One issue that is always high on the list of issues of concern to foreign investors in that of tax. The taxes in force at present include :

Business Turnover or Sales Tax ("BTT")

BTT on manufacturing is 1 percent of gross income. Businesses engaged primarily in services must pay BTT of 2 percent of gross income. The 1995 Finance Law revisions increase the 2 percent charge to 4 percent, beginning January 1st, 1996. Restaurant, hotels and other entertainment venues must pay a 10 % BTT.

Corporate Income Tax

All profits derived from industrial, craft, commercial and service endeavours are subject to Corporate Income Tax. The tax will catch activities undertaken on a professional basis by a natural person or legal entity within Cambodia. Which are, "regular business activities".

"Regular business activities" can be identified in three ways:

1. Businesses whose goal it is to turn a profit in Cambodia by entities which are considered independent Cambodian establishments. A durable presence will usually be assumed to constitute a Cambodian establishment.

2. Businesses, having a non-independent representation in Cambodia will be held to indicate "regular business activity". It should be noted however, that the proper use of independent representatives may render Cambodian taxation inapplicable.

3. Undertaking operations which are regarded to constitute a "complete circle of commercial activity", will render profits thereof taxable in Cambodia. The definition of a "complete circle of commercial activity" may be defined as a series of transactions aimed at attaining a specific business objective.

Presently the 1994 Finance Law specifies that businesses are obliged to render a monthly profit tax prepayment of 2 percent of the gross income. This is the adjusted at the year end so that the taxpayer either makes a further payment or receives a refund although of the 2 percent, half a percent per month is not refundable.

The position is however due to charge and under the 1995 Finance Law revisions, starting from January 1st 1996, the monthly advance payment will be reduced to one percent of the turnover realised the month before. Under the 1995 law the monthly charge is wholly non-refundable.

Subject to incentives that may be granted under the Foreign Investment Law the current profit tax rates are as follows:

Profit Amount                                Rate

Under $400 10 %
$401 to 4000 15 %
$4001 to 8000 20 %
Above $8000 30 %

As already mentioned the Foreign Investment Law does make available a corporate tax rate of 9 percent, but is rarely granted.

Salary Tax

Salary Tax (or personal income tax) is to be paid in respect of all local and expatriate staff monthly by the employer. The rates are as follows:

Monthly Salary Amount in US$ terms              Rate
Under $400 5 %
$401 to $4000 10 %
$4001 to $8000 15 %
$8000 upwards 20 %

Salary tax is levied on all salary and benefits attributable to work done in Cambodia. This is so even if the employee receives payment offshore. Application of the tax to an employee does not depend on that employee's residency status in Cambodia. However: credits are available for taxes paid in foreign countries on income also subject to Cambodian tax. At present there are no double tax treaties in force between Cambodia and its trading partners although some are now being negotiated.

Registration Tax

The registration tax is charged on real and personal property sale transactions. Tax officials always look to the seller for payment unless the agreement indicates otherwise.

Registration tax rates are 4 % for transfer of real property and most personal property.

Turnover Tax

As the name suggests, turnover tax is based on the yearly turnover of the company. The rates are as follows:

Turnover Tax (yearly turnover in US$)                   RATE
Industry Service (in US$)
to 3,000 to 1,200 6.00
3,001 - 5,000 1,201 - 2,000 8.40
5,001 - 10,000 2,001 - 4,000 10.80
10,002 - 12,000 4,001 - 4,800 16.00
12,001 - 15,000 4,801 - 6,000 24.00
15,001 - 20,000 6,001 - 8,000 36.00
20,001 - 24,800 8,001 - 10,000 56.00
24,801 - 30,000 10,001 - 12,000 72.00
30,001 to 40,000 12,001 - 16,000 96.00
40,001 to 400,000 16,001 - 160,000 1 per 1000 of turnover
4,000,000 and over 160,001 and over 1 per 400 of turnover

Land Taxes

At present there is no land ownership tax.

A 4 % tax is applied to the sale and purchase of land as noted above.

There is also a 10 % tax on the lease of real property which is payable by the owner. There is also an annual tax on undeveloped land of 2 % of the assessed market, value of the land.

Tax Incentives

These have already been reviewed in the Investment Law section above.

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".