Cambodian Withholding Taxes

Cambodian tax law provides a withholding tax

("WHT") system for many types of income

including services, rent, interest, royalties and dividends. The

applicable rate depends on whether the recipient of the income is a

resident or not. In this article, the WHT regime of Cambodia is

examined with particular attention for those situations which

create the most practical difficulties.

There are widespread misunderstandings about WHT because many

fail to recognize that WHT is just a collection system of tax due

by the beneficiary of the service income, and not tax owed by the

payer of the income. The payer ("withholding agent")

remits the WHT directly to the Tax Department but it is in fact

paid on behalf of the beneficiary of the income. The beneficiary of

the income, the one that performed the service and is paid a fee,

is the person that is taxable on that fee (the taxpayer). That tax

is paid as a matter of responsibility of the payer of the income,

which the payer remits to the Tax Department

("TD") on behalf of the taxpayer.

That is why the WHT must be grossed -up when the beneficiary

charges a fee "net of withholding tax". That just means

that the beneficiary expects the payer to bear the cost of the tax

which is actually tax owed on the income by the beneficiary. So,

the income of the beneficiary is actually the fee paid in cash plus

the tax which is paid to the Tax Department and which the payer

also took care of. The law provides that the WHT applies to the

entire income, also to income paid in kind. Income paid in kind can

consist of supplying goods or services, or by paying a debt to a

third party.

Applicable rates

The applicable WHT rates are represented in the following

tables:

Payer

Income

Beneficiary

Rate

Note

Resident taxpayer carrying on a

business

performance of services

resident physical person

15%

Exemption confirmed if beneficiary is

a real regime taxpayer

Resident taxpayer carrying on a

business

royalty for intangibles

resident taxpayer

15%

Exempt from WHT if this income is

exempt income for a government institution and certain non -profit

organizations

Resident taxpayer carrying on a

business

royalty for mineral resources

resident taxpayer

15%

Exempt from WHT if this income is

exempt income for a government institution and certain non -profit

organizations

Resident taxpayer carrying on a

business

rent of movables and immovable

goods

resident taxpayer

10%

Exempt from WHT if this income is

exempt income for a government institution and certain non -profit

organizations

Resident taxpayer carrying on a

business (except a domestic bank)

interest

resident taxpayer (except domestic

bank)

15%

Exempt from WHT if this income is

exempt income for a government institution and certain non -profit

organizations

Resident taxpayer carrying on a

business

interest

domestic bank

exempted

Domestic bank

interest on fixed term account

resident taxpayer

6%

Exempt from WHT if this income is

exempt income for a government institution and certain non -profit

organizations

Domestic bank

interest on non - fixed term

account

resident taxpayer

4%

Exempt from WHT if this...