The government has endorsed a draft of Double Tax Avoidance (DTA) with South Korea and Malaysia to pave the way for free trade agreements (FTAs), and increased trade and investment.
The draft, which was approved during a Friday Cabinet meeting chaired by Prime Minister Hun Sen, will be sent to the National Assembly soon.
Cambodia Investment Management group CEO Anthony Galliano told The Post that DTAs abolish and discourage incidents of double taxation, promote bilateral investment, clarity and transparency, stimulate global trade, and, most importantly for Cambodia, attract foreign investment.
He said the Kingdom’s initiative to negotiate FTAs with China, South Korea, and the Eurasian Economic Union is timely and strategic, given recent adverse developments impacting the economy, especially the EU’s partial suspension of preferential trade preferences.
“The successful execution of FTAs will increase economic growth, expand bilateral trade, encourage foreign direct investment, and have a positive impact on employment,” Galliano said, adding that DTA agreements are complimentary to FTAs.
He said DTAs also provide a mechanism to exchange information between tax authorities and help prevent tax avoidance and evasion. DTAs on the other hand are international treaties that help reduce instances of double taxation on income and property.
He noted that FTAs are international law contracts between countries that allow access to markets. They determine the tariffs and duties that countries impose on imports and exports, which reduce or eliminate trade barriers and facilitate the unhampered flow and exchange of goods and services.
“FTAs are more complex and comprehensive and more linked to encouraging trade flows rather than avoiding double taxation. However, the Kingdom’s efforts to execute both can only support the economy at a time when they’re needed most,” he said.
Late in November, Cambodia and South Korea signed a joint feasibility study agreement on a potential FTA aiming to expand bilateral investment volume between the two countries.
The agreement was signed by Cambodian Minister of Commerce Pan Sorasak and South Korean Minister for Trade Yoo Myung-hee during the two-day ASEAN-Republic of Korea Commemorative Summit, which kicked off on November 25 in the South Korean port city of Busan.
Last year, trade volume between the two counties grew noticeably to around $1.032 billion, up from 2018’s $756 million, data from the commerce ministry shows.
On November 3, the National Assembly ratified an agreement for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.
The National Assembly also approved DTAs with Singapore, China, Brunei, Thailand, Vietnam and Indonesia and signed one with Hong Kong.