Search

Search form

Logo of Phnom Penh Post newspaper Phnom Penh Post - Special tax on QIP rolled back

Special tax on QIP rolled back

Assembly line workers check products before packaging at Taica Factory in the Phnom Penh Special Economic Zone
Assembly line workers check products before packaging at Taica Factory in the Phnom Penh Special Economic Zone last year. Hong Menea

Special tax on QIP rolled back

The Ministry of Economy and Finance last week did away with a special tax on imported products that were being used for re-export, after Japanese businesses said that it undermined their status as Qualified Investment Projects.

Following a January letter from the Japanese Business Association of Cambodia, the ministry’s General Department of Customs and Excise (GDCE) said on June 4 that it would “give exemption from special tax for import of some goods which are the input[s] of production and export-supporting industry”.

Under the Qualified Investment Projects (QIP) scheme, firms can import raw materials and other goods tax-free as long as they are processed in Cambodia and then re-exported to other markets.

The scheme was put to question last August when the government announced sub-decree 239, which increased the special tax rate from zero to 10 per cent on certain kinds of finished and semi-finished electronic and plastic goods. It was supposed to be implement on January 1 of this year, according to a report from accounting firm PricewaterhouseCoopers.

Hiroshi Uematsu, CEO of the Phnom Penh Special Economic Zone, said that although the tax was never implemented, but it had created uncertainty for businesses who had been promised the QIP scheme would shield them from duties.

“Until now, we were very anxious if we have to pay or not,” he said.

Uemastu added that Japanese firms had been caught off guard by the special tax, since the Cambodian government wooed Japanese firms to invest in the Kingdom and to take advantage of the QIP scheme.

“I want to say that the tax policy should be consistent,” Uematsu said. “This kind of thing should never happen.”

While most of the firms in PPSEZ are Japanese businesses involved in light manufacturing and assembly, other businesses have been worried that the special tax would affect their imports as well.

Cambodia’s garment industry, which relies heavily on duty-free raw material imports and accounts for over 80 per cent of the country’s exports, has also been apprehensive.

Ken Loo, secretary general of the Garment Manufacturers Association of Cambodia, said businesses in the industry “had enquired if the new special tax would affect garment factories”.

Loo said that GMAC had shared the GDCE notice on their Facebook page “to confirm that QIPs were exempted from the new regulation regarding special tax”.

The notice added that the tax exemption did not cover certain types of goods, such as vehicles, petroleum products and goods which are not raw materials in production processes.

RECOMMENDED STORIES

  • Breaking: PM says prominent human rights NGO ‘must close’

    Prime Minister Hun Sen has instructed the Interior Ministry to investigate the Cambodian Center for Human Rights (CCHR) and potentially close it “because they follow foreigners”, appearing to link the rights group to the opposition Cambodia National Rescue Party's purported “revolution”. The CNRP - the

  • Rainsy and Sokha ‘would already be dead’: PM

    Prime Minister Hun Sen on Sunday appeared to suggest he would have assassinated opposition leaders Sam Rainsy and Kem Sokha had he known they were promising to “organise a new government” in the aftermath of the disputed 2013 national elections. In a clip from his speech

  • Massive ceremony at Angkor Wat will show ‘Cambodia not in anarchy’: PM

    Government officials, thousands of monks and Prime Minister Hun Sen himself will hold a massive prayer ceremony at Angkor Wat in early December to highlight the Kingdom’s continuing “peace, independence and political stability”, a spectacle observers said was designed to disguise the deterioration of

  • PM tells workers CNRP is to blame for any sanctions

    In a speech to workers yesterday, Prime Minister Hun Sen pinned the blame for any damage inflicted on Cambodia’s garment industry by potential economic sanctions squarely on the opposition party. “You must remember clearly that if the purchase orders are reduced, it is all