If you run a business in Cambodia, Tax on Profit (now officially referred to as Corporate Income Tax or CIT) is one of your most significant annual obligations. It's the tax your company pays on its net taxable profit, and it's filed and settled once a year with the General Department of Taxation (GDT).
This guide breaks down what you need to know as a foreign business owner. We will cover what are the CIT rates, monthly prepayment system, allowable deductions, and compliance.
Understanding Cambodia’s Corporate Income Tax
What Is Tax on Profit?
Tax on Profit is Cambodia's corporate income tax. For years, it was known locally as "Tax on Profit," and you'll still see that term used interchangeably with CIT. Under the Law on Taxation, every company registered in Cambodia and operating under the self-declaration regime is subject to this tax.
The tax is calculated on your company's net taxable income (total revenue minus allowable deductions) for the financial year. Unlike some countries where you simply write a check at year-end, Cambodia uses a prepayment system that collects tax throughout the year, with an annual reconciliation at the end.
Who Pays CIT in Cambodia?
Any business operating as a legal entity in Cambodia is subject to CIT. This includes:
- Private Limited Companies (Co., Ltd.): the most common structure for foreign investors
- Branch offices of foreign companies
- Representative offices engaged in business activities
- Qualified Investment Projects (QIPs)
If your business is resident in Cambodia (incorporated here, or managed and controlled here), you are taxed on your worldwide income. If your business operates through a permanent establishment (PE) but is not resident, you are taxed on Cambodian-sourced income only.
Cambodia operates under a self-declaration regime, which means there is only one tax regime in the country. Under this system, taxpayers are classified into three categories: small, medium, and large, based on their annual turnover, legal form, and sector (see section below).
How Taxpayers Are Classified
Cambodia operates under a single self-declaration regime. Every taxpayer is assigned one of three classifications (small, medium, or large) based on annual turnover, legal form, and sector. Your classification determines your CIT rate and compliance obligations.
| Classification | Service/Commercial Sector Turnover | Industrial Sector Turnover |
|---|---|---|
| Small | KHR 250M – KHR 1B (~USD 62K – 245K) | KHR 250M – KHR 1.6B (USD 62.3K – USD 398.7K) |
| Medium | KHR 1B – KHR 6B (~USD 245K – 1.47M) | KHR 1.6B – KHR 8B (USD 400K – USD 1.5M) |
| Large | Above KHR 6B (~USD 1.47M+) | Above KHR 8B (USD 2M+) |
Note: Regardless of turnover, any business registered as a legal entity (Co., Ltd.), a branch of a foreign company, or a QIP is automatically classified as at least a medium taxpayer. In practice, this means nearly every foreign-owned company is filing at the medium or large level from day one.
If the GDT believes your declared turnover does not reflect your actual turnover, they have the authority to reclassify you based on the value of assets used in your business.
Income Tax Rates and How Your Tax Is Calculated
The Standard Rate and Special Cases
The standard CIT rate for medium and large taxpayers is 20% of net taxable profit. This is the rate that applies to the vast majority of foreign-owned businesses in Cambodia. A few industries are carved out:
| Business Type | CIT Rate |
|---|---|
| Standard medium/large companies | 20% |
| Oil, gas, and certain mineral exploitation | 30% |
| Insurance companies (on gross premium income) | 5% |
| Insurance companies (on other non-insurance income) | 20% |
| Qualified Investment Projects (QIPs) during tax holiday | 0% |
| Small taxpayers | Progressive, 0%–20% |
Small taxpayers (generally sole proprietorships or partnerships below the turnover thresholds above) are taxed at progressive rates under Article 20 of the Law on Taxation. Most foreign-registered companies don't fall into this category.
What Counts as Taxable Income
Your taxable income is total revenue from business operations minus allowable deductions. Revenue includes sales, service income, interest, rent, royalties, and any other income earned in the normal course of business.
Resident companies are taxed on worldwide income. This means income your Cambodian entity earns from overseas sources is generally included in the tax base, and are subject to foreign tax credit provisions. Non-resident entities operating through a PE are taxed on Cambodian-sourced income only.
The Minimum Tax
Cambodia also has a Minimum Tax (MT) equal to 1% of annual gross turnover (excluding VAT). This is a separate tax from CIT, and it applies when your 1% turnover-based liability exceeds your actual 20% CIT liability. It's a safeguard against businesses that consistently report losses to avoid paying tax.
If your company is genuinely profitable, your 20% CIT will almost always exceed the 1% MT, so the MT won't cost you anything extra. The MT is also not applicable to enterprises that maintain proper accounting records, per the Law on Financial Management 2017.
Tax Incentives for Qualifying Investment Projects (QIPs)
If you're making a significant investment in Cambodia, registering as a QIP through the Council for the Development of Cambodia (CDC) can dramatically reduce your CIT burden. QIP incentives include:
- CIT holiday of 3 to 9 years depending on your investment category. During this period, you pay zero CIT and are exempt from the 1% monthly prepayment
- Partial CIT exemption for the six years after the full holiday expires: 25% of CIT in years 1–2, 50% in years 3–4, and 75% in years 5–6
- Import duty exemptions on qualifying production inputs and equipment
- 40% special depreciation in year one (if you elect this instead of the tax holiday)
To keep your QIP incentives active, you must submit half-year and annual compliance reports to the CDC within 20 days of the CIT return filing deadline. The CDC will then issue a Certificate of Compliance (CoC) confirming your adherence to the relevant regulations.
QIP registration is not mandatory for all investments, but it is an option for priority sectors such as manufacturing, agri-processing, or infrastructure. Approval usually takes 30-60 days.
Regulatory Updates on Capital Gains in 2026
This is a significant update for foreign business owners. Cambodia has been phasing in a Capital Gains Tax (CGT) at a flat rate of 20%, and the scope expanded at the start of this year.
From 1 January 2026, CGT applies to gains from the transfer or sale of leases, investment assets, goodwill, intellectual property, and foreign currencies. CGT on immovable property (real estate) transactions will not take effect until 1 January 2027.
For businesses, these gains are taxed under CIT at the standard 20% rate, and the return and payment must be submitted to the GDT within three months of realising the gain.
Allowable Deductions to Reduce Taxable Profit
Cambodia allows deductions for ordinary and necessary business expenses, but a number of specific rules and caps apply.
Depreciation
When your business buys a long-term asset (an office, a vehicle, a computer) you don't deduct the full cost in the year you buy it. Instead, you spread that cost as a deduction over several years, reflecting the fact that the asset loses value gradually as it gets used.
For example, if you buy a company car for USD 20,000 and it depreciates at 25% per year on a declining balance, you deduct USD 5,000 in year one, then 25% of the remaining USD 15,000 in year two, and so on.
Assets must be depreciated according to four prescribed classes using fixed methods and rates:
| Asset Class | Method | Annual Rate |
|---|---|---|
| Buildings and structures | Straight-line | 5% |
| Computers, IT systems, data handling equipment | Declining balance | 50% |
| Automobiles, trucks, office furniture, equipment | Declining balance | 25% |
| All other tangible property | Declining balance | 20% |
Keep in mind, you cannot choose your own depreciation schedule. Land is also not depreciable.
Intangible assets are amortised over their useful life, or at 10% per year if the useful life cannot be determined. Purchased goodwill follows the same treatment.
Interest Expenses
If your business takes out a loan (from a bank, a shareholder, or a parent company) the interest you pay on that loan is generally a deductible business expense. It makes sense since interest is a real cost of running the business, just like rent or salaries.
However, Cambodia caps how much of that interest you can actually deduct, specifically to prevent businesses from loading up on debt to artificially shrink their taxable profit. In any given year, you can only deduct interest up to your interest income plus 50% of net profits (excluding interest income and expenses).
So if your business earned no interest income and made KHR 100 million in net profit, the maximum interest deduction you could claim that year would be KHR 50 million. Any excess that gets disallowed can be carried forward and claimed in a future year, for up to five years.
Related Party Expenses and Transfer Pricing
If your Cambodian company transacts with its parent company, regional headquarters, or any related entity, this is one of the highest-risk areas in a GDT audit. Under Prakas 986, all intercompany transactions (management fees, royalties, loans, goods transfers) must be priced at arm's length and documented accordingly.
There is also a specific timing rule: any expense payable to a related party that remains unpaid 180 days after year-end is disallowed as a deduction for that year. You can claim it in the year the payment is actually made. This rule does not apply to purchases of inventory or capital property.
The GDT has consistently flagged related party transactions (particularly management fees paid to overseas head offices and shareholder loans) as focus areas in tax reassessments. Getting your transfer pricing documentation in order before an audit is far less costly than disputing a reassessment after one.
Other Deductible Items
- Bad debts are deductible where you can clearly demonstrate the debt cannot be recovered and it has been written off your books. The write-off must be commercially justified.
- Charitable contributions are deductible up to 5% of taxable income, with proper supporting documentation.
- Start-up and formation expenses can be fully deducted in the period they arise, or amortised over two years.
Net Operating Losses: If your company reports a net tax loss, you can carry it forward for up to five years. There is no loss carry-back, and no group loss relief and each entity files independently. To remain eligible, your company must not change its principal business activities during the carry-forward period.
Filing, Payment, and Staying Compliant
The Monthly Prepayment System
Cambodia doesn't wait until year-end to collect CIT. Every medium and large taxpayer must make a monthly prepayment of 1% of gross monthly turnover (inclusive of all taxes except VAT), filed alongside your other monthly tax returns.
At year-end, when you calculate your actual CIT liability, you deduct all the prepayments you've already made. If your prepayments exceed your actual liability, the excess is carried forward as a credit. You cannot claim it as a cash refund, instead the credit offsets future obligations.
Monthly filing deadlines are:
- 20th of the following month: paper filing at your local tax branch
- 25th of the following month: e-filing through the GDT's e-Tax Services Portal (the standard method for most businesses)
If the deadline falls on a weekend or public holiday, it shifts to the next working day. Even in months with zero revenue, you must still file a nil return. Failing to do so is treated as non-compliance in the GDT's system and can trigger penalties.
The Annual CIT Return
For companies on a standard calendar year, the annual CIT return is due by 31 March. Your return must include:
- A completed CIT return form, filed electronically via the GDT's e-Tax portal
- A balance sheet for the year
- A profit and loss account for the year
- A transfer pricing declaration if your company has any related party transactions (required under Prakas 986)
If your annual CIT liability exceeds the prepayments you've already made, you pay the difference by 31 March. If you've overpaid, the excess rolls forward as a credit.
Almost all filings in Cambodia are now done electronically. If you haven't registered for e-filing yet, you can partner with our tax compliance experts to help you make an account with the GDT platform.
Penalties for Late or Incorrect Filing
The GDT takes non-compliance seriously, and the penalty framework scales with severity.
| Violation | Penalty |
|---|---|
| Late or underpaid tax declaration | 10%–40% additional tax on the outstanding amount |
| Late payment interest | 1.5% per month on outstanding balances, from the original due date |
| Fraudulent or evasive declarations | Additional tax up to 40%, plus potential criminal liability |
A late but otherwise honest declaration attracts a lower additional tax rate than an incorrect or intentionally misleading one. These penalties can stack: you pay the additional tax percentage on top of a 1.5% monthly interest charge from the original due date.
What to Expect During Tax Audits
The GDT conducts both limited and comprehensive on-site audits. When an audit is initiated, the GDT sends a notification letter, then auditors visit your office to review documents and discuss potential issues. After the visit, they issue a Notice of Tax Reassessment (NoTR) stating any reassessed liabilities. If you agree, you pay. If you don't, you have 30 days from receipt to submit a formal objection.
The GDT can audit your returns within three to five years of the filing date. Going beyond five years requires prior approval from the Minister of Economy and Finance.
In practice, auditors most commonly focus on payments to third parties overseas, fringe benefits provided to employees, and related party transactions. If your company has any of these, make sure your documentation is thorough and up to date before your audit window opens.
How Emerhub Can Help With Your Tax on Profit Obligations
Cambodia’s CIT framework can be challenging to anyone new to the landscape. Together with our experts, here’s how we can assist with your corporate tax filing in Cambodia:
- Monthly prepayment filings: Calculate your 1% prepayment on gross turnover each month and file it through the GDT's e-Tax portal before the 25th deadline.
- Annual CIT return: We prepare your balance sheet, profit and loss account, and transfer pricing declaration, then file your return by 31 March.
- Transfer pricing documentation: Help you establish and maintain arm's length pricing for intercompany transactions, so you're audit-ready if the GDT comes knocking.
- Deduction optimization: Review your depreciation schedules, interest expense positions, and related party payments to make sure you're claiming everything you're entitled to.
- Audit support: If you receive a Notice of Tax Reassessment, we manage the response and objection process on your behalf.
Whether you're setting up in Cambodia for the first time or you've inherited a compliance backlog from a previous provider, our team can help you stay compliant with the GDT.
Talk to us about your Tax on Profit obligations by filling out the form below.
Frequently asked questions
Does my company need to pay CIT even if it made a loss this year?
If your company reports a net loss, your CIT liability is zero. However, you may still be liable for the Minimum Tax of 1% of annual gross turnover, unless you maintain proper accounting records. Cambodia's tax legislation under the Law on Financial Management 2017 exempts businesses from the MT if they keep proper books, though the definition of "proper records" remains formally undefined. This is why clean, well-maintained accounts prepared in accordance with Cambodian accounting standards matter beyond just internal management purposes.
Can I deduct expenses paid to my parent company or head office?
You can deduct expenses paid to your parent company but with caveats. Payments to related parties (including management fees, royalties, and interest) must be made at arm's length prices, documented under Prakas 986, and included in your transfer pricing declaration. Additionally, if an expense payable to a related party remains unpaid 180 days after year-end, it is disallowed as a deduction for that year. You can claim it in the year the payment is actually made.
What happens to unused monthly prepayments if my CIT liability is lower than what I've paid?
You cannot claim a cash refund. Any excess prepayments are automatically carried forward as a credit to offset the following year's monthly prepayment obligations. In practice, if your business is growing and you're regularly paying more in prepayments than your annual CIT liability, this credit will eventually be absorbed in the next tax year.
Does my company need an audit to file its annual CIT return?
Not necessarily for the CIT return itself. The annual return requires a balance sheet and profit and loss account, but not a standalone audited financial statement. However, your company may be required to submit audited financial statements to ACAR (Cambodia's Accounting and Auditing Regulator) by 15 July if it meets certain thresholds (annual revenue above approximately USD 1 million, or assets above USD 750,000). The CIT return and the ACAR financial filing are separate requirements.
My company has QIP status. Do I still need to make monthly 1% prepayments?
During your QIP tax holiday period, you are exempt from both CIT and the monthly 1% prepayment obligation. You will, however, still need to lodge nil monthly returns to remain compliant in the GDT's system. Once your tax holiday expires, monthly prepayments resume.
Can the GDT audit my company more than five years after I filed?
An audit beyond five years requires prior approval from the Minister of Economy and Finance. The GDT can also audit any period if you give written consent. In practice, the three-to-five year window covers the vast majority of audits, and the risk diminishes significantly once that period passes for any given year.