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All businesses must now register with the GDT within 15 working days of commencing economic activity. Bloomberg

Tax regulation gets a shake=up

In an effort to centralise tax registrations and improve taxpayer accountability, the Ministry of Economy and Finance (MoEF) this month passed a raft of changes to the country’s tax registration regulations.

Prakas 1139, issued by the MoEF on October 9, states that all legal entities including NGOs and business associations must register with the General Department of Taxation (GDT) within 15 working days of commencing economic activity.

All tax-paying enterprise owners will also need to “physically present” themselves to the GDT’s central office only, provide a fingerprint scan and photo identification upon registration. Firms will no longer be able to register for taxation at any of the GDT’s provincial offices, according to the Prakas.

The GDT’s physical demands are part of the authority’s effort to boost taxation revenue, which last year totalled $1.7 billion in domestic funding, according to the government’s 2013 consolidated budget statements.

Taxpayers currently registered with the GDT are required to re-register themselves with the GDT in order to fulfil the new requirements.

“Centralisation of all tax registrations for real regime taxpayers to now register at the main office of the GDT – not the tax branches,” one clause of the Prakas states.

A new electronic registration system and taxpayer ID cards will also be launched, according to the Prakas, which also states that the GDT has the ability to back-date new registrations of legal persons found to be operating without paying taxes. Those enterprises will then be billed for the cumulative amount of tax not paid.

“The GDT may decline a tax registration if the owner, shareholder, director, etc, have outstanding unpaid tax liabilities … The GDT can unilaterally register those legal persons who should have been registered for tax – the GDT can choose the effective date of registration,” the Prakas states.

Clint O’Connell, partner at local legal and tax advisory firm, VDB Loi, welcomed the government’s changes to the existing tax registration process.

“One of the ways to bring more taxpayers into the tax base is to make dealing with the GDT easier and more transparent,” O’Connell said.

“The requirement for owners/key stakeholders of businesses in Cambodia to physically present themselves to the GDT to get their photo and thumbprint taken shows how seriously the GDT want to improve the existing process.”

However, the recent changes only address part of Cambodia’s taxation problems.

“The GDT still needs to be more proactive in getting those businesses that should be in the real regime for taxation registered. For example real regime taxpayers are required to charge 10 per cent value added tax ... it is hard to compete with someone providing the same service and goods who is not currently charging 10 per cent value added tax,” O’Connell added.

The GDT this year introduced incentives for government auditors who catch tax-dodging companies. The auditor payment scheme grants government auditors 10 per cent of the total penalties imposed on any company which that employee has reassessed and found to be non-compliant.

Kong Vibol, director general of the GDT declined to comment.

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