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Jan 20, 2017

Instruction No. 017 dated 27 December 2016 on the Implementation of New Rate of Tax on Salary

By Simon Burlinson

On 27 December 2016 the Ministry of Economy and Finance (“MEF”) issued Instruction No. 17 on the Implementation of the New Tax Rate on Salary  (“Instruction 17”).  The MEF has issued Instruction 17 in accordance with Article 47 of the Law on Taxation which has recently been amended by the Law on Financial Management 2017, dated 14 December 2016. 

The purpose of Instruction 17 is to inform all resident taxpayer employers which have an obligation to withhold salary tax on behalf of their employees to withhold a new tax rate on salary from January 2017, and to file their relevant tax returns no later than 20 February 2017.

Essentially, the non-taxable portion of an employee’s income has increased so they will need to earn a higher amount in order for their salary to become taxable: a most welcome development for a great many people.

Table of New Progressive Rate Tax on Salary

Taxable Parts of  the Monthly Salary   Tax Rate
From 0 riels to 1 000 000 riels  0%
From 1 000 001 riels to 1 500 000 riels  5%
From 1 500 001 riels to 8 500 000 riels  10%
From 8 500 001 riels to 12 500 000 riels  15%
More than 12 500 000 riels  20%







According to Instruction 17, the monthly deduction rate applied to taxable salary for dependent children and spouses of employees has also been increased from KHR 75,000 (or approximately USD 18.75) to KHR 150,000 (or approximately USD 37.50).  (As a reminder, Prakas No. 396, dated 27 June 1997, on Salary Tax, defines dependent children and spouses of employees as (respectively): (a) those that are under 14 years old or are over 14 years old but under 25 years old and in full-time education at officially recognized educational institutions; and (b) spouses who are not in employment.)

The rationale for this gratefully received Notification 17 appears to reflect the good intentions extended by the Government to grant tax exemptions and increased deduction-threshold rates for low-salaried employees and public staff, most of whom are workers in the garment industry, workers in the hotel or tourist industry, teachers, soldiers and/or policemen. 

Developments of this kind by the MEF can only be lauded as recognition of the contribution the benefactor employees make to Cambodia’s continued development.

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.

For more information please visit www.sa-asia.com or contact us at info@sa-asia.com

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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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