Cambodia is one of the fastest-growing economies in the world with relatively low income tax rates for both businesses and individuals. While Cambodia’s tax laws aren’t among the most complicated in the world, it is of fundamental importance for employers and business owners to understand the tax obligations and tax system where the business is.
To help employers and HR leaders grasp the basics of taxation in Cambodia, Links International has put together some essentials of what you need to know about taxes in this southeast Asian country. Tax rates and various tax obligations an employer in Cambodia should be aware of, such as withholding taxes from their employees’ income and paying foreign contractor tax.
Please note that this page serves as a general guide only, for more details on Cambodia’s taxation system, please visit official government websites:
Tax Obligations as an Employer in Cambodia
Withhold Tax Before Salary Payment
Employers in Cambodia are obliged to withhold the individual income tax payable by the employee and remit the amount to the tax administration by the 20th of the month following the month in which the salary is paid. Any fringe benefits provided to employees are also subject to a 20% tax of the total value of fringe benefits, which is to be paid by the employer monthly.
Social Security Taxes in Cambodia
Social security taxes in Cambodia comes in two forms: Occupational Risk Scheme and Health Care Scheme. Every employer with 8 employees or more shall mandatorily register and pay contributions to the National Social Security Fund (NSSF) for both occupational risk scheme and health care scheme.
The contribution towards the occupational risk scheme is borne by the employer only, at a rate of 0.8% of the employee’s wage. Both the employer and the employee has to contribute to the health care scheme, with each party responsible for 1.3% of the employee’s wage. Employers shall pay the contribution to the National Social Security Fund no later than 15th of the following month. Any late payment will result in an additional 2% interest charge.
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Cambodia Corporate Income Tax
The standard corporate tax rate in Cambodia is 20%; however, depending on the business’ annual turnover and the industry its industry, corporate tax rates can vary from 0% to 30%.
A progressive tax rate from 0% to 20% is applied to businesses not classified as a legal person under the Cambodian tax laws. A “legal person” is defined as any enterprise or organization carrying out business in Cambodia and includes any government institution, religious organization, charitable organization, or non-profit organization. Permanent establishments of businesses operating under a non-resident person are also considered as “legal person” in Cambodia, taxed only on Cambodia-sourced income. However, the term “legal person” does not include a pass-through or a sole proprietorship.
Corporate income tax rates for businesses in certain industries or investment programmes:
- Insurance companies are taxed 5% on gross premiums received for insurance or reinsurance of risk in Cambodia and the standard rate of 20% applies activities that are not insurance or reinsurance.
- Profits derived from the oil or natural gas operations and the exploitation of natural resources including timber, ore, gold, and precious stones are taxed at 30%.
- Qualified investment projects (QIPs) are offered a tax exemption period in which they enjoy a 0% corporate income tax.
Employees’ Income Tax in Cambodia
As an employer, it is important, and a responsibility, to understand and facilitate your employee’s tax obligations in addition to your own. Individual income tax in Cambodia is a monthly tax levied on salaries of resident and non-resident taxpayers.
According to Cambodia tax laws, an individual is considered a resident for tax purposes if he/she has a domicile in or primarily reside in Cambodia, or is physically present in Cambodia for more than 182 days during a calendar year. Resident taxpayers are taxed at a progressive rate, ranging from 0% to 20%, on their worldwide income.
Non-resident taxpayers are taxed only on Cambodia-sourced income at a flat rate of 20%.
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