Prakas No. 098 on Tax on Income

On 29th January 2020, the Ministry of Economy and Finance just issued the Prakas No. 098 on Tax on Income, which takes effect immediately. This Prakas is applicable to taxpayers under the self-assessment regime except for small taxpayers who shall comply with the other provisions.

Several substantial changes are made.

Tax residency

For a physical person, the term resident taxpayer refers to any person who satisfies any one of the 3 criteria as below:

a- A physical person has his residence located or situated in the Kingdom of Cambodia if he owns, rents, leases, or has available for use a house, apartment, dormitory, etc. in which he usually stays or occupies;

b- A physical person's principal place of abode in the Kingdom of Cambodia, which is a factual determination based on factors such as the physical person's centre of economic interest, the amount of time spent, the nature of time spent, where that person's family resides, the physical person’s bank accounts are hold, his main social activities take place.

c- A presence of the physical person in the Kingdom of Cambodia for more than 182 days during one or more separate periods in any period of 12 months ending in the current tax year. In determining the number of days in the Kingdom of Cambodia, presence for any part of a day is counted as a whole day.

In the case of any uncertainty in the specified in sub-paragraph (a) and (b) of this paragraph, the presence of physical person stated in sub-paragraph (c) shall be the final criteria for determining the resident of the physical person.

Permanent establishment

The term "Permanent Establishment" means a fixed place of the business in the Kingdom of Cambodia, the branch of a foreign company or an agent resident in the Kingdom of Cambodia, through which the non-resident person carries on their business. The term "Permanent Establishment" also includes network or other association or connection through which a non-resident person engages in economic activity in the Kingdom of Cambodia. For e-commerce activities, a non-resident taxpayer is considered to have a permanent establishment in the Kingdom of Cambodia if the goods or services are supplied or used in the Kingdom of Cambodia. Permanent establishment is considered as a resident legal person for only the income from a Cambodian source. For the purpose of this Article, Permanent establishment refers to the following:

a- A place of management;

b- A branch of a foreign enterprise an agency;

c- An office of a foreign enterprise

d- A warehouse, a factory, a workshop, a fanrm or a plantation;

e- A mine, an oil or gas well, a quarry or any other natural resources;

f- A building site, a construction project or an assembly project, or supervisory activities connected to such site or project, where such site or project or activities continue for more than 182 days at one time or more in any 12-month period;


Cambodian source of income include dividend distributed by a resident taxpayer. In case of a transfer of any or all of the retained earnings into the capital of the enterprise, if any time, the enterprise withdraws capital to the shareholder, the withdrawal of the capital shall be deemed as a dividend on the share of capital acquired from retained earnings; in case of a transfer of any of all of the shares in the capital or equity of enterprise which represents the retained earning, the retained earnings pertaining to the shares transferred, whether diverted in capital or not, are considered as dividends

Management and technical service

The term “management service” means any management service designed to perform the management functions of a business including recruitment, training, management, sales etc.

The term “technical service” means services that require technical skills or knowledge to develop or create inputs in business, such as scientific, physical, chemical, medical, dental, pharmaceutical, law, hydrology, veterinary, arts, education, engineering, architecture, research, accounting, economic, well-being, atomic, services including consulting services. The term “consulting service” means the professional or advisory service related to technical service.


Except for a domestic bank, provisions from other enterprises to absorb an expense or loss which is not yet incurred actually is not allowed for deduction and this is so even such expense or loss is very probable.

For a domestic bank, provisions for bad debts shall determined as followed:

Credit risk classification Allowance provisions
Normal 0%
Special mention 0%
Substandard Compliance with law and regulations of National Bank of Cambodia
Doubtful Compliance with law and regulations of National Bank of Cambodia
Loss Compliance with law and regulations of National Bank of Cambodia

Withholding tax exemption

Payment in cash or in kind as below is exempted from the tax withholding:

  1. Interest paid to a domestic bank, and the payment of income exempted from tax as stated in Article 8 ofth1s Prakas;
  2. Payment to the Government or a government institution of the royalties or rental on a movable or immovable property (including among other things the rental of fishing lot or fishing area, the rental of ferry, the royalty on woodland concession, the market tax of goods, and so on) and which payment must meet the two conditions as below:
    1. the payment must pertain to a movable or immovable property recorded as state property in the property register maintained by the Ministry of Economy and Finance;
    2. this payment must receive certification from the Ministry of Economy and Finance that it is a revenue to be paid to the state budget;
  3. Payment of an income of physical person subject to the tax on salary or the tax on fringe benefits as stated in the provisions of Prakas on the Tax on Salary;
  4. Payment of interests made by the Government or a government institution to a non-resident on a loan which the Royal Government of Cambodia or the Minister of Economy and Finance has recognized and approved;
  5. Payment of any service supplies under 50,000 Riels.

Payment in cash or in-kind among the self-assessment taxpayer is exempt from withholding tax for the following cases:

a- the income from the performance of services including management, consultancy, and similar services;

b- Income from supplies:

  • Shrink-wrap Software;
  • Site License;
  • Downloadable Software; or
  • Software Bundled with Computer Hardware;

c- the income from a movable or immovable property.

Advance Grand Formula Co., Ltd is a Cambodian tax agent under license number – TA202204002.

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