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Cambodia Withholding Tax (WHT) Rates 2020

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The Cambodian government, through the Ministry of Economy and Finance (MEF) has issued Prakas (regulation) no. 525 in late June 2020 on the new reduced withholding tax (WHT) rates to be applied in the Kingdom. The new WHT are to be applied on interest paid by banks and other financial institutions on domestic and foreign loans in Cambodia. The MEF has introduced the reduced rates to assist businesses in Cambodia to cope with the financial strain of the ongoing global COVID-19 pandemic.

What are the new withholding tax (WHT) rates in Cambodia?

Existing loans

The standard WHT rate that applies to interest payments for resident lenders in Cambodia is 15 per cent whereas the rate for non-resident lenders is 14 per cent. Under Prakas 525, for banks and financial intuitions that have an existing loan with a resident and non-resident lenders, the WHT rate has been reduced to 10 per cent. This is effective between April 1, 2020, to December 31, 2020. The standard 14 or 15 per cent will be applicable again as of January 1st, 2021. In summary:
  • 10% WHT on interest payments to resident and non-resident lenders from April 2020 to December 2020.
  • The standard WHT rates apply on interest payments made to resident and non-resident lenders from the 2022 tax year onward.

New Loans

If banks and financial institutions have entered into new loan agreements with resident and non-resident taxpayers, the WHT rate is five per cent – effective between April 1, 2020 to December 31, 2020. This will be increased to 10 per cent for the 2021 tax year (January 1-December 31, 2020) with respect to new loans before the standard WHT rate of 14 or 15 per cent is reapplied from January 1, 2022. In summary:
  • 5% WHT on interest payments to resident and non-resident lenders from April 2020 to December 2020 on new loans.
  • 10% WHT on interest payments to resident and non-resident taxpayers for the 2021 tax year with respect to new loans.
  • The standard WHT rates apply on interest payments made to resident and non-resident lenders from the 2022 tax year onward.
To be eligible for the new WHT rates, banks and financial institutions must provide the following supporting documents:
  • The loan agreement, certified by the lawyers of both parties.
  • The cash transfer documents related to the loan agreement.
  • The accounting records of the loan and interest payments in the records of the bank/financial institution.

SMEs in Cambodia

The Cambodian Ministry of Economy and Finance has also "provided more financing for small and medium-sized (SMEs) in the country through the Credit Guarantee Fund" reports ASEAN Briefing. This is aimed at guaranteeing loans provided by financial institutions in Cambodia, hence improving access for SMEs to obtain working capital. This is also intended to increase cash flow into the banking system in the Kingdom and reduce the tax burden for businesses operating here. Earlier in 2020, the SME Bank Cambodia was launched to provide financing for Small and Medium-sized Enterprises in the Kingdom. You can read more about the financing here. In June 2020, the Cambodian Ministry of Industry, Science, Technology and Innovation was looking at setting up another online portal, this one is aimed at small and medium enterprises (SMEs), called KhmerSME.

Cambodia Tourism and the Garment Industry incentives

Cambodia’s Ministry of Tourism (MOT) and the Ministry of Labor and Vocational Training (MLVT), issued MOT Letter 11 and Instruction No. 045/20, for measures to support businesses and employees in the tourism and garment industry in Cambodia. This also covers restaurants and travel agents in the cities of Phnom Penh, Siem Reap, Sihanoukville, Kep, Kampot, and Bavet.
  • MOT Letter 11: extends the number of cities in which businesses in the tourism sector can apply for tax exemption.
  • Instruction No. 045/20: clarifies the obligations that businesses must adhere to in order for them to suspend employment contracts. This includes assisting employees in applying for the government monthly allowance.

Seniority Payments

The Ministry of Labour and Vocational Training (MLVT) also notified that payment of seniority back pay prior to 2019 (for textile, garment and footwear manufacturing sectors) and new seniority payments for 2020 (for all sectors) are delayed until 2021 according to Notification No. 018/20 dated 02 June 2020. According to DFDL, seniority payment is applicable to employees under unfixed duration contracts only. Employees under fixed duration contracts are subject to different entitlements.

Education Sector in Cambodia

Prakas 209 was also issued in March 2020 and provides incentives on withholding tax, value-added tax (VAT), minimum tax, and prepayment of tax on income (PTOI) for educational establishments identified under the law in the Kingdom. These include:
  • kindergartens
  • technical and vocational schools
  • primary schools
  • higher education institutions

What is Cambodia's GDT’s e-Tax service?

GDT’s e-Tax service allows taxpayers to scan and deliver their monthly and annual tax returns through the GDT’s e-tax service online. The Cambodian government also allows the tax payments to be paid in monthly instalments through to November 2020. You can see more about the Cambodian tax rates in 2020 here. It is always advised to seek the advice of dependable financial advisors or the business chambers in Cambodia to better understand how you can benefit from the incentives.