The Ministry of Economy and Finance (MEF) published a prakas yesterday that clearly defines the government’s laws for nontaxable supplies that receive a VAT exemption on primary financial services – a move that industry insiders claim gives more clarity to businesses.
Prior to the prakas, primary financial services were loosely defined and difficult for businesses to enact when meeting their tax obligations. Now, five financial activities have been identified that fall into the 10 percent VAT exemption territory.
These five services, listed into subsectors, include deposit, loan and credit activity; initial public offering (IPO) and trading related to the Cambodian Securities Exchange (CSX); money exchange; pawn brokers; and gold trading, providing it is not used for jewellery production.
Clint O’Connell, head of tax practice for foreign investment advisory and tax firm DFDL Cambodia, said the announcement provides assurances for registered taxpayers and businesses looking to invest in Cambodia that they will not be required to charge the 10 percent VAT on these activities.
“This will benefit those businesses who may have been unsure as to whether what they were doing fell under one of the categories of a non-taxable supply,” he said.
In Channy, president of Acleda Bank, said that while VAT exemption had been applied for some time by MEF, it was not until now that the government explicitly said in writing what primary financial services were.
While he said the announcement does not change current operations by financial institutions, it makes meeting the tax obligation “clearer and easier to achieve”.