Cambodia Tax Update

Double Taxation Agreement with Hong Kong Is Effective

On 1 January 2020, the double taxation agreement between the Royal Government of the Kingdom of the 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.

The double taxation agreement was signed by Deputy Prime Minister of the Ministry of Economy and Finance of Cambodia, Dr. Aun Pornmoniroth, and the Secretary for Financial Services and the Treasury of the Government of Hong Kong, James H. Lau Jr., on 20 June 2019 and 26 June 2019, respectively, and became effective after the completion of certain procedures required for the double taxation agreement to enter into force.

Cambodia has entered into double taxation agreements with Brunei, China, Indonesia, Malaysia, Singapore, South Korea, Thailand, and Vietnam, each of which double taxation agreements follow the United Nations model double taxation agreement.

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 that wish to take advantage of the reduced withholding tax rates available pursuant to the Cambodia-Hong Kong double taxation agreement 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.

The DFDL Cambodia Tax and Customs Practice has won the International Tax Review tax firm of the year award in Cambodia for three consecutive years and has broad experience with the application of double taxation agreements including experience filing the necessary paperwork in order for tax residents to obtain the reduced withholding tax rates as outlined above.

Please do not hesitate to contact us if we may assist and advise you in respect of this or other Cambodian tax matters.

Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.