The payment of taxes is the obligation of every citizen or relevant institution to the state to contribute to the protection and development of the motherland. This is the most equitable social contract. This tax is levied on the price of goods or services and the taxpayer is the end user. Taxes and duties are different in that “taxes” refer to the obligations of citizens and all economic components to be paid in cash or in kind to the state in accordance with the law # directly or # through the tax agency. In particular, “tax” refers to the obligation of citizens and all economic components to pay cash or goods to the state in accordance with the law # indirectly through the use of goods or services. Therefore, the tax can also be called an indirect tax.
According to the article published by the Traju School Law Association in 2017, we have studied and prepared to know that there are 18 types of taxes in Cambodia, including:
1. Tax on Profit
This tax is levied on resident taxpayers (persons living on Cambodian territory) for Cambodian and foreign source income. For non-resident taxpayers (foreigners in Cambodia, but in the case of non-residents living in Cambodia for more than 182 days will become residents), the income tax is limited to the Cambodian source income. Taxable profit is net profit. From all the results of all types of business operations, including capital gains achieved during the course of business or at the end of the business, as well as income from financial assets or investment assets, interest, fees and royalties. Taxable profit also includes all capital gains on real estate, financial assets or investment assets that are earned from operations other than business operations. We can know in detail the annual income tax rate according to Article 20 of the tax law.
2. Prepayment of Profit Tax
All enterprises that are taxed on real profits, including qualified investment projects, are taxed at a profit rate of 9% and are required to pay a monthly tax deduction. Profit at the rate of 1% of turnover including all taxes, excluding value added tax achieved in the previous month. The redemption will be deducted from the income tax at the time of the annual payment.
3. Minimum Tax
This tax is paid by the taxpayer under the self-declaration regime, except for qualified investment projects at the rate of 1% of annual turnover, including taxes, excluding value added tax. This tax is paid at the time of payment of the annual income tax and may also be deducted from the annual income tax.
4. Withholding Tax
Withholding tax refers to the tax levied by a resident taxpayer on certain payments made in cash or in kind to resident and non-resident taxpayers. All businesses must collect withholding tax. Withholding tax collected from royalties on intangible assets, royalties derived from a share in mineral resources, non-bank and non-bank interest income, both fixed and indefinite, is paid to the General Department of Taxation.
5. Payroll Tax
This tax is a monthly tax determined on the salary that a natural person receives within the framework of performing business activities. Natural persons, residents in the Kingdom of Cambodia are subject to payroll tax on salaries of Cambodian sources and salaries of foreign sources. Non-residents are subject to payroll tax on salaries of Cambodian origin. The enterprise, which is the employer, is obliged to withhold the payroll tax before paying the salaries to the employees and pay this tax to the tax administration no later than the 15th day of the month following the month in which the payroll is paid.
Salary tax is deducted at the rate of 20% of the amount due before deduction. This withholding tax is the final payroll tax for non-resident salaried recipients. For monthly benefits, the enterprise deducts and pays tax at the rate of 20% of the total value of the benefits provided to all employees. Value added benefits are the market value including all taxes.
6. Value added Tax (VAT)
Value added tax is a tax that is added to the original value of a taxable product or service and is determined by the end user’s purchase costs. This tax is collected from business operations and imports.
Formulas of value added tax without import duty = (customs duty + import duty) x 10% (for general goods not subject to special tax) / = (customs duty + import tax + special tax) x 10% (For general merchandise)
7. Special Tax on Certain Merchandise and Services
Refers to the following special tax rates on certain products and services.
• 3% for local and international calls
• 5% for cement
• 10% off airfare, entertainment services, non-alcoholic beverages and motor oil, brake fluid and raw materials to produce motor oil
• 20% for cigarettes
• 30% off beer
• 35% for alcohol
The reason why cigarettes, beer and wine are taxed at a higher rate than other goods and services is because these three products have a significant impact on consumers. Special tax is calculated on the form of the sum of the customs duty and import duty as expressions multiplied by the rate.
What are the 7 major taxes in Cambodia?