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

  • Locations shut, dozens more Covid-19 positive

    The Ministry of Health has closed 23 locations in connection with the February 20 community transmission of Covid-19 and summoned for testing anyone who had direct contact with affected people and places. The number of discovered related infections has risen to 76, including 39 women. In a press release,

  • Covid cluster raises alarm, health bodies urge vigilance

    The Ministry of Health and the World Health Organisation (WHO) in Cambodia have expressed great concern over the February 20 cluster transmission of Covid-19 in the community. Both entities appealed for vigilance and cooperation in curbing further spread of the virus. Ministry spokeswoman Or Vandine said

  • PM confirms third Covid-19 community transmission

    Prime Minister Hun Sen on February 20 announced the Kingdom's third outbreak of Covid-19 community transmission after 32 people tested positive in just over 10 hours. Addressing the public from his residence after an emergency meeting, Hun Sen said: "I dub it February 20 Community Event, in which 32 cases

  • Cambodia to make auto-rickshaws

    Locally-assembled electric auto-rickshaws could hit the Cambodian market as soon as early in May after the Council for the Development of Cambodia (CDC) gave the greenlight to an investment project at the weekend. According to a CDC press release, it will issue a final registration

  • Cambodia's Covid cluster cases rise to 137

    The Ministry of Health on February 24 recorded 40 more cases of Covid-19, with 38 linked to the February 20 community transmission. Of the 40, two are imported cases involving Chinese passengers. The 38 include two Vietnamese nationals and one Cambodian, with the rest being Chinese. This brings the total cases

  • Howard Johnson opens in Sihanoukville

    New York Stock Exchange- (NYSE) listed hotel franchiser Wyndham Hotels & Resorts Inc (WH) has opened its first hotel in the Kingdom – the Howard Johnson Plaza by Wyndham Blue Bay Sihanoukville, WH said in a February 18 press release. WH said the new 36-storey property in Sihanoukville’