The guideline issues (Prakas 270) on TA (Tax Audit) that intends to organize the tax audit process to enhance transparency in tax payments and collections in order to promote a business environment to be fair and competitive in Cambodia, was announced by the Ministry of Economy and Finance on March 13th, 2021 last year. In addition, the interest rate for the underpayment of taxes be decreased from 2% to 1.5% from the announcement date, but the underpayment penalty rate still conducts the same.
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According to the Law on Tax (LoT), there are three types of Tax Audit including Desk Tax Audit, Limited Tax Audit, and Comprehensive Tax Audit. However, a more vigorous basis on how each sort of tax audit is conducted has been set out in the Prakas on Tax Audit. Therefore, this article will explain the different types of these three Tax audits for which one must accountable.
1. Desk Audit (DA)
According to the Ministry of Economy and Finance, Desk Audit (DA) considers as “a review and judgment of tax returns that are irregular or inconsistent to ensure the correctness of the declaration of taxpayers”. A Desk Audit (DA) can now only be conducted within a period of 12 months after the submission of the tax return and to be completed by Tax authorities within three months.
2. Limited Tax Audit (LA)
A LA is categorized into “On-site audit” and the term refers to “a visit to conduct an audit at the business location of the enterprise that is subject to an audit to examine the actual business status, accounting records, supporting documents and other documents” according to the Ministry of Economy and Finance. Specifically, a Limited Tax Audit (LA) is a short-term and immediate audit sort as special tax including some goods and service, public lighting tax, value-added tax (VAT). This tax can be carried out for the current tax year and the immediately preceding tax year (N-1) only and additionally this task will be completed by a Tax authority within three months.
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3. Comprehensive audit
This kind of audit also the family of “On-site audit”. A CA is strictly the re-examination of all types of tax obligations including Tax on Income (ToI). This process is to verify and to ensure the correctness of account records and financial reports under the law and fulfill the tax obligation in accordance with the law and regulations on taxation. Normally, this audit carries out three years back, but in case there are obvious pieces of evidence regarding tax evasion or else, it will extend to five tax years backward, due to the MEF.
These three Tax Audits are worth-seeking for business owners who intend to run a business in Cambodia. However, it’s better to seek experts regarding these terms in order to clearly understanding since this article provides only a brief explanation for fundamental understanding.
What types of tax audits might your business be subject to