THERE IS no personal income tax per se in Cambodia. Instead, individuals are
taxed either as employees or as business persons.
A monthly Salary Tax is
imposed on individuals who derive income from employment. Unless consultants are
deemed employees, general consulting income is considered to be business
An individual's business income is subject to Tax on Profit.
Business income would generally arise from the habitual conduct of commercial
activities with the aim of profit making.
In this article, we will
concentrate on Salary Tax.
Residency and source
Employment income is
taxed based on internationally familiar residency and source principles.
A Cambodian resident is one who is domiciled in or lives predominantly
in Cambodia. Additionally, any individual who is present in Cambodia for more
than 182 days in a calendar year is also considered to be resident in Cambodia.
This later classification will be of interest to most expatriates.
Cambodian resident is subject to Cambodian Salary Tax on his worldwide salary.
In other words, once an individual is considered to be a Cambodian resident for
tax purposes, his salary from employment activities throughout the world will be
subject to Cambodian Salary Tax.
Non-residents are taxed only on their
Cambodian-sourced salary. Under Prakas No 396, their Cambodian-sourced salary
may be exempt from Salary Tax if this salary is not claimed as an expense in
computing taxable profits for Cambodian Tax on Profit purposes.
determined with reference to where employment activities are carried out. It is
important to note that the place of salary payment is irrelevant for the
purposes of determining the source of salary. Therefore, even where an
individual is employed to work in Cambodia but is partially paid in another
country, his entire salary from his employment in Cambodia will be
Cambodian-sourced and so generally subject to Cambodian Salary Tax.
Determination of taxable
Salary Tax is payable on monthly taxable salary. Salary
includes remuneration, wages, bonuses, overtime, fringe benefits and
compensation paid for fulfilling employment activities, whether or not paid for
the direct benefit of the employee.
A distinction is, however, made
between cash salary and fringe benefits.
Cash salary is generally the
basic wages, overtime and bonuses paid for employment activities.
importantly, however, cash advances and loans from the employer to the employee
are also considered cash salary, with the repayments being deductible.
understand this provision was introduced to overcome the common practice of
advancing non-taxable loans to expatriates and forgiving these loans on
completion of the expatriates' assignments.
benefits are considered to be supplementary salary and include the provision
- accommodation support including of utilities and domestic helpers
- education assistance for an employee's minor dependants
- all kinds of motor vehicles for private use
- low interest loans and discounted sales
- "excessive or unnecessary" cash allowances, social welfare and pension
- life and health insurance, unless provided to all employees
- entertainment or recreational expenditure
To-date, the tax authorities have been most interested in pursuing the
declaration of accommodation and domestic helper benefits.
reduce taxable salary are limited to small amounts for an employee's spouse who
is a housewife, his minor dependants and for repayments of employer loans or
The cash salary of residents is taxed on the
following rates, assuming an exchange rate of Cambodian riel 3800:
Where monthly cash salary is in the range
- 500,001 to 1,250,000 riels (US$132 to $329), the tax is 5%;
- 1,250,001 to 8,500,000 riels ($329 to $2,237): 10%;
- 8,500,001 to 12,500,000 riels ($2,237 to US$3,289): 15%;
- 12,500,001 ($3,289) or more: 20%.
Non-residents are taxed at a flat rate of 15%, which also constitutes a final
tax, that is, no further Cambodian Salary Tax is due on the
Fringe benefits are taxable on the employer at a flat rate of 20%
of the market value of the "grossed up" fringe benefit. Note that the market
value is to be divided by 0.8 to determine taxable value.
Salary tax liability
Salary Tax is computed
on the payment of cash salary and fringe benefits. Employers must deduct Salary
Tax from employees' salaries in accordance with the tax tables above on a
Note that there is a distinction between Salary
Tax on cash salary and that on fringe benefits. Salary Tax on cash salary is the
liability of the employee, while Salary Tax on fringe benefit is the liability
of the employer. Salary Tax has to be paid in riels and official exchange rates
are provided monthly by the tax authorities.
Although it is a tax on
an individual's employment income, employers are responsible for withholding the
Salary Tax monthly. The tax withheld must be submitted to the tax authorities,
together with a monthly Salary Tax declaration, not later than 15 days after the
end of the month in which the salaries were paid. Late submission of the Salary
Tax declaration and late payments are subject to penalties. There is no
requirement for the employee to file any return.