Cambodia: Clarification of rules regarding when withholding tax is due

The General Department of Taxation (GDT) issued guidance—Instruction No. 12350 GDT (dated 20 April 2023)—to clarify the rules regarding the timing of the imposition of withholding tax on various transactions.

•  Withholding tax is due at the time when the payment is made or recorded in the accounting book. Therefore, in accordance with the Cambodian International Financial Reporting Standard (CIFRS), the taxpayer must record the accrual expenses from economic activities every month, regardless of the payment status.  
• As for expenses that are subjected to withholding tax, taxpayers have the obligation to withhold and pay withholding tax to the tax administration every month in accordance with the relevant tax laws and provisions in force.

This guidance stems from the GDT’s observation that some enterprises may have misinterpreted the withholding tax rules and only declare the applicable withholding tax at the time of payment, instead of declaring the withholding tax at the time of accrual, which is to be recorded on a regular basis in accordance with the CIFRS.

However, depending on the nature of the transaction and the arrangement between the parties involved, the accrual of the expense may only be reasonably recorded at a particular time (i.e., not necessarily monthly). This applies, for example, to transactions that are billable based on completion of specific milestones, or if the basis of the accrual can only reasonably be determined on a quarterly or semi-annual basis. This matter requires further clarification from the GDT as Instruction No. 12350 GDT may be interpreted that taxpayers are required to record accrued expense on a monthly basis.

Read an April 2023 report [PDF 112 KB] prepared by the KPMG member firm in Cambodia