17/02/2015
Workshop on:
Cambodian Tax on Salary and
Withholding Taxes
24 February 2015
Agenda
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Introduction on Cambodia Tax System
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Real Regime System of Taxation
Tax Registration Requirement for NGO/IO
General Concept on:
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Tax on Salary – TOS
Tax on Fringe Benefit – TOFB
Withholding Tax – WHT
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Calculation of TOS/FBT and WHT
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Procedures for Preparation and Submission of Tax Returns
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Questions and Answers – Q&A
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Training Outcomes
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Training Outcomes
Training
Outcomes
At the end of the session, you should be able to:
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Understand the principal of Tax on Salary and Withholding Taxes
Implication
Calculate the Tax on Salary and Withholding Taxes
Comply with Cambodian tax law
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Introduction
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Introduction to Cambodian Tax System
24 February 2015
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Tax System and Registration
Tax System
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Real regime
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Estimated regime
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Simplified regime (not implemented)
Registration
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All real regime including companies, NGO, IOs,….
By 15 days after registration with MoC or relevant ministries
General Concept
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Tax on Salary (“TOS”)
24 February 2015
Tax on Salary
Introduction
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TOS is a monthly tax imposed on salary that a employee has been
received within the framework of fulfilling employment activities.
TOS shall be collected through withholding by employer at the time
of salary payment.
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Resident physical person à tax on worldwide salary income.
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Non-resident physical personà tax on Cambodian salary-source
income.
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Residency status of employee:
► Has residence in Cambodia;
► Has principal place of abode in Cambodia; or
► Is present in Cambodia on more than 182 days in any 12 month
period ending in the current tax year.
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Non-resident employee who are not met the test of residency status.
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Tax on Salary (Cont.)
General
Provision
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The term “Salary” includes salary, remunerations, wages, bonuses,
overtimes, compensations and fringe benefits paid to employee.
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Employer or its representative is obligated to withhold the monthly
TOS from his employees at the time of each salary payment, and to
file and pay the monthly TOS to the tax authority.
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Deadline à by the 15th of the following month.
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Tax on Salary (Cont.)
Exemption on
TOS - Resident
Under Article 43 and 44 of LOT, the following salary shall be exempted
from the TOS:
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Salaries of certain employees of approved diplomatic, international
and aid organizations.
Salaries of members of the National Assembly and Senate.
Real reimbursement from employee under assignment for the benefit
of the employer. (Certain conditions applied)
Indemnity for layoff as provided in Labor Law.
Additional remuneration with social characteristics as provided in
Labor Law.
Certain uniform entitlements.
Certain flat and travelling allowances (e.g. business purpose) but not
redundant with real refund.
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Tax on Salary (Cont.)
Exemption on
TOS – Nonresident
The salary of a non-resident will be exempted from the TOS if all the
following conditions are met:
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The employee is present in Cambodia for no more than 182 days in
any period of twelve (12) months ending in the current tax year;
The employee receives the remuneration or salary which is paid by
or on behalf of an employer who is not a resident in Cambodia; and
The remuneration or salary paid to the employee is not borne by a
permanent establishment or fixed base of operation maintained by
the employer in Cambodia.
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Tax on Salary (Cont.)
Monthly Taxable
Salary
Monthly taxable salary for resident employee:
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Salary received from Cambodian sources;
Salary received from foreign sources; and
Advance money, loan or installment made by the employer to the
employee (To be added to the taxable salary of the month in which
they are paid out and deducted from salary in the month of any
repayment made by the employee).
Monthly taxable salary for non-resident employee includes salary from
Cambodian sources only and there is no deduction allowed.
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Tax on Salary (Cont.)
Rebate
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75,000 Riels per month is provided to employee’s dependent à child
age up to 25 years old and still studying full time at a recognized
educational institute or minor child age less than 14 years old.
75,000 Riels per month is provided to dependent spouse.
Deduction is allowed only for resident employee and based on the
evidence of family situation.
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Tax on Salary (Cont.)
TOS on
Resident
Taxpayer
TOS for resident taxpayer is calculated at progressive tax rates ranging
from 0% to 20%.
Table below is the salary tax computation for resident:
(Calculated from
January 2015
onwards)
Monthly Salary (Riels)
Tax Rate
Formula
From
0
To
800,000
0%
X*0%
From
800,001
To
1,250,000
5%
X*5% - 40,000
From
1,250,001
To
8,500,000
10%
X*10% - 102,500
From
8,500,001
To
12,500,000
15%
X*15% - 527,500
Over
12,500,000
Up
20%
X*20% - 1,152,500
Note: X is the gross salary
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Tax on Salary (Cont.)
TOS on
Resident
Taxpayer –
Example
Example:
A sample TOS calculation for January 2015.
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X (monthly salary) = 1,200,000 Riels
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Dependents = 2 children; 1 housewife
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Tax on Salary (Cont.)
TOS on
Resident
Taxpayer –
Solution I
Solution – Gross salary paid to employee
Salary tax = (X – D*75,000)*Rate – DA
Salary tax = (1,200,000 – 3*75,000)*5% - 40,000 = 8,750
Gross salary
Salary tax
Net salary
1,200,000 As stated in employment contract
(8,750) Withheld TOS from salary payment
1,191,250 Net cash pay to employee
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Tax on Salary (Cont.)
TOS on
Resident
Taxpayer –
Example
Practice 1:
A sample TOS calculation for January 2015.
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X (monthly salary) = 5,000,000 Riels
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Dependents = 2 children, 1 sister, 1 wife (working at the same place)
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Tax on Salary (Cont.)
TOS on
Resident
Taxpayer –
Example
Practice 2:
A sample TOS calculation for January 2015.
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X (monthly salary) = 10,000,000 Riels
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Dependents = 1 child, 1 sister, 1 wife (working at the same place)
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Tax on Salary (Cont.)
TOS on
Resident
Taxpayer –
Solution I
Solution to Practice 1– Gross salary paid to employee
Salary tax = (X – D*75,000)*Rate – DA
Salary tax = (5,000,000 – 2*75,000)*10% - 102,500 = 382,500
Gross salary
5,000,000 As stated in employment contract
Salary tax
(382,500) Withheld TOS from salary payment
Net salary
4,617,500 Net cash pay to employee
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Tax on Salary (Cont.)
TOS on
Resident
Taxpayer –
Solution I
Solution to Practice 2 – Gross salary paid to employee
Salary tax = (X – D*75,000)*Rate – DA
Salary tax = (10,000,000 – 1*75,000)*15% - 527,500 = 961,250
Gross salary
10,000,000 As stated in employment contract
Salary tax
(961,250) Withheld TOS from salary payment
Net salary
9,038,750 Net cash pay to employee
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Tax on Salary (Cont.)
TOS on NonResident
Taxpayer
Non-Resident Taxpayer is subject to a flat tax rate of 20% on Salary
received from Cambodian sources, and there is no deduction allowance
on monthly taxable salary. [Article 49 of the LOT]
Example:
A sample TOS calculation for January 2015.
Salary package = 4,000,000 Riels
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Tax on Salary (Cont.)
TOS on NonResident
Taxpayer –
Solution I
Solution – Gross salary paid to non-resident taxpayer
Salary tax = X * 20%
Salary tax = 4,000,000 * 20% = 800,000
Gross salary
4,000,000 As stated in employment contract
Salary tax
(800,000) Withheld TOS from salary payment
Net salary
3,200,000 Net cash pay to employee
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Tax on Salary (Cont.)
Foreign Tax
Credit
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A foreign tax credit is applied to a resident taxpayer who has
received foreign source salary and has paid taxes according to
foreign tax law.
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Compute salary tax on all income i.e. Cambodian and foreign
salary sources.
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Tax credit is allowed based on the smaller of the salary tax paid in
foreign country and salary tax on all income multiply by the ratio of
foreign country income to total income from all sources.
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Documents must be provided, e.g. tax certificate from employer or
tax authorities abroad.
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Tax on Salary (Cont.)
Foreign
Tax Credit
Example: Mr. A’s total salary (Note: Mrs. A is a housewife)
Salary
TOS Remarks
KHR
Foreign
8,000,000 (a)
Cambodia
12,000,000
Total
20,000,000 (b)
e.g. foreign tax is US$400 =KHR1,600,000 (1)
TOS on all incomes is KHR2,832,500 (c)
Ratio of foreign income to total income (d) = (a)/(b)
8,000,000/20,000,000
(2) = (c)*(d)
KHR1,133,000
Tax credit allowed, (1) or (2) which is smaller (3)
KHR1,133,000
TOS payable in Cambodia (C) - (3)
KHR1,699,500
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Tax on Fringe Benefit (“TOFB”)
24 February 2015
Tax on Fringe Benefit
Introduction
Tax on Fringe Benefit (“TOFB”) is a monthly tax imposed on
employee who receives directly or indirectly any good, services, or
other benefits in cash or in kind for the employment activities that
has fulfilled for the benefits of the employer. [Section 3.1, Prakas on
the Salary Tax]
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Tax on Fringe Benefit (cont.)
General Rules on
TOFB
The fringe Benefit includes mainly:
► Private
use of vehicle;
and accommodation;
► Utilities, telephone and household personnel;
► Loans with low interest rates;
► Sale with discount;
► Non-employment related educational expenses, including
children’s education;
► Life and health insurance which it’s not provided to all staff;
► Part of expense allowance unreasonable or unnecessary to the
employment;
► Amount of pension plan exceed 10% of the employee’s monthly
salary; and
► Entertainment not part of employment activities.
► Meal
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Tax on Fringe Benefit (cont.)
General Rules
on TOFB
► Employer
or its representative is obligated to file and pay TOFB to the
GDT.
► Deadline
► 20%
à by the 15th of the following month.
on the taxable value.
► The
taxable value of fringe benefits is the fair market value inclusive of
all taxes provided to the employees.
Note:
Prakas No.599.MEF.PK dated 15 July 2009 issued by MoEF, the gross
up amount for TOFB calculation is non-deductible for TOP calculation.
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Tax on Fringe Benefit (cont.)
General Rules
on TOFB
Example
A sample tax calculation for TOFB is provided below:
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Benefits provided = 400,000 Riels
Solution
Benefit Provided
TOFB @ 20%
400,000 In cash or kind provided to staff
80,000 To pay tax to GDT
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Withholding Tax (“WHT”)
24 February 2015
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Withholding Tax (cont.)
General rules on
WHT
► Any
resident taxpayer shall withhold WHT on any gross amount of
payment before the payment in cash or in kind is made to resident or
non-resident taxpayers.
► WHT is
payable when the amount is paid. An expense is considered
as paid when it is recorded in accounting book as an expense.
► The
resident taxpayer or withholding agent has an obligation to
withhold the WHT and to pay the WHT to the tax authority by the 15th
day of the following month.
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Withholding Tax (cont.)
WHT on
Resident
Taxpayer
Any resident taxpayer making payments in cash or in kind to a resident
taxpayer shall withhold and pay the WHT to the tax authorities. The
following payments are subject to WHT:
Payment by a domestic bank or saving institution to residents on:
► Non-fixed term interest – 4%
► Fixed term interest – 6%
Payment by a resident taxpayer to a resident taxpayer on:
► Performance of services – 15% (except payment to a registered
taxpayer and supported by a valid VAT invoice)
► Royalties for the use of intangibles – 15%
► Rental – 10%
► Interest – 15% (except payment to a Cambodian bank or saving
institution)
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Withholding Tax (cont.)
WHT on NonResident
Taxpayer
Any resident taxpayer making payments in cash or in kind to a nonresident taxpayer shall withhold WHT of 14% on the gross amount of
the following payments and pay the WHT to the tax authorities.
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Interest
Royalties, rent and other incomes connected with the use of property
Compensation for management or technical services
Dividends
The term “compensation for management or technical services" is not
defined by the law. In practice, the Cambodian tax authority has
indicated that "compensation for management or technical services”
will be broadly defined to capture all service payments, other than for
goods, to non-resident taxpayers.
The WHT system is generally a collection mechanism of income tax of
the non-registered and non-resident taxpayers.
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Withholding Tax (cont.)
Deductibility
of WHT
WHT is required by law to be withheld on payments made by resident
taxpayers. However, if a taxpayer fails to withhold the WHT before
making payment, the WHT borne by the taxpayer and paid to the tax
administration on behalf of the recipient are not allowed to deduct from
the company’s profit.
The gross up method is not allowed.
[Prakas No.599.MEF.PK dated 15 July 2009 issued by the MoEF and
Notification from the GDT]
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Withholding Tax (cont.)
WHT Exemption
The following payments shall be exempted from WHT:
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Interest paid to a domestic bank or saving institution or financial
institution
Payment of income exempted from tax [Article 9 (New) of LOT]
Payment made to the government (certain conditions are applied)
Payment subject to the Tax on Salary or Tax on Fringe Benefit
Interest made by the Government to a non-resident
Payment for services to a real regime taxpayer (with valid VAT
invoice)
Payment for goods
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Withholding Tax (cont.)
WHT on Mixed
Supply
In case of mixed supply (i.e. supply of goods and provision of services),
the following rules shall be applied:
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WHT applies to the provision of services only
WHT does not apply to supply of goods
In practice, in case the value of goods and services are not segregated
on the invoice, WHT shall apply to the total amount of the invoice.
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Procedures of Submission of Tax on Salary
and Withholding Taxes Returns
24 February 2015
Procedures for Preparation of Tax Returns
Tax Workings
Procedures for preparation of
Tax Returns
Calculate TOS, TOFB and
WHT
Error
Review the Monthly Tax
Workings
Fill in the Monthly Tax
Returns
Error
Review the Monthly Tax
Returns
Verification of Tax Liability
Correct
Sign and Stamp on the
Monthly Tax Returns
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Procedures for Submission of Tax Returns
Signed and Stamped
Returns
With Tax Liability
Canadia/ACLEDA Bank
Without Tax
Liability
Tax Department
Tax Department
Tax Return Bureau
Tax Return Bureau
Tax Debt Bureau (done by
tax officer)
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Questions & Answers
Questions and
Answers
►
Q&A
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17/02/2015
Thank You!
Page 43
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