Navigating the tax landscape in a new country can be complex, but for foreign entrepreneurs looking to establish a presence in Cambodia, understanding the key tax obligations is crucial for success. This guide provides a comprehensive overview of the updated tax regulations for 2025, helping you stay compliant and make informed business decisions.
Key Taxes for Businesses in Cambodia
1. Tax on Income (TOI) / Corporate Income Tax (CIT)
The Tax on Income (TOI), also known as Corporate Income Tax (CIT), is a major tax for businesses in Cambodia.
- Standard Rate: The standard CIT rate for most legal entities is 20%.
- Special Rates: A higher rate of 30% applies to revenue from the exploitation of natural resources like oil, gas, forests, and precious stones.
- Minimum Tax: Businesses are also subject to a minimum tax of 1% of their total annual revenue, which is a separate tax from the CIT. This is a tax paid during the annual tax on income preparation. However, Qualified Investment Projects (QIPs) with an independent audit report may be exempted.
2. Value Added Tax (VAT)
Value Added Tax (VAT) is a consumption tax applied to the supply of goods and services within Cambodia.
- Standard Rate: The standard VAT rate is 10%.
- Zero-rated: Exports of goods and services provided outside of Cambodia are subject to a 0% VAT rate. This also applies to certain supporting industries that supply export-oriented manufacturers.
3. Withholding Tax (WHT)
Withholding tax (WHT) is deducted at the source of payment. For foreign entrepreneurs and non-resident companies, this is particularly important.
- Payments to Non-residents: A 14% WHT is applied to various payments of Cambodian-sourced income to non-residents. This includes dividends, interest, rent, royalties, and fees for management or technical services.
Personal Tax for Foreigners
Foreign individuals living and working in Cambodia are categorized as either resident or non-resident for tax purposes, and this distinction is critical.
- Tax Residency: An individual is considered a tax resident if they are physically present in Cambodia for more than 182 days in any 12-month period.
- Resident Taxpayers: If you are a resident, you are taxed on your worldwide income at progressive rates ranging from 0% to 20%. These rates are applied to salary income.
- Non-resident Taxpayers: If you are a non-resident, a flat tax rate of 20% is applied only to your Cambodian-sourced income. This is considered a final tax, and non-residents are not eligible for the progressive rates or personal deductions.
New Tax Developments for 2025
The year 2025 brings several key updates that foreign entrepreneurs should be aware of:
- Capital Gains Tax: The implementation of capital gains tax on certain assets, including leases, investment assets, goodwill, intellectual property, and foreign currencies, began on January 1, 2025. However, the tax on capital gains from real estate for individuals has been postponed until the end of 2025.
- Updated Regulations: New “Prakas” (regulations) effective from January 1, 2025, have been issued to update and align the tax laws with the new Law on Taxation. These changes impact areas like the definition of a permanent establishment (PE), minimum tax, and withholding tax rules.
Key Compliance Dates and Penalties
Staying on top of compliance is essential to avoid penalties.
- Patent Tax: Businesses must register and pay their annual Patent Tax by March 31, 2025, for each business activity. The fee depends on the size of the taxpayer.
- Tax on Income (TOI) Filing: The annual declaration for the 2024 TOI must be filed by March 31, 2025.
- Penalties: Late filing and payment can result in significant penalties, including interest of 1.5% on the total tax due and fines ranging from 10% to 40% based on the severity of the violation.
Disclaimer: This information is for general guidance only and is based on publicly available data as of 2025. Tax laws are subject to change. It is highly recommended that foreign entrepreneurs consult with a professional tax advisor in Cambodia to ensure full compliance with the latest regulations.