VDB Loi Cambodia Clinches Historic Tax Ruling

Loss carry-forward for corporate income tax purposes is challenging in Cambodia, as various restrictions and limitations are imposed. For example, companies that undergo a “change in shareholder” are not permitted to offset their tax losses from before the change. This means that start-up companies in particular are hit hard by this tough rule. Such companies may actually end up paying taxes twice on their income just because they had a new shareholder investing in the company. In a landmark ruling from the General Department of Taxation, the VDB Loi tax team, led by Sivila Khim and Laysim Sim, were able to convince the authorities to relax their interpretation of this rule. The team obtained a ruling for a client in the financing sector that allowed the company to offset prior tax losses even though there had been a change in shareholding because the change did not exceed a certain percentage. The team argued that since the regulations do not mention any percentage, it is left to the interpretation of the authorities. The ruling was received with great satisfaction by the client, as the VDB Loi tax team racked up this impressive win. The new Prakas on Tax on Income of 2020 has removed the change in shareholding issue for loss carry-forwards for the future.