Specific Tax Rate Increase
“This vice brings in one hundred million francs in taxes every year. I will certainly forbid it at once – as soon as you can name a virtue that brings in as much revenue.” Napoleon III.
Notification 4227 issued on 22 March 2016 advises that from 1 April 2016 onward, the Specific Tax Rate on certain goods which are domestically produced and supplied in Cambodia shall be adjusted and assessed as follows:
- 30 percent on all types of beer products (previously 25%)
- 35 percent on all types of wine products (previously 20%)
- 20 percent on all types of cigarette products (previously 15%)
Specific Tax is a form of excise tax imposed on the importation or domestic production and supply of certain goods and services. It is commonly referred to as a sin tax as it applies to luxury items and items which may be detrimental to one’s health. Two Government Departments in Cambodia are responsible for collecting Specific Tax, namely the General Department of Customs and Excise (GDCE) and the General Department of Taxation (GDT). The former collects Specific Tax on the import of certain goods while the latter collects Specific Tax on the domestic supply of certain goods and services.
In December last year, Sub-decree 192 on the Adjustment of Customs and Excise Rates was issued which increased the Specific Tax rate on a number of imported goods effective from 1 April 2016. Notification 4227 issued by the GDT this month brings the Specific Tax rates on the local supply of beer, wines and cigarette’s in-sync with the changes on the Specific Tax rates on the import of the same products.
Please note with respect to calculating Specific Tax on locally supplied goods that the tax base is defined as the “ex-factory selling price”. In 2014, the “ex-factory selling price” for real regime taxpayers was increased from 65% to 90% of the selling price recorded on invoices to customers excluding Value Added Tax (VAT), any discount and the Specific Tax itself.
Tax Invoice Clarification
Many taxpayers have expressed concern with respect to the implementation of Instruction No. 1127 that was issued by the GDT on 26 January 2016 – please refer to our update on this here. Instruction 1127 provided important instructions on the issuance of invoices for taxpayers who are registered under the real regime of taxation – the key points being:
- All VAT registered taxpayers are required to issue an invoice for every sale or supply of goods or services in accordance with the 4 invoice templates that have been provided by the GDT; and
- Any invoice which does not conform to the requirements of Instruction 1127 shall not be permitted to be used to obtain a VAT input credit or to claim as an expense with respect to tax on profit.
Following a meeting last week between the Tax Working Group (TWG) and the GDT clarification on some of the interpretation issues of Instruction 1127 was provided by His Excellency Kong Vibol the Director of the GDT. These included:
- With respect to policing these new invoice requirements the GDT will allow taxpayers some time to make the appropriate changes to their invoicing – informally the grace period would be 6 months from the date of TWG meeting with the GDT which occurred this month;
- There will be some flexibility with respect to ensuring that all the requirements under Instruction 1127 are met i.e. the exact format(s) as prescribed by the GDT do not need to be followed precisely – provided that the key information, as set out in Instruction 1127, are met then a taxpayer can format their own invoice template;
- The issuer of a VAT invoice must sign and stamp all invoices and the recipient must also sign and stamp all received VAT invoices if they wish to claim a VAT input credit;
- The requirement to issue sequential serial numbered invoices must be refreshed on an annual basis e.g. at the start of each tax year the invoicing starts from (0001); and
- If branches of a taxpayer issue VAT invoices they should also be numbered sequentially on a branch by branch basis.
Please note these updates have not yet been formalized and advice from a professional tax advisor should be sought on how best to protect yourself against any adverse consequences of failing to comply with the new requirements.
Tax Branch Transfer Procedures
Instruction 4108 issued by the GDT this month outlines the procedure with respect to a taxpayer who wishes to transfer from one tax office to another tax office. This would generally occur when a taxpayer changes their office location or when they meet the requirements to be governed by the Department of Large Taxpayers (DLT).
1. Request from enterprise to transfer from one tax branch to another tax branch
In this scenario an enterprise is required to complete and submit a transfer application form (Form C001) with the following documents to their current tax branch:
- Last year’s patent tax certificate;
- Ownership certificate or lease contract for the last location of the head office; and
- Authorization or certificate from the Ministry of Commerce, or relevant institution in the case of legal entities confirming the change of location.
Upon receipt of the application and documents the Director of the Tax Branch shall carry out the following procedures:
- Prepare a notice enclosed with an information sheet, inspection sheet for the last two years, tax arrears status schedule, and other supporting documents, requesting a decision from the DG of the GDT within seven working days after submission of the request;
- In the event where the taxpayer is being audited, the tax branch where the enterprise is located shall make their best effort to finish the audit within one month commencing from the date of request before allowing the enterprise to be transferred; and
- After getting approval from the GDT, the Director of the Tax Branch shall transfer the related file of the enterprise to be transferred to the GDT for recording in the database system, scanning for records, and transferring the file and tax arrears figure to the new Tax Branch which will be in charge of controlling the enterprise.
2. Transfer of enterprise from Tax branch to the Department of Large Taxpayers or vice versa An enterprise is required to be transferred to be under the management of the DLT when the enterprise’s annual turnover is over 2000 million riels (USD500,000), is a branch of a foreign company, or is registered as a qualified investment project (QIP);
- The enterprise is required to be transferred from the DLT to a tax branch if the enterprise’s annual turnover is 2,000 million riels or less.
Transfer Procedures
The Directors of the DLT or the Tax Branch that controls the enterprise shall carry out the following procedures:
- All steps as per transfer from Tax Branch to Tax Branch above.
- In some necessary cases with a decision from the GDT, the enterprise shall be transferred without requiring a tax audit to be finished.
Post-transfer Procedures
- Update information of the enterprise requesting transfer or requiring transfer to the database system after getting approval from the General Department of Taxation;
- Print new patent tax certificate, tax registration certificate, tax registration card, notification to relevant tax entities and enterprises for the enterprise requesting transfer;
- Scan all supporting documents related to transfer request, and keep them in the database system of the General Department of Taxatio
n, and make a duplicate of the documents to be kept with the previous original documents of tax registration request at the Document Record Center of the General Department of Taxation; and - Deliver patent tax certificate, tax registration certificate, tax registration card, notification to enterprise at the site of enterprise (in case of address change), by taking picture of the location and recording the enterprise’s location (GPS) onto the database system of the General Department of Taxation, with the signature of acknowledgment of the enterprise owner or representative on the documents delivered;
The DFDL tax team is always ready to answer any questions you may have on this and other tax issues.
DFDL Contact
Clint O’Connell
Cambodia Head of Tax
clint.oconnell@dfdl.com
*The information is provided for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
