Doing Business in Cambodia: Tariff Barriers & Taxation
Tariffs and non-tariff barriers
Tariff duties on goods are levied on numerous import items and consist of only ad valorem duties. Imported goods are assessed at their customs value including insurance, freight, customs duties and specific tax. Imported goods are subject to Cambodia’s VAT of 10 per cent.
Cambodia follows the harmonised system of tariff, classified into eight digits. While on paper there are currently 12 import tariff bands, duties have been simplified generally to a four band system, with rates ranging from zero to 120 per cent.
Tariff duties are imposed on the following items:
- Raw materials such as cement, iron, tile and brick, and items considered essential to daily life, including meats and fruits – 7 per cent.
- Equipment and machinery – 15 per cent.
- Finished products such as television, radios and house furnishings – 35 per cent.
- Luxury goods, including automobiles, wine, cigarettes and cosmetics – 70 per cent.
Imports which are exempt from tariffs include imports:
- By diplomatic missions
- For humanitarian or religious purposes
- That provide incentives in accordance with the 1994 Law on Investment
- Of commercial samples
Of various ad hoc exemptions, as decided by the Prime Minister,
Cambodia is not yet a member of the WTO, although it has stated its intention to accede. Cambodia has been a member of ASEAN since April 1999, and has commenced reducing tariffs on ASEAN products according to its obligations under AFTA.
The Ministry of Economy and Finance abolished the system of customs valuation based on an indicative price list in September 1993. The decision stipulates that customs value will be based on CIF market values, and will be expressed in riels. Insurance must be purchased in Cambodia if a consignment has no insurance policy from abroad.
All goods on which the customs duty is more than US$300 must have their customs value approved by the Valuation Office at the Department of Customs and Excise Headquarters in Phnom Penh. Seven major border checkpoints are empowered to approve customs values for goods with a customs duty of US$300 or less. There is a fee of approximately US$4 for this service.
Cambodia operates a Pre-Shipment Inspection Scheme (PIS), which requires the inspection company, SGS, to determine whether the invoice price (transaction value) corresponds to the open market price of the goods. Exemptions for pre-shipment inspection would be shipments with a FOB value of less than US$4000. Under the scheme, importers will have to pay the intervention fee for the PIS service prior to application for inspection. For more details, the SGS Liaison Office can be contacted on +855 15 919 121.
There are no quantitative restrictions on imports into Cambodia. There are import prohibitions on narcotic drugs and poisonous chemicals.
Most imported goods may enter Cambodia without an import license. Import licensing requirements cover only a small number of products, as specified in the Ministry of Commerce Announcement No.2211 and as described below:
- Weapons, explosives and ammunitions (permit required from the Ministry of National Defence).
- Vehicles and machinery for military purposes (permit required from the Ministry of National Defence).
- Gold, silver, precious stones and articles thereof (permit required from the National Bank of Cambodia).
- Pharmaceuticals and medical material (permit required from the Ministry of Health).
Foreign investors and investments will generally be affected by the following taxes:
A Value Added Tax (VAT) of 10 per cent was introduced in Cambodia in January 1999. The VAT is applied to the ‘taxable value’ of the goods or services and applies to all stages of production. Corporations, importers, exporters and investment enterprises are required to register for VAT when starting up their business.
Taxpayers will be required to file VAT returns and make VAT declarations and payments on a monthly basis, ie. By the 20th day of the succeeding month. For imports, VAT will be payable to customs at the time of import.
Several categories of imported goods are subject to excise taxes (10 per cent to 30 per cent). Those include:
- some types of cars
- car spare parts
The standard rate of profit tax for companies is 20 per cent. Oil and gas and a number of mineral exploitation activities are subject to a 30 per cent rate. At present, a preferential rate of nine per cent is available for investments which meet certain criteria required by the Council for the Development of Cambodia (CDC). The CDC might also grant tax holidays to certain projects for up to eight years depending on their satisfaction of these criteria. Profit tax returns are to be filed annually within three months of the end of the calendar year. In addition, a tax on profit prepayment equal to one per cent of turnover, is required to be paid on a monthly basis by the 15th day of the succeeding month.
The minimum tax is equivalent to a tax floor or minimum threshold which real regime taxpayers are required to pay. Its effect is that Cambodian taxpayers are liable to pay one per cent of annual revenue as tax to the government. Minimum tax is separate and distinct from the profit tax and is due whether or not the taxpayer has made a profit or loss. In the event that a taxpayer’s profit tax liability is greater than the minimum tax, then the minimum tax will be credited against the total profit tax liability of the taxpayer.
A flat rate of 15 per cent withholding tax applies to payment of ‘Cambodia source income’ to non-residents, whether overseas or within Cambodia. The rate of 15 per cent must be withheld from payments of income, such as income received from services provided in Cambodia, interest on debt obligations issued by a resident or by the government, dividends received from a resident enterprise, capital gains on property sale, rents paid on property in Cambodia, and insurance premiums.
Withholding taxes also arise from local transactions between residents, including a 15 per cent tax on payment made to individuals for services such as consulting and management fees, 15 per cent on royalties for oil, gas and minerals, 10 per cent on rental payments and 5 per cent on interest paid by local banks to resident individuals with a non-fixed term account.
A two per cent turnover tax applies to those tax-payers not within the real regime (large and/or incorporated) taxpayers. Turnover includes revenue from the supply of goods and services. Taxpayers must make monthly turnover declarations and payments.
Resident and non-resident individuals who derive assessable income from sources in Cambodia, irrespective of the place of payment, are subject to personal income tax at progressive tax rates ranging from five per cent to 20 per cent of net assessable income. For non-residents, only the Cambodian sourced salary will be subject to the salary tax. Cash salary includes remuneration, wages, bonuses, overtime, compensations and employer provided loans and advances.
There are a range of other minor taxes which might affect foreign businesses, including house and land rent tax, patent tax, fiscal stamp tax (eg. advertising postings and signages), unused land tax, and specific taxes on certain merchandise and services. To date, Cambodia has not negotiated any double taxation agreements.
Investors in Cambodia are required to prepare annual income statements and balance sheets primarily to assess profit tax liability. Accounts must be received by the Tax Department within three months after the end of the calendar year, ie. 31 March. Current law stipulates that all accounting books and records must be denominated in riel, although in practice it appears that financial statements denominated in US dollars are also acceptable.
Source: The Australian Trade Commission (Austrade) http://www.austrade.gov.au/Doing-business-in-Cambodia/default.aspx
(info in the above link is updated regularly)
Related links: Cambodia – economic and trade information
- Country Brief
- Country Fact Sheet (pdf)
- Trade with Australia ASEAN-Australia-New Zealand Free Trade Agreement
Source: Australian Government, Department of Foreign Affairs and Trade http://www.dfat.gov.au/geo/cambodia/index.html