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The Classification of Taxpayers Under the Real Regime Tax System and Fees for Patent Tax Certificates
By Simon Burlinson
Recently, the Ministry of Economy and Finance issued Prakas 1819 on the classification of taxpayers under the real regime tax system (“Prakas 1819”) and Prakas 1821 on the procedure for the management of patent tax collection (“Prakas 1821”). The purpose of Prakas 1819 is to classify real regime taxpayers into three separate categories and Prakas 1821 sets out the patent tax fees in relation to each category. As before, the patent tax fees must be paid before 31 March in each fiscal year.
The categories into which real regime taxpayers are classified, and the patent tax fees payable by each, are as follows:
1. Small taxpayers
This category includes sole proprietorships or partnerships that:
a. Have an annual turnover of between KHR 250,000,000 to KHR 700,000,000 (approximately USD 62,500 to USD 175,000);
b. Realize a taxable turnover greater than KHR 60,000,000 (approximately USD 15,000) in any three consecutive calendar months at the end of a tax year;
c. Estimate a taxable turnover of KHR 60,000,000 or more for any proceeding three consecutive months; or
d. Engage in any bidding or quotation in respect of goods or services supplied as duties.
The patent tax fee for small taxpayers is KHR 400,000 (approximately USD 100) per business activity in each province.
2. Medium taxpayers
Medium taxpayers include enterprises that:
a. Have an annual turnover of between KHR 700,000,000 to KHR 2,000,000,000 (approximately USD 175,000 to USD500,000);
b. Are incorporated as legal entities; or
c. Are sub-national government institutions, associations and non-governmental organizations.
The fee payable in respect of patent tax for medium taxpayers is KHR 1,200,000 (approximately USD 300) per business activity in each province.
3. Large taxpayers
Large taxpayers include enterprises that:
a. Have an annual turnover greater than KHR 2,000,000,000 (approximately USD 500,000);
b. Are subsidiaries of foreign companies;
c. Are registered as a qualified investment project (“QIP”) as approved by the Council for the Development of Cambodia; or
d. Are national government institutions, foreign consulates, embassies, international organizations or technical cooperation agencies.
The fee payable in respect of patent tax for large taxpayers is KHR 3,000,000 (approximately USD 750) per business activity in each province.
As well as detailing the patent tax fees payable by each category of real regime taxpayer, Prakas 1821 serves as a reminder to businesses that they must pay the applicable fee for each business activity conducted in each province. For example, a taxpayer who conducts unrelated business activities, such as transportation and hotel services, in Siem Reap must pay patent tax for each business activity. The same taxpayer conducting the same activities in both Siem Reap and Phnom Penh must pay four patent tax fees (i.e. two unrelated business activities in two provinces).
However, related business activities are considered as a single activity and only incur liability for a single patent tax payment. For example, a hotel with entertainment clubs, restaurants, massage parlors and fitness areas in one province attracts only a single patent tax fee as these activities are considered to be related to the business activity of “hotel services”.
Sciaroni & Associates Taxation Practice Group offers a full range of tax compliance, advisory and dispute resolution services, from the filing of monthly and annual tax returns and patent tax filings, tax registrations and structuring advice to conducting due diligence in corporate transactions and assisting clients with disputes involving the tax authorities. We advise many of our clients on tax optimization strategies and assist them during tax audits. At every stage of a company’s life, our advisers ensure clients are fully compliant with the dynamic field of taxation in Cambodia. To our local clients we bring international standards of professional service and to our international clients we merge our understanding of local compliance and legislative practices with quality of service and financial information required for global business.
Sciaroni & Associates, one of Southeast Asia’s leading professional services and investment advisory firms, has been providing skilled counsel and knowledgeable business insights for over two decades. Based in Cambodia, with legal offices in Laos and Myanmar, our experienced team of advisors brings considerable general and sector-specific expertise to the challenges confronting companies doing business in emerging markets. We are proud that our clients comprise many of the world’s premier companies, banks, financial institutions, governments and global development organizations.
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Sciaroni & Associates is a leading professional and investment advisory firm doing business in Southeast Asia since 1993. Based in Cambodia with legal offices in Laos and Myanmar, we provide experienced advice and business insights to many of the world’s leading companies, governments, economic think tanks, global development funds, international NGOs and the Royal Government of Cambodia in accordance with strict international standards.
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