Technical Update

This Prakas provides certain tax incentives and relief granted to the Agriculture Sector, particularly those involved in the cultivation, production, domestic supply, or export of paddy, rice, corn, soybeans, pepper, cassava, cashew nuts, rubber, Pailin longan, mango, banana, animal husbandry, and aquaculture and domestic palm oil products as raw materials for animal feed.

Below is the summary of the tax incentives/relief granted, valid until the end of 2027:

•The Value Added Tax (VAT) on local supply of goods/services to enterprises that cultivate,produce, supply domestically or export the above-mentioned agricultural products shall be borneby the state (i.e., VAT state-charged).

•The VAT on the supply of local palm oil as raw materials for animal feed production shall also beborne by the state (i.e., VAT state-charged).

•Enterprises that are suppliers as stated above shall not be required to charge VAT on theirsupplies but shall be allowed input tax credits related to the supplies.

•Enterprises that cultivate, produce, supply domestically, or export the above-mentioned agriculturalproducts shall also receive the following tax relief:

-Minimum Tax (MT) suspension

-Prepayment of Tax on Income (PToI) suspension

-Withholding tax (WHT) exemption on payments for the supply of services provided by non-VATregistered suppliers

To be eligible for such tax incentives, the above-impacted taxpayers must meet the following conditions; otherwise, the tax incentives will be revoked:

a.Request a state-borne VAT certificate from the General Department of Taxation (GDT).

b.Attach the list of suppliers of goods or services with the monthly VAT declaration.

c.Maintain accounting records in accordance with applicable laws and legal regulations.

d.Submit (monthly and annual) tax declarations to the GDT according to the format, time, and placedetermined by the GDT.

On a related note, the GDT issued Instruction no. 076 GDT dated 2 January 2026 to provide guidance on the procedure for requesting state-borne VAT incentives for the supply of goods and services in the E-Filing system.

Meanwhile, enterprises that supply domestic palm oil products as raw materials for the production of animal feed must attach a list of the enterprises receiving the supplies to the monthly VAT declaration, in order to be eligible for the state-borne VAT incentive.

The government acknowledges the potential of this industry to contribute to the local economy, and as such, it has extended the similar tax incentives/relief previously granted under Prakas No. 170, dated 20 March 2024. It is important to highlight that the eligible taxpayers must comply with the conditions set out under this Prakas to remain eligible for the said tax incentives/relief.

This Prakas provides that the VAT on the supply of locally produced goods that are basic food, shall be borne by the state (i.e., VAT state-charged), effective from 1 January 2026 onwards.

This state-borne VAT provision shall cover the following locally produced items that are essential for daily living, and valid until the end of 2028:

1.Livestock product either fresh meat, or processed by fermented, marinated, or smoked.

2.All types of pet eggs, whether fresh or processed.

3.All types of freshwater or saltwater fish, including lobsters/prawns, shrimps, baby shrimps, crabs, and all types of shellfish, whether fresh or processed by fermented, marinated, or smoked.

4.All types of sugar that are not in the form of candy.

5.All kinds of salt.

6.All kinds of fish sauce or soy sauce.

The state-borne VAT provision does not apply to the supply of the same items, or food, supplied by restaurants.

The government’s objective of applying the VAT state-charged provisions on these items considered as basic goods and necessities would, in a way, alleviate the concerns of its citizens on the rising cost of living. Impacted businesses in the retail sector (e.g., grocery stores, etc.) must ensure the proper implementation of the VAT state-charge mechanism on these supplies, and ensure keeping the relevant documentation (e.g., VAT state-charge invoice, accounting records, etc.) to mitigate any future tax risk.

This GDT Instruction was issued to clarify the tax implications and documentary requirements regarding accrued revenue or expenses.

In accordance with the 2023 Law on Taxation (LoT) and the Prakas on Tax on Income (ToI), taxpayers are required to comply with the CIFRS by maintaining accounting records on an accrual basis. In accordance with the accrual basis of accounting, taxpayers must record accrued expenses in the relevant period, regardless of whether the payment has been made. For WHT purposes, such accrued expense shall already trigger the applicable WHT obligations. 

Below are the salient provisions of this Instruction:

The Instruction further provides that estimates of accrued revenue or expenses must be made based on historical transaction data for similar or comparable transactions (e.g., according to the duration, or the amount of usage per month, etc.).

On a related note, the GDT issued Instruction no. 37706 to provide guidance on how to declare the accrued revenue/expense transactions in the E-filing system.

The previous Instructions issued by the GDT focus on the WHT obligations of taxpayers in respect of accrued expenses. This Instruction further reinforces that rule, and at the same time, clarifies the tax implications on accrued revenue. In effect, it would be reasonable to expect that timing differences would arise between the PToI/ToI declaration and the VAT output declaration on the accrued, as well as in the WHT and VAT input declaration on accrued expenses. It is very important that taxpayers perform a regular reconciliation of these timing differences to properly justify the tax declarations submitted to the GDT. Needless to say, the keeping of the relevant supporting documents (e.g., vouchers, invoices, accounting records, etc.) is equally vital.

Crucially, taxpayers shall ensure that tax invoices are properly issued in accordance with the Sub-decree on VAT, which requires that invoices be issued no later than 7 days after the goods are shipped or services are rendered, or after payment is made if payment occurs before the goods are shipped or services are rendered.

Meanwhile, it would be worth noting that the recording of the accrued revenue and expenses must be made in accordance with the accrual principle under the Cambodian International Financial Reporting Standards (CIFRS). Taxpayers are recommended to consult with their respective accounting advisors to understand this accounting concept to ensure proper compliance with this Instruction.

This Prakas provides temporary tax relief for the textile and garment industry by granting PToI suspension until the end of 2028.

The PToI suspension shall apply to Qualified Investment Projects (QIP) in the textile and garment industry whose Income Tax Holiday (ITH) incentives have already expired, including textile enterprises, clothing manufacturing enterprises, footwear manufacturing enterprises, handbag and briefcase manufacturing enterprises, and hat manufacturing enterprises, as well as enterprises producing brand labels for clothing, glove manufacturing enterprises, sock manufacturing enterprises, towel manufacturing enterprises, pillowcase manufacturing enterprises, duvet cover manufacturing enterprises, bedsheet manufacturing enterprises, and tablecloth manufacturing enterprises for export. To qualify for such relief, the impacted taxpayer must: (1) maintain accurate accounting records, (2) submit tax declarations and pay the applicable taxes on time, and (3) provide an independent auditor’s report to the GDT.

This PToI suspension is an extension of the same tax relief provided to the textile and garment sector in previous years. This sector is one of the backbones of the Cambodian economy, and this tax relief echoes the government’s efforts to make this sector more sustainable, promote exports, and create a positive impact for workers and citizens who benefit from this sector.

As committed tax advisors to our clients, we welcome any opportunities to discuss the relevance of the above matters to your business.