Employers in Cambodia have several tax responsibilities. These include withholding and filing Tax on Salary (ToS) and Tax on Fringe Benefits (ToFB) from employee salaries, including any fringe benefits, and remitting these taxes to the Cambodian General Department of Taxation (GDT) on a monthly basis. Cambodian tax residency determines how salary and benefits are taxed. Residents are taxed on worldwide income, while non-residents are taxed on Cambodian-sourced income only.

Monthly Prepayment Tax

Employers are also responsible for calculating and paying a monthly prepayment tax, which is 1% of the company's monthly turnover (revenue). This prepayment tax functions as a minimum tax. If your annual Tax on Profit liability is less than the total of your prepayments, you still owe the prepayment amount. Prepayments made throughout the tax year are offset against the company's income tax liability at year-end when filing the annual tax return.

Social Security Contributions

In terms of social security contributions, employers must register companies with eight or more employees with the National Social Security Fund (NSSF). Employers contribute 0.8% of each employee's monthly wage to cover Occupational Risk Compensation (ORC). Employees do not contribute to the NSSF.

Additional Considerations

Additional tax responsibilities for employers include withholding tax on payments for royalties and rent to both resident and non-resident recipients. Depending on the industry and other factors, employers may be required to contribute to the Skills Development Fund (SDF). Detailed records of employee salaries, taxes withheld, and contributions made must be maintained.

Income tax is a mandatory deduction from employee salaries, withheld at source based on a progressive tax rate structure. The latest tax brackets and rates can be found on the website of the General Department of Taxation (GDT) of Cambodia.

Employees also contribute 0.8% of their gross salary to the National Social Security Fund (NSSF) for work-related injury and illness benefits.

Other Potential Deductions

In addition to mandatory deductions, there are other potential deductions. If offered by the employer, an employee might elect for additional voluntary contributions to a pension plan. If applicable, union membership fees can also be deducted from salaries.

Important Considerations

Employees may be eligible for certain tax allowances or deductions, which could reduce their overall income tax burden. It's important to stay updated with the latest information on the GDT website or consult a tax advisor in Cambodia. Also, income tax rates or NSSF deductions are subject to potential changes.

The standard VAT rate in Cambodia is 10%. This applies to most services provided within the country. However, certain essential services, such as healthcare, education, and some financial services may be exempt from VAT.

VAT on Imported Services

For specific services received from outside its borders, Cambodia may apply a "reverse charge" mechanism. In this scenario, the recipient of the service in Cambodia becomes responsible for calculating and paying VAT, even if the supplier is a foreign entity. It's important to assess if a particular imported service is taxable under Cambodia's VAT regulations.

Important Considerations

Where a service is deemed to be supplied can be complex and impacts VAT obligations. Certain services might have specific VAT treatment or potential exemptions.

Staying Compliant

The General Department of Taxation (GDT) is the primary source of information on VAT regulations in Cambodia. For complex situations, international transactions, or to ensure complete compliance with VAT on services, consult a tax advisor specializing in Cambodian VAT.

Cambodia offers a range of tax incentives to attract foreign investment and stimulate economic development. These incentives are aimed at promoting specific industries and activities.

Qualified Investment Projects (QIPs)

QIPs may be eligible for a corporate income tax (CIT) holiday of up to 9 years, depending on the sector and project specifics. The standard CIT rate in Cambodia is 20%. As an alternative to the tax holiday, QIPs can choose a 40% special depreciation allowance. QIPs may also receive exemptions from import duties on construction materials, production equipment, and raw materials.

Special Economic Zones (SEZs)

Companies operating within designated SEZs in Cambodia may enjoy additional tax benefits, including extended income tax holidays which may be longer than the standard QIP incentives. Businesses in SEZs may also benefit from value-added tax (VAT) exemptions on certain goods and services.

Priority Sectors

Cambodia provides enhanced tax incentives for investments in priority sectors, which include agriculture and agro-industry, manufacturing, tourism, infrastructure, and science and technology.

Small and Medium-sized Enterprises (SMEs)

SMEs in Cambodia are eligible for reduced prepayment of Tax on Income (TOI) requirements. SMEs meeting certain criteria may also receive exemptions or reductions in the payment of Minimum Tax (MT).

Important Considerations

Tax incentives in Cambodia are generally granted on a case-by-case basis. Eligibility criteria and the specific benefits available may vary depending on the investment project, location, and sector. Investors are advised to consult with the Council for the Development of Cambodia (CDC) and tax advisors to determine their eligibility and understand the application process for tax incentives.