Cambodia has revealed its plans to introduce specific VAT rules on cross-border supplies by foreign digital businesses.
In doing so it will follow the path of its fellow ASEAN member states, Malaysia and Singapore (rules effective in both jurisdictions since January 2020); Indonesia (since July 2020), and Thailand, where a rule change is due to come into effect in September this year.
We are also aware of plans to tax foreign digital businesses in the Philippines where a draft Bill is before parliament awaiting a final decision.
Cambodia’s plans are contained in a recent Sub-decree no. 65 (dated April 8, 2021) and issued by the Royal Government of Cambodia on the implementation of VAT for foreign digital businesses or e-commerce.
Some highlights of Cambodia’s plan to tax foreign digital businesses:
This helpful update from Acclime in Cambodia also lists the type of transactions that will be affected. They include, among others, electronic downloads (e.g. software), application hosting, provision of customer support from offshore, online shopping and web-based broadcasting.
According to the Khmer Times, Cambodia’s government has been mulling over such a move to tax digital services by foreign businesses for some time.
The government aims to collect tax from these businesses that are currently not registered in Cambodia and therefore have no VAT obligations. By placing the obligation on such digital businesses to register and then collect and remit VAT on their sales to customers in Cambodia the government expects a significant revenue boost.
As a consequence of the COVID-19 pandemic the number of internet users increased dramatically in 2020. The Khmer Times article states that “more than 16 million people, including mobile and fixed internet users, were registered as internet subscribers last year, a year-on-year increase of 40 percent.” For context, the population of Cambodia is also 16 million.
Acknowledgement: With thanks to Hugh Darwell and team at Acclime Cambodia.
The information contained in this publication (“Information”) has been provided to you for general information purposes only and we recommend that you obtain professional advice before acting or refraining from action as a result of the Information. Taxamo accepts no liability for any loss occasioned to any person acting or refraining from action as a result of the Information.
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