B2B Cambodia's ‘Tax Update’ is a show where we break down Cambodia's tax laws and regulations with key experts in the field. In this episode we discuss annual tax and accounting compliance obligations with Vajiravann Chamnan, Tax Director at DFDL Cambodia.
What Is Annual Tax On Income In Cambodia?
Filing your Tax on Income (TOI), or Corporate Income Tax (CIT), is an annual requirement. The standard rate for annual tax on income is 20 per cent. Annual tax on income applies to all taxpayers under self-assessment (small taxpayers, medium taxpayers and large taxpayers). The deadline to file your annual tax on income is March 31, 2024.
Every taxpayer or enterprise that marked the end of the 2023 tax year on December 31 needs to file their tax returns through the e-filing system of the General Department of Taxation (GDT), with the enterprise's financial statement and power of attorney (if utilising the services of a tax agent) also attached.
"If an enterprise fails to do this, they will be penalised for obstruction of tax law, or they can face an additional tax of 10 per cent and interest of 1.5 per cent per month, if they have any tax to be paid for the past tax year," said Vajiravann.
NOTE: If an enterprise has a different fiscal year-end than December 31, they must remember that the deadline to file their annual tax return is three months after the year-end.
What Are The Steps To File An Annual Tax Return In Cambodia?
One main point taxpayers should especially be aware of is the adjustment on deductible and non-deductible expenses – income that needs to be adjusted in the year-end tax computation.
"You need to make sure that your accountant, or especially your agent, fully understands your company’s transactions, because if you are not careful about this kind of adjustment, you will be [penalised]...," said Vajiravann. "I would recommend enterprises to hire a qualified employee or tax agent to review or prepare the tax on income to minimise any mistakes."
What Counts As Deductible Vs. Non-Deductible Expense When Filing Annual Tax Return In Cambodia?
Vajiravann explained that under Cambodian tax law, non-deductible expenses include:
- Entertainment expenses
- Donation expenses
- Expenses related to the prior fiscal year (so when filing for 2023, expenses incurred in 2022 are not deductible)
- Extravagant expenses, or expenses not related to the business operation
- Expenses that do not have supporting documents to justify the nature of the expense
Deductible expenses, on the other hand, must cover three criteria:
- The expense must have supporting documents – whether an invoice, agreement, receipt, or any other supporting voucher that can justify the amount of the expense
- The expense must be related to business activity
- Expenses must be precise and not extravagant
"There are also some special conditions when determining deductible and non-deductible expenses, such as salary unpaid within six months after the [fiscal] year-end. All these things need to be analysed carefully by the enterprise or taxpayer when they prepare their tax on income return," Vajiravann stressed.
Episode 1: Annual Tax and Accounting Compliance - Part 2: ACAR:
What Is ACAR?
ACAR stands for the Auditing and Accounting Regulator in Cambodia – previously known as the National Accounting Council (NAC). All enterprises are required to submit their financial statements to ACAR. Enterprises need to first identify whether they have to submit an audited or unaudited financial statement with ACAR.
What Are The Requirements For Submitting An Annual Financial Statement To ACAR?
- Enterprises that have unaudited financial statements need to submit the report to ACAR within three months, 15 days of the fiscal year-end – the 2024 deadline is April 20.
- Enterprises required to have an audited financial statement must submit their financial report to ACAR within six months, 15 days of the fiscal year-end – the 2024 deadline is July 20.
Enterprises and organisations must register their information with ACAR to obtain a Financial Reporting Identification Number (FIN), which is needed to access the online e-filing system in order to submit their annual financial report. According to Vajiravann, registration can take around two or three working days.
Who Needs To Submit An Audited Vs. Unaudited Financial Statement To ACAR?
Qualified investment projects (QIPs) and public limited companies (PLCs) must have an audited financial statement. Additionally, any enterprises or organisations that meet two out of three of the following conditions must have an audited financial statement:
- More than 100 employees
- Annual turnover more than KHR 4 billion (roughly USD $1 million) per year
- Total annual assets of more than KHR 3 billion (roughly USD $750,000) per year
Audited financial statements must be prepared by an external auditor licensed by the Kampuchea Institute of Certified Public Accountants and Auditors (KICPAA). Enterprises that do not meet any of the conditions mentioned above can submit an unaudited financial statement to ACAR.