On 1 January 2020, the double taxation agreement between the Royal Government of the Kingdom of Cambodia (“Cambodia”) and the Government of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”) for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income became effective.
Cambodia has entered into double taxation agreements with Brunei, China, Indonesia, Malaysia, Singapore, South Korea, Thailand, and Vietnam.
More specifically, the provisions of the Cambodia-Hong Kong double taxation agreement include a 10% withholding tax in respect of each of the following four categories: dividends; royalties; technical services; and interest – noting that interest arising in one of the two countries and paid to certain government bodies of the other country may be exempt from tax in the State where such interest originated.
In Cambodia, double taxation is eliminated by means of a deduction from the tax on income of the resident of Cambodia in an amount equal to the tax paid in Hong Kong. In addition, the double taxation agreement provides for an information exchange mechanism between the tax authorities of Cambodia and Hong Kong to enhance tax enforcement against tax evasion, base erosion, and profit-shifting by taxpayers.
Taxpayers in Cambodia must apply for a certificate of tax residency and provide certain supporting evidence required by the General Department of Taxation of the Ministry of Economy and Finance before using the reduced withholding tax rates available pursuant to the Cambodia – Hong Kong double taxation agreement.