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U.S. Income Tax Return Preparation and Advice for American Citizen (Expatriates) Living in Cambodia




At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Cambodia for over 8 years. Our clients hail from all parts of the country - Phnom Penh and Batdambang, Siem Riep and Sihanoukville, Paôy Pêt and Kâmpóng Chhnang.





As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country. 


We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS


The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.


We have many clients living in Egypt and know how to integrate your U.S. taxes into the local income taxes you pay.  Any Egyptian income tax you already pay can be claimed as against the tax liability on your U.S. return on the same income.

As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end.  (You cannot file using the calendar year as is standard in Egypt for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.

There are other forms which must be filed if you have foreign bank or financial accounts;  foreign investment company; or own 10% or more of a foreign corporation or foreign partnership.   If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form.  These penalties are due regardless of whether you owe income taxes or not.

We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.

Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.



Below we include information on the Cambodian Tax System for the American Expatriates.

Cambodia Tax on Salary rates are progressive, between 0% - 20%.

 

Monthly Salary (KHR)           /           Cumulative Tax          /  Tax Rate %

KHR 0 - 500,000                               0                               0%
KHR 500,001 - 1,250,000                  37,500                        5%
KHR 1,250,001 - 8,500,000               762,500                      10%
KHR 8,500,001 - 12,500,000             1,362,500                   15%
KHR 12,500,001 and above                                     20%

 

A Cambodian resident taxpayer's worldwide salary will be subject to Cambodian Tax on Salary. For nonresidents, only the Cambodian sourced salary will be subject to Tax on Salary. The place of salary payment is not relevant in determining source.

Residency: A Cambodian resident taxpayer includes any physical person who:

- has residence in Cambodia, or
- has a principal place of abode in Cambodia, or
- is physically present in Cambodia for more than 182 days in any 12 month period ending in the current tax year.

Cash salary tax rate for nonresidents is a flat 20%. This constitutes a final tax.

As the Tax on Salary rate scales are stated in Cambodia Riel, earnings in foreign currency have to be translated into Cambodian Riel. Official exchange rates are provided for this purpose.

Employers must make monthly Tax on Salary declarations and payments not later than the 15th day of the succeeding month. There is no annual return.

 

Tax Relief: The following relief is given to resident individuals:
- Child relief for each child per month (14 years old or 25 years old if still at school): KHR 75,000
- Dependent spouse: KHR 75,000

 

Taxation of Investment Income and Capital Gains: Non-employment income sourced from within Cambodia is not subject to salary withholding tax. However, profits tax may be payable.

Income from dividend, interest and rental are not subject to salary tax; however, they may be subject to profit tax.

 

Relief for Foreign Taxes: A resident taxpayer who has received foreign-sourced salary and who has paid taxes according to foreign tax laws shall receive a tax credit in Cambodia providing there is compliance with certain conditions.

 

General Tax Credits: There are no other general tax credits for resident employees apart from the above mentioned tax relief.

Social Security Tax: There is no social security tax in Cambodia.

Gift, Wealth, Estate, and/or Inheritance Tax: There is no gift, wealth, estate, and/or inheritance Tax in Cambodia.

Real Estate Tax: There is no real estate tax in Cambodia.

Unemployment Tax: There is no unemployment tax in Cambodia.

Cambodia Corporate Tax Rates

The standard rate of profit tax rate for companies in Cambodia is 20%. Oil and gas, and a number of mineral exploitation activities are subject to a 30% tax rate. At present, a preferential rate of 9% ( which will be phased out by 2010) is available for investments which meet certain criteria required by the Council for the Development of Cambodia (CDC). The CDC might also grant tax holidays to certain projects for up to eight years depending on their satisfaction of these criteria. Profit tax returns are to be filed annually within three months of the end of the calendar year. In addition, a tax on profit prepayment equal to 1% of turnover, is required to be paid on a monthly basis by the 15th day of the succeeding month.

Resident taxpayers are subject to tax on worldwide income / profits while nonresidents are taxed on Cambodian sourced income / profits only. Residents earning foreign sourced profits and income can receive credits for foreign taxes paid.

 

Taxes in Cambodia

- Tax on Profit
- Minimum Tax
- Withholding Tax
- Value Added Tax
- Import Duties
- Tax on Salary

There are various other taxes that affect certain investors, including:
- Accommodation Tax
- Specific Tax on Certain Merchandise and Services
- Tax for Public Lighting
- Other taxes

 

Cambodia Rates of Tax on Profit

Tax                                                     /                                  Tax Rate %

Standard tax rate                                                                  20%
Preferential rate                                                                    9% (to be phased out by 2010)
Oil and gas, and certain mineral exploitation activities               30%
Insurance activities                                                              5% (on gross premium income)
Resident individuals                                                              0% - 20%

 

Capital Gains Tax: Cambodia does not have a separate capital gains tax. Any gain on the sale of fixed assets and investment is subject to Tax on Profit.

 

Tax Prepayments

A Prepayment of Tax on Profit equal to 1% of monthly turnover inclusive of all taxes except VAT, is required to be paid on a monthly basis by the 15th day of the succeeding month. The Prepayment can be offset against the annual Tax on Profit liability and the Minimum Tax.

Where a taxpayer has a Tax on Profit exemption, the taxpayer is also exempted from the Prepayment obligations. However, a nil monthly return will need to be lodged.

Where a taxpayer is not subject to Minimum Tax, a monthly Prepayment of Tax on Profit must still be made. However, unutilised Prepayments from a prior year can be used to offset the current amount due and no physical payment may be required.

 

Investment incentives

The investment incentives primarily consist of:
- An exemption from Minimum Tax.
- A Tax on Profit holiday of up to 6 years.
- Import duty exemptions.

Annually, a QIP is required to obtain a Certificate of Compliance (CoC) from the CDC to guarantee its investment incentives. The CoC is intended to provide confirmation that the QIP has acted in compliance with the relevant tax regulations.

 

Tax Holidays

A Qualified Investment Project (QIP), being a project recognised and registered with the Council for the Development of Cambodia (CDC) will  be entitled to a tax holiday. The holidays take the form of a complete exemption from Tax on Profit. The tax holiday period begins from the earlier of the year the QIP becomes profitable or 3 years from it's first revenue . The duration of these holiday periods is from 3 to 6 years.

 

Losses

Taxpayers can carry forward their losses for five years. The carry-back of losses is not permitted. There is no provision for any form of consolidated filing or group loss relief.

To be eligible to carry forward tax losses, a taxpayer must not change its activities or ownership.

If a taxpayer received a unilateral tax reassessment from the General Department of Taxation (GDT), a taxpayer will not be able to utilise the tax losses brought forward in the year of reassessment.

 

Minimum Tax

Real Regime taxpayers are subject to a separate Minimum Tax. The Minimum Tax is an annual tax with a liability equal to 1% of annual turnover inclusive of all taxes except VAT. However, an exemption has been provided for QIPs.

As a separate tax to the Tax on Profit, Minimum Tax is due irrespective of the taxpayer's profit or loss position. A taxpayer will pay either Tax on Profit or Minimum Tax, whichever is higher.

 

Foreign Branch Income: Generally, foreign branch income is taxable. The tax paid overseas is creditable.

Domestic Branch Income: Incorporate into the head office's tax return.



Dividend Distribution

Distributions of dividends are subject to Additional Tax on Profit on Dividend Distribution (Additional Tax on Profit) as follows:

Distribution of profits that   /  Additional ToP calculation
were subject to a Tax on
Profit rate of                                      

0%                                          Distribution x 20/100
9%                                          Distribution x 11/91
20%                                                    Nil
30%                                                    Nil

A shareholder is entitled to establish a special dividend account from which the relevant dividend may be on-paid without further Additional Tax on Profit obligations.

A dividend will be exempt from tax in the hands of the shareholder if Additional Tax on Profit and Withholding Tax (for nonresident shareholders) have been paid.

Withholding Tax needs to be withheld on payments made by residents (and it seems only those who are real regime). The withheld tax constitutes a final tax when withheld in respect of resident and nonresidents.

The types of payments caught are as follows:

Payment to residents

- Rental: 10%
- Interest: 15% (except payment to a Cambodian bank)
- Services: 15% (except payment to a registered taxpayer and supported by a valid VAT invoice)
- Royalties: 15%

Payment to non-residents

- Interest: 14%
- Royalties rent and other income connected with the use of property: 14%
- Management or technical fees (not defined): 14%
- Dividends: 14%

Withholding Tax is due when the amount is paid. An expense is considered paid when it is accrued.

Withholding Tax is required to be remitted by the payer on a monthly basis, by the 15th day of the succeeding month.

Cambodia Other Taxes

Tax for Public Lighting (TPL): TPL is imposed on the distribution in Cambodia of both foreign made and locally produced alcoholic and tobacco products.

TPL is levied at 3% of the value of such products at the time of each in-country sale. Value for these purposes includes all taxes other than TPL and VAT.

 

Accommodation Tax: Accommodation Tax is calculated at 2% of the accommodation fee inclusive of all taxes and other services except Accommodation Tax and VAT.

Accommodation Tax in Cambodia is a monthly tax and is due for payment not later than the 15th day of the following month for real regime taxpayers and by the 10th day of the following month for estimated regime taxpayers.

 

Tax on House and Land Rent: Businesses (other than those in the real regime) renting out land, buildings, certain equipment, storage facilities, etc are liable to Tax on House and Land Rent. The tax is levied at 10% of the relevant rental fee.

 

Patent Tax: Registered businesses in Cambodia must pay a (relatively nominal) Patent Tax on initial business registration and annually thereafter. Patent Tax is levied with reference to prior year turnover or estimated turnover.

 

Fiscal Stamp Tax: Fiscal stamp tax is to be paid on certain official documents and, perhaps more importantly for foreign investors, certain advertising postings and signages. Amounts vary according to such factors as the location of the signage, illumination and nationality of any scripted words.

 

Tax on Unused Land: Land in towns and other specified areas in Cambodia, without any construction, or with construction that is not in use, and even certain built-upon land, is subject to Tax on Unused Land. The tax is calculated at 2% of the market value of the land per sq.m as determined by the Commission for Evaluation of Unused Land at 30 June each year. The owner of the land is required to pay the tax by 30 September each year.



Registration Tax (or Property Transfer Tax): Certain documents relating to the establishment, dissolution or merger of a business, or the transfer of title in certain assets (such as land and vehicles) are subject to Cambodia Registration Tax. Registration tax is imposed at the rate of 4% and is generally levied on the transfer value.



Tax on Means of Transportation: This tax imposes a number of statutory fees on the registration of certain transportation vehicles including trucks, buses, motor vehicles, and ships.



Tax Stamps: Domestic producers or importers of cigarettes have the obligation to buy and affix Tax Stamps on packets of cigarettes. No person is allowed to sell or display packaged cigarettes for sale without a Tax Stamp.

Cambodia Sales Tax / Value Added Tax Rates

The standard rate of Value Added Tax (VAT) in Cambodia is 10%.

There is also a 0% VAT rate. This rate applies only to goods exported from Cambodia and services consumed outside Cambodia. Exports are defined to include the international transportation of passengers or goods, or services in connection thereto. In addition, this 0% rate applies to supporting industries or sub-contractors who supply certain goods and services to exporters (i.e. garment manufacturers, textile and footwear industries) subject to certain criteria.