Capital Gains Tax

Capital Gains Tax (“CGT”) has finally been introduced in Cambodia by Prakas no. 356 MEF.Prk dated 1 April 2020, issued by the Ministry of Economy and Finance (“MOEF”).

As per the Prakas, taxpayers both resident and non-resident are subject to CGT at the rate of 20% on their gains from the sale or transfer of capital. The term “capital” includes immovable property, finance lease, investment asset, goodwill, intellectual property, and foreign currency. Each item is defined as follows:

• Immovable property refers to land, houses, buildings, and other construction built on the land in line with regulations on tax on immovable property
• Finance lease refers to a transaction where a lessor enters into an agreement with a lessee, where the lessee is granted the right to own and use immovable assets in a certain period by paying a lease fee periodically or based on the equivalent value
• Investment asset refers to stock, bonds, and securities issued by a private enterprise
• Goodwill refers to licensed customer/client list and brand name
• Intellectual property refers to technology, literary and art works, logos, and pictures and paintings that are used for business purposes
• Foreign currency refers to currency apart from KHR

CGT is exempted on sale or transfer of:

• Property belonging to government institutions
• Property belonging to foreign diplomatic and consular missions, international organizations, and agencies of technical cooperation of other governments
• Principal residence of the taxpayer that is owned at least five years before sale or transfer
• Immovable property within the family as per Stamp Tax regulations, except sales between siblings, father/mother in-law and children in-law, and grandfather/grandmother in-law and grandchildren in-law
• Assets sold or transferred for serving public interest in line with the Law on Expropriation

To calculate CGT, we need to take revenue from the sale or transfer, deduct expenses, and multiply by 20%. For expenses, the MOEF allows as follows:

1. Allowed deductible expenses equal to 80% of revenue from sale or transfer – this method is applicable to sale or transfer of immovable property only
2. Allowed deduction of actual expenses

Taxpayers must fill in tax returns as required by the General Department of Taxation (“GDT”) and pay the CGT within three months after the gain takes place. The transfer of ownership is yet to be legalized in case there is no proof that CGT has been paid. CGT is effective from 1 July 2020 onwards. However, due to a delay in official announcement to the public, the GDT has confirmed that it would start collecting the said CGT from 2021.