Service

TAX ON REAL ESTATE RENTAL

GENERAL DEPARTMENT OF TAXATION (GDT)

Tuesday, March 31, 2020
Source/Copyright: General Department of Taxation (GDT) Cambodia

TAX ON RENTAL OF IMMOVABLE PROPERTY

A. What is the Tax on Rental of Immovable Property?

Tax on Rental of Immovable Property is a monthly tax collected on the rental income of immovable property located within the Kingdom of Cambodia. It applies to property owners or right holders who are not under the self-declaration tax regime, and the revenue is allocated to sub-national administrations.

B. Definitions of Key Terms

  • Immovable Property refers to:
    • Buildings and other constructions such as houses, factories, hotels, offices, and their appurtenances.
    • Machinery or equipment permanently attached to industrial foundations.
    • Fixed commercial or industrial fixtures, large structures, or warehouses.
    • Land without any constructions.
  • Right Holder (Successor) refers to a person who has been granted legal rights over the property by the property owner.
  • Rental Fee refers to the gross rental amount contracted or agreed upon with the lessee based on market value.

C. Tax Exemptions

The Tax on Rental of Immovable Property is exempted in the following cases:

  • Rental income from property owned by the Royal Government, ministries, or state institutions.
  • Rental income from property owned by foreign diplomatic missions, consulates, international organizations, and technical cooperation agencies of foreign governments.
  • Rental income from property owned by organizations or associations organized and operated purely for religious, charitable, scientific, literary, or educational purposes, provided no part of the income is used for private interest.
  • The security deposit deposited by the lessee, which the owner/right holder must return in full at the end of the lease agreement.
  • Rental income that has already been subject to withholding tax by a self-declaration enterprise under Articles 25 and 26 of the Law on Taxation.
  • Rental income from the lease of immovable property belonging to a self-declaration enterprise where it has already been included in the enterprise’s taxable profit calculation.
  • Any case where the total monthly rental fee is less than 500,000 Riels.

D. Tax Rate, Tax Base, and Tax Calculation

1. Tax Rate

The tax rate is set at 10% of the total gross rental fee.

2. Tax Base

The tax base is determined as:

  • The total monthly rental fee specified in the lease agreement or agreed upon based on market value.
  • The total rental fee received by the owner or right holder from the lessee.

3. Tax Calculation Formula

Tax on Rental of Immovable Property = Tax Base × 10%

  • Example 1: Mr. A leases a house to Mr. B for 2,000,000 Riels per month. Mr. B provides a security deposit of 6,000,000 Riels. Both Mr. A and Mr. B are physical persons (individuals).
    • Rental Fee = 2,000,000 Riels
    • Tax Rate = 10%
    • Tax Payable = 2,000,000 Riels × 10% = 200,000 Riels
    • Note: Mr. A (the owner) is responsible for declaring and paying the tax.
  • Example 2: Mr. A leases a house to Mr. B for 2,000,000 Riels per month. Mr. B provides a security deposit of 6,000,000 Riels. Mr. A is a physical person (individual), but Mr. B is a legal entity (enterprise).
    • Rental Fee = 2,000,000 Riels
    • Tax Rate = 10%
    • Tax Payable = 2,000,000 Riels × 10% = 200,000 Riels
    • Note: Mr. B (the legal entity lessee) must withhold, declare, and pay the tax to the tax administration.

E. Obligations and Procedures for Tax Declaration and Payment

Property owners or right holders have the following obligations:

  • Registration: Register the lease at the local tax administration where the property is located within 15 days from the date of the lease contract or from any date changes are made to the contract terms.
  • Termination Notice: Notify the tax administration in writing within 15 days after the rental agreement terminates. The notice must be dated and signed by the owner, right holder, or an authorized representative.
  • Receipt Issuance: Issue an official receipt to the lessee every time a rental payment is received.

Deadlines for Tax Filing and Payment:

  • Monthly Lease: File the tax return and pay the tax at the latest by the 20th day of the following month for which the payment is due.
  • Multi-Month Advance Payment: If the contract requires a lump-sum payment for multiple months, file and pay by the 20th day of the month following the payment.
  • Note: Lessees who are self-declaration taxpayers must perform withholding tax duties and remit the payment in accordance with Article 25 of the Law on Taxation.