General Department of Taxation

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

Value Added Tax (VAT)

A. What is Value Added Tax?

Value Added Tax (VAT) is a type of tax levied on the added value from the supply of goods or services. Value Added Tax must be collected at every stage of supply. Taxpayers under the self-assessment regime who make taxable supplies are obligated to register for VAT and collect VAT on the supply of goods or services from customers.

B. Definitions of Key Terms

• Taxable Person: Refers to a person who is subject to tax under the self-assessment regime and makes taxable supplies. A non-resident person who supplies digital goods or digital services into the Kingdom of Cambodia is considered a taxable person.
• Goods: Refers to tangible assets other than land and money.
• Services: Refers to the provision of anything of value other than goods, land, and money.
• Supply of Goods: Refers to the transfer of the right to use or dispose of goods as an owner, whether for consideration or not. The supply of ancillary services related to the supply of goods shall be treated as a supply of goods.
• Supply of Services: Refers to a supply that is not a supply of goods, land, or money, made for consideration or not. The supply of ancillary goods related to the supply of services shall be treated as a supply of services.
• Input Tax: Goods or services purchased for business are called inputs, and the tax paid on the purchase of goods or services is called input tax.
• Output Tax: Goods or services supplied to customers are called outputs, and the tax collected on the supply of goods or services is called output tax.
• VAT: Refers to Value Added Tax.
• Person: Refers to an individual or a group of individuals carrying on a business, and any other person related to that person.

C. Non-Taxable Supplies (Exemptions)

• Public postal services.
• Hospital and clinic services, medical and dental services, and the sale of ancillary medical and dental goods related to the performance of these services.
• Passenger transportation services by a public transportation system wholly owned by the State.
• Insurance services.
• Basic financial services as determined by the Prakas of the Minister of Economy and Finance.
• Supply of unprocessed agricultural products (locally grown).
• Educational services.
• Supply of electricity and clean water.
• Garbage and solid or liquid waste collection services.
• Import of personal effects exempt from customs duties up to the value limit determined by the Prakas of the Minister of Economy and Finance.
• Non-profit activities for the public benefit recognized by the Minister of Economy and Finance.
• Import or domestic purchase of goods by foreign diplomatic and consular missions, international organizations, or technical cooperation agencies of other governments for official use.

D. Taxable Supplies

• The supply of goods or services by a taxable person in the Kingdom of Cambodia.
• The supply of digital goods or digital services into the Kingdom of Cambodia.
• The provision of gifts or supplies below the real value of goods or services by a taxable person.
• The withdrawal of goods or services for personal use by a taxable person.
• The import of goods into the customs territory of the Kingdom of Cambodia.

E. Creditable Input Tax

Input tax credit is allowed only if the purchase of taxable goods or services is related to business activities and complies with the following conditions:

• Goods or services must be purchased for taxable resale or used to make taxable supplies.
• Import customs declaration and tax payment receipt must serve as evidence of the tax amount paid on the import of goods.
• The original tax invoice issued by a taxable person or supplier must be retained.
• Proper and clear supporting documentation must be provided to the General Department of Taxation confirming that the person has actually paid the tax to be allowed as a credit.
• The request must be made in the format prescribed by the General Department of Taxation.

Monthly Input Tax Credit:

• Tax credit is allowed as an input tax credit for VAT paid on:
  • All supplies received during the month.
  • All imports of goods by the taxable person during the month.
• VAT credit is allowed only if the taxable supply or imported goods are related to taxable business activities.

F. Non-Creditable Input Tax

• VAT paid on purchases or services supplied by a person not registered for VAT.
• VAT paid on the purchase or import of automobiles, unless the taxable person is in the business of selling or renting automobiles.
  • The word “automobile” refers to a vehicle designed solely for carrying passengers with not more than 10 seats.
• VAT paid on entertainment, amusement, or recreation expenses, unless the taxable person is in the business of providing entertainment, amusement, or recreation.
  • The word “entertainment” means the provision of food, beverages, tobacco, accommodation, or hospitality.
• VAT paid on the purchase or import of certain petroleum products, unless the taxable person is in the business of supplying those petroleum products.
  • Petroleum products refer to regular gasoline, premium gasoline, diesel fuel, and lubricants.
• VAT paid on mobile phone services.

G. VAT Tax Base and Rates

VAT Tax Base calculation:

• Supply of goods or services = the price of goods or services charged by the seller to the buyer.
• Payment for a taxable supply in a form other than money = the taxable value based on the market value.
• Provision of gifts or sales below the real value = market value.
• Taxable value of used goods = selling price minus purchase price (gross margin) or commission.
• In case the taxable value of goods or services cannot be determined, the tax administration may determine the value based on market value principles.
• Imported goods = CIF + Customs Duty + Special Tax (if any)
  • CIF = Cost + Insurance + Freight
• Turnover excluding VAT = Turnover including VAT / 1.1
• In case of turnover inclusive of all taxes, the formula applied is:VAT Tax Base = Total Turnover Inclusive of All Taxes / 1.1

VAT Rates:

H. Pro-rata Input Tax

• Input tax is used partly for taxable supplies and partly for non-taxable supplies.
• In case it is separable: The input VAT from taxable supplies and non-taxable supplies must be separated; VAT credit is allowed only for taxable supplies.
• In case it is inseparable: The allowed VAT credit amount must be calculated using the formula:Allowed Credit = A × (B / C)
  • A: Total input tax in the month.
  • B: Total taxable value of supplies in the month.
  • C: Total taxable and non-taxable value of supplies in the month.
• If (B / C) is from 0.05 to 0.95, input tax is allowed proportionally according to the formula above.
• If (B / C) is less than 0.05, input tax is not allowed.
• If (B / C) is greater than 0.95, all input tax is allowed…