in accordance with the laws and regulations in force.
This instruction will take effect from August 1, 2023 onwards.
What Taxes Apply To Tobacco in Cambodia?
- Excise tax ( 20% of the 90% of the price)
- VAT/GST (10%)
- Import Tariffs (7% – 35% plus 10% of the import VAT)
- Public Lighting Taxes (3% of the invoice value)
- Profit Tax (20% on profit)
- Turnover tax (2% of invoice value)
In 2022, the Cambodian government said it would strengthen tax collection on beer and tobacco products as part of a range of measures to increase tax revenues in 2023.
The World Health Organization (WHO) and the World Bank estimated that Cambodia could generate around USD $235 million in revenue over a period of five years and USD $933 million over the next 15 years if it increases the tax on cigarettes to 75 per cent of its retail price.
According to Southeast Asia Tobacco Alliance, in ASEAN, Thailand currently has the highest tax burden as a percentage of the retail price, at 78.60%, followed closely by the Philippines at 71.32% and Singapore at 67.50%. Cambodia and Lao PDR have the lowest tax burdens, at 25-31.10% and 18.81%, respectively.