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Prakas No. 525
The Ministry of Economy and Finance (MEF) promulgated Prakas No. 525 on June 19, 2020, which aims to reduce the withholding of withholding when the Cambodian banks and microfinance institutions ("MFI") pay domestic and overseas interest payments Tax ("WHT") tax rate to help target lenders achieve increased cash flow in the banking system. The standard WHT interest rates applicable to the payment of interest to local and non-local lenders are 15% and 14%, respectively.
For banks and monetary financial institutions that sign new loans with resident and non-resident borrowers, the WHT interest rates are as follows:
●From April 2020 to December 2020, the tax rate on new loan interest paid to resident and non-resident lenders is 5%.
●The new loan interest tax rate paid to resident and non-resident taxpayers in the2021 tax year is 10%.
●Starting from the 2022 tax year, the standard tax rate will be applied to pay interest tax to residents and non-resident lenders.
For banks and monetary financial institutions that have existing loans with resident and non-resident lenders, the interest rates are as follows:
●From April 2020 to December 2020, the interest tax rate paid to residents and non-resident lenders is 10%.
●From the 2022 tax year, the standard tax rate will be applied to pay profits and taxes to resident and non-resident lenders.
The withholding tax reduced in accordance with the above regulations will be borne by the Royal Government of Cambodia, so that banks and monetary financial institutions can increase the cash flow in the banking system. In order to reduce the aforementioned withholding tax rate, banks and microfinance institutions must keep the following supporting documents, which may be required in future tax audits:
●Loan agreement certified by a lawyer;
●Transfer documents related to the loan;
●And evidence of loan and interest expenses in the accounting books of banks and financial institutions.
Sub-Decree No. 79 ANKr.BK
Penalties for violations of accounting and auditing laws
The Second Decree No. 79 issued on June 1, 2020 stipulates the penalties applicable to companies that violate the Accounting and Auditing Law. Decree No. 79 applies to:
●Enterprises or legal persons registered as large and medium-sized taxpayers with the Ministry of Commerce and/or the State Administration of Taxation;
●All non-profit entities registered with specialized ministries and agencies;
●As well as all certified public accountants and auditors of the Cambodian Institute of Certified Public Accountants and Auditors ("KICPAA"), they have obtained accounting and/or auditing professional licenses issued by the National Accounting Commission ("NAC").
| Type of violation | penalty (Large) | penalty (Medium size) |
| Use an accounting period different from the standard period prescribed by the Accounting and Auditing Law without approval | About 500 USD | About 375USD |
| Khmer language is not used in accounting records and financial reports | About 500 USD | About 375USD |
| Unapproved use of currencies other than riel in accounting records and financial reports | About 500 USD | About 375USD |
| Failure to submit or late submission of the annual financial report to the Secretary-General of the National Audit Committee within the deadline | About 500 USD | About 375USD |
| Failure to keep accounting documents in accordance with the law/not holding accounting records/not preparing financial reports in accordance with accounting standards/not submitting financial statements for independent audit/not maintaining financial reports in accordance with accounting standards | About 2500 US | About 2000US |
As always, the team of Zhuozhi (Cambodia) Accounting Firm is always ready to answer any questions you have about this tax issue and other tax issues.
