On 13 March 2019, the Ministry of Economy and Finance (“MEF”) issued Prakas 270 on Tax Audits (“Prakas 270”), which attempts to improve the audit procedures to ensure transparency in paying taxes and increasing competitive environment in a fair manner in doing business in the Kingdom of Cambodia.

In accordance with Prakas 270, there are three types of tax audit:

• Desk audit shall be conducted at the tax administration office. Desk audit is a review and judgment of tax returns that are irregular or inconsistent to ensure the correctness of the declaration of taxpayers. In general, this audit shall focus mainly on irregular and unclear points found in the tax returns such as verification of tax returns with the information that the tax administration has received from various sources, in which the tax administration may invite the taxpayer to clarify and present documents concerning the irregularities found in the tax returns.
• Limited audit: is a short-term and immediate audit on some kinds of taxes such as special tax on some goods and services, public lighting tax, value-added tax (VAT) including refund and other taxes except income tax by checking the points that are of risks in accounting records and relevant documents. This audit may be conducted for only tax period in the current tax year (N) and tax year before the current tax year (N-1).
• Comprehensive audit: is an audit conducted on all kinds of taxes and assess the accounting records of the enterprise by reviewing the actual business operation and verify it with the accounting records, financial reports and documents related to the business to ensure that the enterprise has prepared correct accounting reports and financial reports in accordance with the law and duly fulfill the tax obligation in accordance with the law and regulations on taxation. This audit may only be conducted within 3 tax years backwards (N-3). In the event that there is clear evidence on tax evasion or loss carried forward or credit carried forward from tax year or previous tax period that requires a comprehensive audit exceeding 3 tax years backwards, the comprehensive audit may be conducted within 5 tax years backwards. If necessary and there is clear evidence on tax evasion that requires a comprehensive audit exceeding 5 tax years backwards, the comprehensive audit may be conducted in accordance with the regulations of the Law on Taxation by seeking approval in advance from the Minister of Economy and Finance for each actual case.

Which enterprises are selected for audit?

The selection of enterprises to be audited shall be based on the following criteria:

• Analysis of risk
• Result from crosscheck Information received from a third party
• Information on tax type or any specific sector
• Information of any group of taxpayers
• Location of the enterprise etc.

Timeframe of audit

Before starting an audit, the tax administration shall give notice of an audit to the taxpayer or representative of the taxpayer.

An audit may begin 10 days of working day after the delivery of the notice letter on the audit to the taxpayer or sooner at the request of the taxpayer. In special case based on Article 100 and Article 116 of the Law on Taxation, the tax administration may conduct an audit without giving notice to the taxpayer.

In case of having enough documents, the audit duration is set no later than 03 months for desk audit and limited audit and 06 months for comprehensive audit.

Request for audit delay

In case of being unable to accept an audit as stipulated in Article 9 of this Prakas, the taxpayer may request a delay in the audit based on a proper reason not exceeding 30 days from the due audit date stated in the notice letter. In case of requesting less than 10 days, the taxpayer may make an oral request to the tax auditors. In case of requesting from 10 days to 30 days, the taxpayer shall make a request in writing to the Department Director or Director of Provincial/District Tax Branch.

Audit Result

After completing an audit, the taxpayer shall make a report on the audit result in which there could be tax re-assessment or no tax re-assessment and the notice letter on the tax re-assessment shall be sent to the taxpayer or taxpayer representative.

Protestation against Tax Re-Assessment

Any taxpayer who disagrees to any part or the whole of the tax re-assessment and protests to the tax assessment unit as stipulated in paragraph 3 of Article 15 of this Prakas has the right to protest in writing to the General Department of Taxation within 30 days after receiving the notice letter on tax collection by attaching the letter of protest to the tax assessment unit and evidence to prove that the tax assessment is not correct. The rules and procedures for the protest shall follow Prakas 1470 dated 06 November 2015 on Rules and Procedures for Resolution of Tax Protest.