Logo of Phnom Penh Post newspaper Phnom Penh Post - Government increasing audits on local businesses

Government increasing audits on local businesses

The General Department of Taxation in Phnom Penh.
The General Department of Taxation in Phnom Penh. Pha Lina

Government increasing audits on local businesses

The tax department has stepped up its use of audits to scour through the filings of companies and individuals and penalise those deemed to be evading or misreporting their taxes, foreign investment advisory and tax firm DFDL Cambodia warned yesterday.

Speaking at a workshop organised by the firm in Phnom Penh, Clint O’Connell, head of tax practice for DFDL Cambodia, explained that the rise of audits was in part due to the increased capacity of the General Department of Taxation (GDT) to carry out its duties.

“I believe the increase in recent audit activity by the tax authorities can be attributed to a number of underlying factors including the recruitment and increased training of tax audit officers, greater efficiency in closing tax audit cases and more comprehensive tax audit programmes within the GDT,” he said.

He said historically, taxpayers in Cambodia, particularly small- and medium-sized enterprises, submitted their tax declarations on a self-assessed basis and paid little concern to the possibility of audits. However, that has changed in recent years, with the end of the grossly ineffective estimated regime in 2016 and the GDT taking a more aggressive role in collecting revenue for the state coffer.

O’Connell explained that while under Cambodian law the audit process generally scrutinises tax returns for the last three years, “the tax department can and does extend the audit to 10 years if they deem that the taxpayer has breached or obstructed the law.”

In regards to breaching or obstructing the law, the GDT has seemingly taken a very broad stance in what qualifies as an auditable offense. These offences include filing a late tax return, not notifying the tax department of changes in management, and failing to update a company address or a change in a company’s shareholding structure.

O’Connell described audits as “the ultimate test” of a company’s adherence to the law, but said there were legal ways to dampen their severity.

“Once the audit has begun, be careful of who you have in charge of handling it within your company,” he remarked. “Too many times information is given to the tax department that can be very harmful.”

He said in the event that the GDT rules negatively during the draft reassessment phase of an audit companies can submit a protest letter outlining a legal argument in their defence.

“The protest letter is very important and you need to have a legal basis to why you object to the decision of the tax auditor,” he said.

He said this should be done at the earliest stage while the issues raised by the audit are still manageable.

Py Borapyn, DFDL tax country associate director, said there are steps a companies can take to steer clear of an audit.

“A common issue we see that triggers a tax audit is that companies have not notified the GDT when they have received a loan,” he said. “If the GDT is not notified about a loan agreement within 30 days, this is seen as taxable income.”

“Another thing is that the GDT will ask for all of a company’s bank statements and will go through the transactions line by line,” he said. “So it is best to submit all banking transactions with supporting documents, because if you do not, they will treat all money coming in as income.”

MOST VIEWED

  • First Khmer woman to pass out of West Point

    The life of a soldier certainly isn’t for everyone. The training is gruelling, the hours long and there’s no room for excuses. On top of that, soldiers must be ready to respond to sudden threats at a moment’s notice. Just ask Sithyka

  • Tourists urged not to skip trip

    The Ministry of Tourism has called on international tourists not to cancel trips to Cambodia, but urged them to adhere to several dos and don’ts when arriving in the Kingdom during the Covid-19 pandemic. The ministry released an eight-point instruction manual on Wednesday published

  • The taxman cometh – Cambodia’s capital gains tax casts the net on individual taxpayers

    In a country where only limited personal income tax existed, the new taxation law beginning January 1, 2021, will make taxpayers out of Cambodians, whether they are ready for it or not About two years ago, a little known amendment was made to Article 7 of the Law

  • Cambodian-American gets Star Trek treatment

    Kevin Ung, a Cambodian-American whose family escaped genocide during the Khmer Rouge’s reign of terror, was recently selected from thousands of applicants to participate in the Television Academy Foundation’s inaugural 2020 Star Trek Command Training Programme, a course intended to give hands-on filmmaking experience

  • Cambodia seeks to be transport hub

    Cambodia is working on several fronts to modernise its transport infrastructure and services, concentrating on opening new international gates to relieve and balance traffic congestion at its borders, Minister of Public Works and Transport Sun Chanthol said on Thursday. This is part of the Kingdom’

  • Deminers unearth ancient lion statue

    Cambodia Mine Action Centre (CMAC) director-general Heng Ratana told The Post on Tuesday that a statue of a lion was found by mine clearance experts while they were digging for a development project. It was sent to the Ministry of Culture and Fine Arts last