General Directorate of Taxation

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

Tax on Salary

A. What is Tax on Salary?

Tax on Salary is a monthly tax imposed on salaries received by physical persons (individuals) within the framework of fulfilling employment activities. A resident physical person in Cambodia is subject to tax on salary regarding Cambodia-source salary and foreign-source salary. A non-resident physical person is subject to tax on salary regarding Cambodia-source salary only.

B. Definition of Key Terms

• Salary: Refers to the total amount paid to an employee or paid for the direct or indirect benefit of the employee for fulfilling the employee’s employment activities. Salary includes basic salary, wages, remunerations, allowances, bonuses, overtime pay, various compensations, and fringe benefits.
• Salary (Base Salary): Refers to the basic salary paid to an employee for fulfilling work, including family allowances, whether paid directly or indirectly, or paid in cash or in kind.
• Wages: Refers to wages paid to an employee for fulfilling work, whether the basis is calculated hourly, daily, or weekly, whether paid directly or indirectly, or paid in cash or in kind.
• Remuneration: The value given in return for work performance, in addition to salary or wages, as a reward for performing any task for the employer.
• Allowances: Refers to position allowance, contract termination allowance for fixed-duration employment contracts, or seniority indemnity for unfixed-duration employment contracts, or dismissal allowance, and other allowances.
• Bonuses: Refers to incentives including rewards, performance bonuses, additional salary on top of the monthly salary, and similar incentives for the performance of the employee’s work which is for the business benefit of the employer.
• Compensations: Refers to other subsidies provided to employees due to relocation of the workplace far from home or hazardous work, etc.
• Resident: In the case applied to employees, taxpayers, or physical persons, means having a residence or principal place of stay in Cambodia, or being present in Cambodia for more than 182 days in any 12-month period ending in the current tax year.
• Non-resident: Refers to any physical person who is not a resident and receives Cambodia-source salary.
• Employee: Refers to a physical person who receives salary from their employment activities, including directors or managers of enterprises, public civil servants, and elected public officials, except for members of the National Assembly and the Senate.

C. Tax Exemptions

Tax on salary shall be exempted for:

1. Income of employees including:
   • Genuine reimbursement of professional expenses incurred by the employee under instructions and for the benefit of the employer, which meets 3 conditions: spent for the direct and exclusive benefit of the enterprise, not excessive or extravagant, and supported by detailed invoices already paid in the name of the recipient of the reimbursement.
   • Various allowances in the event of contract dissolution within the limits stipulated in the Labor Law.
   • Fringe benefits for establishing pension funds and social security or of a social nature as stipulated in the Labor Law and the Law on Social Security Schemes.
   • Free supply or below-cost supply of uniforms or special professional equipment.
   • Overtime pay, referring to pay that workers/employees receive within the framework of working overtime, outside of their normal working hours.
   • Lump-sum allowances for mission and travel expenses which cannot exceed the state’s subsidies for similar work.
2. Salary of officials and employees of diplomatic missions, consulates of foreign governments, international organizations, and technical cooperation agencies of other governments received within the framework of fulfilling official functions in Cambodia.
3. Subsidies not subject to tax on salary and fringe benefits including:
   • Travel expenses from the place of residence to the workplace and accommodation allowances or provision of accommodation within the workplace premises.
   • Meal allowances provided to all employees without discrimination of roles.
   • Social security fund, social welfare within the limits stipulated in the Labor Law.
   • Health insurance or life or health insurance premiums provided to all workers/employees without discrimination of roles or positions.
   • Infant care allowances or infant care expenses according to the Labor Law.
   • Contract termination allowance or dismissal allowance within the limits stipulated in the Labor Law.

Note: To receive exemptions under this point 3, enterprises must submit to the General Directorate of Taxation documents regarding their employee subsidy policies for each specified period.

D. Tax Rates, Tax Base, and Tax Calculation

1. Tax Rates

• For resident employees, the tax to be paid is determined according to the progressive rates by tiers as follows:

• For non-resident taxpayers, the tax must be withheld by the payer at a flat rate of 20% on every taxable salary payment.
• For fringe benefits provided monthly, the employer must withhold tax on salary for fringe benefits at a rate of 20% of the total value of fringe benefits provided to all employees, inclusive of all types of taxes. This withheld tax must be declared and paid together with the monthly tax on salary.

2. Tax Base

The tax base for monthly tax on salary is the total amount paid, whether in cash or in kind, deducting the rebates for dependent children and homemaker spouse, except for any payments defined as fringe benefits. The rebate amounts to be deducted from the tax base are:

• Dependent child: 150,000 Riels per child per month.
• Homemaker spouse: 150,000 Riels for only one spouse per month.

3. Tax Calculation

The calculation of tax on salary for resident taxpayers is determined as follows:

Tax on Salary = (Tax Base × Tax Rate) – Deductible Amount

Example: Mr. Sok has a salary of 2,500,000 Riels.

• a. Case of being single:
  • Tax Base = 2,500,000 ៛ (Subject to the 10% rate tier)
  • Tax on Salary = (2,500,000 ៛ × 10%) – 175,000 ៛ = 75,000 ៛
• b. Case of having a homemaker spouse and 3 dependent children:
  • Rebate reduction = 150,000 ៛ × 4 = 600,000 ៛
  • Tax Base = 2,500,000 ៛ – 600,000 ៛ = 1,900,000 ៛ (Subject to the 5% rate tier)
  • Tax on Salary = (1,900,000 ៛ × 5%) – 75,000 ៛ = 20,000 ៛

Alternatively, it can be calculated using the GDT Salary Tax Calculation program by filling in required information such as:

• Amount of salary received
• Fringe benefits subject to the fringe benefits tax
• Number of spouses and dependent children