Cambodia’s Law on Financial Management

• On December 20, 2019, the Cambodian government issued the Law on Financial Management (LoF).
• The new law revises certain rules regarding taxes on dividend distribution and stamp duty, in addition to the rules governing the tax on the income of Cambodian branches of foreign companies.
• Foreign investors should seek the help of registered local advisors to assist them in staying compliant with these changes.

On December 20, 2019, the Cambodian government issued the Law on Financial Management (LoF), which is issued annually and contains a number of updates to the Law of Taxation. The law has been in effect since December 21, 2019.

The new law revises certain rules regarding taxes on dividend distribution, stamp duty, in addition to the rules governing the tax on income (ToI) of Cambodian branches of foreign companies. Foreign investors should seek the help of registered local advisors to assist them in staying compliant with these changes.  

Advanced tax on dividend distribution

The LoF introduced the advanced tax on dividend distribution (ATDD) as a new mechanism which levies companies that distribute dividends from retained earnings and thus ensuring they are subject to the appropriate ToI rates.

The revised rules in the LoF in relation to ATDD are:

• Qualified Investment Projects (QIP) that have distributed dividends to shareholders during a tax holiday period will not have to pay ATDD from January 1, 2020. QIPs are projects that are eligible to receive fiscal and non-fiscal incentives from the Cambodian Investment Board. They are divided into three types – domestic QIPS, export QIPs, and supporting industry QIPs;
• Cambodian branch offices of foreign companies that repatriate profits to their head offices are subject to ATDD if the ToI on repatriated profits have not been paid;
• Investors should note that branch offices that are repatriating profits abroad are still subject to the withholding tax rate of 14 percent;
• The ATDD does not apply to general insurance premiums or the reinsurance premiums on properties; and
• Businesses that have paid the ATDD will not be subject to the advanced tax on this dividend distribution again.

Stamp duty

The stamp tax is usually applied to posters or banners that have a business purpose. Advertising such as for education programs, environmental protection, and non-profit organizations and activities will not be subject to stamp tax. There will be penalties for failure to apply with the stamp tax obligations.

 

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