On 25 May 2017, the General Department of Taxation (GDT) issued Prakas No. 559 relating to VAT for non-taxable supplies in accordance with Article 57 of the Law on Taxation (LoT) which is amended by the Law on Financial Management for 2017.
The purpose of Prakas 559 is to set out clearly the goods or services which are the deemed non-taxable supplies for the purposes of Article 57 of the LoT in order to stimulate economic activity and reduce the cost to citizens on the use of goods or services necessary in everyday life. Usually, tax registered entities charge VAT at the rate of 10% on the goods or services they provide. However, the LoT provides for certain circumstances where entities do not need to charge VAT. Prakas 559 clarifies these circumstances.
Expanding on the list of non-taxable supplies provided by Article 57 of the LoT, Prakas 559 provides for the following as non-taxable supplies:
- Public postal services
- Hospital, clinic, medical and dental services and the sale of medical and dental goods incidental to the performance of such services
- The service transportation of passengers by a wholly state owned public transportation system
- Insurance service
- Primary financial services
- The importation of personal which are exempt from custom duties
- Non profit activities in the public interest
- Education services
- Electricity and water supplies
- Unprocessed agriculture products
- Solid and liquid waste removal or collection services
Prakas 559 also provides some useful definitions to help clarify the scope of Article 57 of the LoT:
- 1. “Primary financial services” (which had previously been undefined) refers to any financial service that derives profit from the following:
- Money deposit operations and the provision of credit or loans, but excluding service fees related to the provision of credit or the loan
- Trading of securities or other financial instruments, and clearance and settlement services with respect to the Cambodia Securities Exchange
- Money exchange services
- Surety services
- Trading of unprocessed gold
2. The term “electricity” refers to electricity which is supplied for use in daily life or business. The supply of electricity does not include the supply of network services or measuring equipment.
3. The term “clean water” refers to water that has been supplied for use in daily life or business, but does not apply all types of drinking water. Clean water supply excludes the placement of pipelines and other measuring devices.
4. The term “unprocessed agriculture products” refers to tree bark, leaves, flowers, fruit, nuts or the resin of plants that come from faming cultivated land, whether or not sliced and which has not been processed into finished products.
5. The term “solid and liquid waste” refers to solid and liquid substances which are no longer used or required or which have been abandoned.
Additionally, Prakas 559 references the provisions of the VAT Sub-Decree that deal with claims for input VAT credit (Articles 29-41). Essentially, Prakas 559 states that Articles 29-41 of the VAT Sub-Decree must be complied with when claiming input tax credit, which effectively means that entities engaging in the provision of non-taxable supplies may not claim input tax credit.
This article was written by Simon Burlinson, Legal Advisor at Sciaroni & Associates.
Sciaroni & Associates Taxation Practice Group offers a full range of tax compliance, advisory and dispute resolution services, from the filing of monthly and annual tax returns and patent tax filings, tax registrations and structuring advice to conducting due diligence in corporate transactions and assisting clients with disputes involving the tax authorities. We advise many of our clients on tax optimisation strategies and assist them during tax audits. At every stage of a company’s life, our advisers ensure clients are fully compliant with the dynamic field of taxation in Cambodia. To our local clients we bring international standards of professional service and to our international clients we merge our understanding of local compliance and legislative practices with quality of service and financial information required for global business.
Sciaroni & Associates, one of Southeast Asia’s leading professional services and investment advisory firms, has been providing skilled counsel and knowledgeable business insights for over two decades. Based in Cambodia with legal offices in Laos and Myanmar, their experienced team of advisors brings considerable general and sector-specific expertise to the challenges confronting companies doing business in emerging markets. Their clients comprise many of the world’s premier companies, banks, financial institutions, governments and global development organisations.
For more information please visit www.sa-asia.com or contact them at [email protected].
Simon is an English-qualified solicitor with extensive experience advising local, regional and international clients on cross-border corporate transactions, corporate restructurings, foreign direct investment in Cambodia and the tax structuring and compliance issues related thereto. Simon’s particular areas of expertise include advising international clients in the pharmaceutical, telecommunications, IP/IT, insurance, petrochemical and plant and seed breeding sectors on all aspects of local law compliance. He speaks English and French.
Sciaroni & Associates Taxation Practice Group offers a full range of tax compliance, advisory and dispute resolution services, from the filing of monthly and annual tax returns and patent tax filings, tax registrations and structuring advice to conducting due diligence in corporate transactions and assisting clients with disputes involving the tax authorities. We advise many of our clients on tax optimization strategies and assist them during tax audits. At every stage of a company’s life, our advisers ensure clients are fully compliant with the dynamic field of taxation in Cambodia. To our local clients we bring international standards of professional service and to our international clients we merge our understanding of local compliance and legislative practices with quality of service and financial information required for global business.
Sciaroni & Associates, one of Southeast Asia’s leading professional services and investment advisory firms, has been providing skilled counsel and knowledgeable business insights for over two decades. Based in Cambodia with legal offices in Laos and Myanmar, our experienced team of advisors brings considerable general and sector-specific expertise to the challenges confronting companies doing business in emerging markets. We are proud that our clients comprise many of the world’s premier companies, banks, financial institutions, governments and global development organizations.
For more information please visit www.sa-asia.com or contact us at [email protected]
