Once you have registered your business in Cambodia, you must withhold taxes on certain payments, including salaries, dividends, and service fees to ensure ongoing compliance with local tax laws. In this article, we will clarify how withholding tax works in Cambodia and how it applies to your business.
Overview of Cambodia’s corporate income tax system
Cambodian resident companies are businesses with a permanent establishment within the country and are subject to taxation on their global income. In contrast, non-resident companies have no permanent address and are only taxed on income generated from activities conducted within Cambodia.
The specific corporate income tax calculations for your company will therefore vary depending on the legal status of your business:
- Permanent Establishments: In Cambodia, a permanent establishment (PE) helps identify resident versus non-resident taxpayers. Non-resident companies with a PE must register with the General Department of Taxation (GDT) and are taxed on Cambodian-sourced income.
- Other Entities: Businesses that include local companies, branches of foreign companies, and representative offices of foreign companies are taxed under the real regime tax system (RRTS). The tax obligations for each entity depend on how they are classified under this tax law.
How to calculate withholding Tax in Cambodia
How Withholding Tax in Cambodia Works
As part of the Law on Taxation in Cambodia, withholding tax requires taxpayers (individual and corporate) to withhold (deduct) a percentage from certain types of payments:
- Interest
- Royalties
- Rental income
- Service fees
You must calculate withholding tax on a monthly basis, which is communicated to the General Department of Taxation through monthly income tax reports. You then have to make a prepayment based on the calculated amount by the 20th of the month following the reporting period.
Emerhub recognizes that managing taxes can be complex. Our team of tax & accounting experts are well versed with Cambodian tax laws and can help ensure that your company submits accurate and timely reports to avoid potential penalties.
Withholding Tax Rates in Cambodia
Withholding tax rates in Cambodia vary depending on whether you are running a resident or non-resident company, as well as based on the specific type of income you are earning from sources within Cambodia:
| Residents | Non-residents | |
|---|---|---|
| Dividends (including Annual Tax on Dividend Distribution (ATDD) | Shareholders are not subject to withholding tax | 14% (may be lower depending on applicable tax treaties) |
| Royalties | 15% for tangible property | Incurs a 14% withholding tax |
| Fees for Technical Services | 15% with certain exemptions | 14% tax payment (unless a tax treaty lowers it) |
| Other | 10% on rental payments to residents | 14% on rental income |
How to qualify for exemptions from Withholding Tax in Cambodia
Cambodia offers certain exemptions from withholding tax provided your company meets the specific requirements. Exemptions are typically applicable to specific service supplies or property types:
- If the payment for service supplies is less than KHR 50,000 (USD 12.50), there is no need for tax.
- If there is rental of movable or immovable property between registered taxpayers, the tax is exempt as they are backed by valid tax invoices.
- Payment among registered taxpayers on the income from specific supplies is exempt. These supplies include shrink-wrap software, site licenses, downloadable software, and software bundled with computer hardware.
Emerhub’s local experts can guide you in determining the applicable tax rates for your business. Our comprehensive tax and accounting service will also help identify whether your business qualifies for exemptions to help reduce how much you owe.
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