This document summarizes the key topics from an agenda on small and medium enterprise tax issues in Cambodia: - It outlines the definitions and requirements for small and medium taxpayers, including the simplified accounting format for small taxpayers. - New laws and regulations that provide tax incentives for qualifying small and medium enterprises operating in priority sectors are summarized, including periods of tax exemption on profit tax. - Issues faced by small and medium taxpayers relating to registration, audits, equity injections, and non-tax obligations are briefly discussed. - The presentation calls for equal enforcement of tax laws across all businesses and sectors in Cambodia.

2. AGENDA
08:30 Opening Remarks
09:30 COFFEE BREAK
09:50 Recent Tax Changes
10:30 Transfer Pricing
11:00 Panel Discussion on
Recent Tax Changes
and Transfer Pricing
12:00 LUNCH
02:00 Double Taxation
Agreement (DTA) -
implementation issues
02:30 Small Medium Enterprise
issues
03:00 Tax Dispute Process
03:30 COFFEE BREAK
03:45 Panel Discussion on
Double Taxation
Agreement, Small and
Medium Enterprise Issues,
and Tax Disputes
05:00 Wrap-up and closing
remarks
05:15 NETWORKING EVENT

3. SMALL MEDIUM TAX ISSUES
Name of speaker
Anthony Galliano

4. Anthony is the CEO of Cambodian Investment
Management, Chairman of Premium Human
Resources, Cambodian Management Insurance
Agent, Jump Digital (Cambodia) and Phnom Penh
BG Serviced Offices.
A career corporate and investment banker with 27
years international experience, he began his career
in the US, has been stationed in London, Brussels,
Hong Kong and Bangkok with Citibank and
Indonesia and Cambodia with ANZ. Anthony holds
a degree in Accounting, Diploma in Cambodian
Tax.
ANTHONY GALLIANO
CEO Cambodian Investment Management
Photo of speaker

5. SMALL MEDIUM TAX ISSUES
The Law on Financial Management 2016 promulgated on
the 17th of December 2015 (Royal Kram No. NS/RK/1215/016),
abolished the Estimated Regime of Taxation and restructured
the Self-Assessed Regime (Real Regime) into Small, Medium
and Large taxpayers
Prakas no. 1820 MEF.Prk dated 25 December 2015 “Method
and Procedure on Implementation of Simple Accounting
Record for Small Real Regime Taxpayers”, Small taxpayers are
able to follow a simplified accounting system

6. SMALL MEDIUM TAX ISSUES
Small taxpayers are Sole Proprietorships or Partnerships that:
Have annual taxable turnover from Khmer Riel (“KHR”) 250 million
(USD62.5k) to KHR700 million (USD175k);
Have taxable turnover, in any period of three consecutive calendar
months (within this tax year), exceeding 60 million KHR (USD15k);
Expected taxable turnover of 60 million KHR (USD15k) or more in the next
three consecutive months;
Participate in any bidding, quotation or survey for the supply of goods
and services including duties

7. SMALL MEDIUM TAX ISSUES
Simplified Accounting Format:
SAF is a single entry accounting format that contains accounts
to record daily business transactions and attached with
invoices or documents clearly specifying income and
expenses.

8. SMALL MEDIUM TAX ISSUES
Simplified Accounting Format:
Purchase Day Book, Goods for sale or for supplying services, Fixed assets,
Raw materials, Wages and salaries. Utilities, Rental, and Other expenses
Sale Day Book. Record all daily transactions of supplying of goods or services
following each invoice if the selling price is high. Record as total daily sale
when retail goods or numerous types of goods are on a single invoice or
lower price
Inventory Book Calculation of historical cost of goods sold or used for
supplying of services

9. SMALL MEDIUM TAX ISSUES
Small Taxpayer Advantages:
- Charge VAT at 10% of Sale and Pay 2%
- Withholding Tax on Rent only, not to non-registered
taxpayers providing serves
- Simplified 1 page versus 4 page Tax Return, schedules still
required
- Cheaper incorporation costs with Department of Commerce
- Tax Patent USD 100 versus USD 300 for Medium and USD 750
or USD 1,250 for Large
- Profit Tax is tiered before reaching the 20% level

10. SMALL MEDIUM TAX ISSUES
Medium taxpayers include:
Enterprises that have annual turnover from KHR700 million
(USD175k) to KHR,4,000 million (USD 1 million);
A Registered legal entity with competent institution,
representative office;
Sub-national government institutions, associations, and non-
governmental organizations.

11. SMALL MEDIUM TAX ISSUES
Material Changes in Law for SMEs
- Sub-Decree No. 124 R.N.Cr.BK (“SD 124”) that came into effect
on the 2nd of October 2018, tax incentives for qualifying Small
and Medium Enterprises (“SME’s”) operating in defined priority
sectors in Cambodia.
- Sub-Decree No. 17 ANKr.BK (“Sub-Decree 17”), February 7th
2017 with the stated objective to incentivize unregistered
SMEs to register for tax.

12. SMALL MEDIUM TAX ISSUES
Material Changes in Law for SMEs
General Department of Taxation Instruction No. 11946
on “Interest Rate Rules on Related Party Loans.”

13. SMALL MEDIUM TAX ISSUES
Sub-Decree No. 124 R.N.Cr.BK (“SD 124”)
Annual Turnover
(USD)
No. of
Employees
Small Enterprise 62,500 – 175,000 10 – 50
Medium Enterprise 175,000 – 1,000,000 51 – 100

14. SMALL MEDIUM TAX ISSUES
To benefit, the SME’s need to operate in “priority sectors”;
- Agricultural or agro-agricultural products;
- Food manufacturing and processing;
- Manufacturing of local consumable goods, waste recycling
and production of goods for the tourism sector;
- Manufacturing of finished products, spare parts or assembling
parts to supply other manufacturers;
- R&D associated with IT or the supply of IT-based services;
- Enterprises located in SME Cluster Zones and Enterprises
developing the Cluster Zone.

15. SMALL MEDIUM TAX ISSUES
1- A 3 (three) year tax exemption on Tax on Profit from the date of tax
registration for newly registered enterprises or from the date of tax
registration update for enterprise already registered, counting from
effective of the Anukret or
2- A 5 (five) year tax exemption on Tax on Profit from the date of tax
registration for newly registered enterprises or from the date of tax
registration update for enterprise already registered, counting from
effective of the Anukret and shall follow conditions below:
 Use at least 60 percent domestic raw materials or
 Increase the number of employees by at least 20 percent or
 Be located in SME districts (SME Cluster)

16. SMALL MEDIUM TAX ISSUES
3- Tax exemption on Prepayment of Profit Tax and Minimum Tax
during which Tax on Profit is exempted.
4- Deductible expense incentives as the following:
a. Allow 200% deductible expense on accounting system expenses
b. Allow 200% deductible expense on accounting training or
technical training to employees
c. Allow 150% deductible expense on machine investment or
innovative IT equipment for usage and empowering on
productivity.

17. SMALL MEDIUM TAX ISSUES
The SMEs shall have accounting records and file annual tax
return on tax on profit as set by tax administrative although
the SMEs receive tax exemption as stated in the Anukret. The
SMEs shall as well file other tax returns as prescribed in
taxation law and regulation
In case the SMEs fail to implement the conditions as stated in
the Anukret or fail to fulfil obligations on other related tax as
stated in taxation law and regulation, tax incentives as
prescribed shall be terminated

18. 2 years exemption from
 Tax on Profit (TOP)
 Prepayment of TOP
 Minimum tax
***Note: SMEs that do not
voluntarily register are
not qualified to receive
such tax incentives.
The SMEs which
voluntarily register
for tax during the
years 2017 and
2018 are subject
to tax incentives
as follows:
Sub-decree No. 17 dated 7 Feb 2017
SMALL MEDIUM TAX ISSUES

19. SMALL MEDIUM TAX ISSUES
Instruction No. 11946 on “Interest Rate Rules on Related Party Loans.”
- An enterprise that operates a loan between related parties shall
determine the interest rate following an Arm’s Length Principle set forth
in the Prakas on Rules and Procedures on Income and Expense allocation
among Related Parties.
- An enterprise is not required to submit loan documents to the tax
administration for approval, but taxpayers shall keep records and keep
documents related to the loans and provide such documents when
required from the tax administration as stated in article 18 in the Prakas
on Rules and Procedures on Income and Expense allocation among Related
Parties.

20. SMALL MEDIUM TAX ISSUES
Issues with Small Taxpayers
- Foreigners are no longer accepted by the Department of Commerce as
Sole Proprietorships, therefore, can no longer be small taxpayers
- Registration of Partnership with the DOC is virtually impossible, therefore
multiple shareholder Small Taxpayers are not possible. Limited Liability
companies must be a Medium Taxpayer
- Issuance of invoices should be Commercial Invoices. Small Taxpayers can
not claim a VAT credit on purchases and Medium and Large Taxpayers can
not claim a VAT credit on purchases from Small Taxpayers.

21. SMALL MEDIUM TAX ISSUES
Issues with Small Taxpayers
- Tax registration is taking extraordinarily long, the taxpayer registers at the
branch, processing is done at GDT, and returned to the branch, then to
the taxpayer eventually.
- Although a taxpayer may file for a small taxpayer, even in the case of
brand new company, with no history, the GDT may at its own discretion
decide the taxpayer is medium.
- When using certain business activities such as “consulting”, the registering
taxpayer may face resistance or additional paperwork. For instance a
“consulting” activity must now show qualifications

22. SMALL MEDIUM TAX ISSUES
Issues with Medium Taxpayers
- Registered Capital and Shareholder Loans
Most companies registered with Minimum Capital (USD 1,000) and have
either made equity contributions over time (in excess of stated capital) or
have been using zero interest rate shareholder loans
- Equity Injection
Making capital injections to support cash flow needs, while not increasing
capital at MOC. Not reporting equity Injections to Tax Department.

23. SMALL MEDIUM TAX ISSUES
Issues with Medium Taxpayers
- Accounting Systems and Financial Statements
LAW ON CORPORATE ACCOUNTS, THEIR AUDIT AND THE ACCOUNTING
PROFESSION, 24th.May 2002
In Audits, Financial Statements (Balance Sheet, Profit and Loss, General
Ledger) are required and are part of the audit process.
Accounting Records must match Tax Records (Monthly and Annual), Cash
Statements, Support Documents.
Cost of Accounting Systems and Accountant, finding qualified staff.

24. SMALL MEDIUM TAX ISSUES
Audits
GDT reports 10-15K audits with 2 billion in revenue last 5 years
Frequency increase, significant burden on businesses
Auditors working on commission
Tactics (start high rather than practical approach)
Even if clean, difficult to close
Unreasonable penalties

25. SMALL MEDIUM TAX ISSUES
Audits
Immediate application of Transfer Pricing
Expatriate Salaries
Comparative Pricing to Similar Businesses
Shareholder Loans and Equity Injections

26. SMALL MEDIUM TAX ISSUES
Equal Enforcement Across the Board
Unregistered Businesses operating with Immunity
15% Withholding Tax on Services for Unregistered Taxpayers, invoices
visible to tax department for enforcement
Other
- Tuk Tuk, buses, taxi, PassApp
- Entertainment
- Employee Benefit Deductions
- Mission Allowances

27. SMALL MEDIUM TAX ISSUES
Non Tax Issues
Seniority Payment
Twice Monthly Payroll
NSSF

28. THANK YOU