On 1 April 2020, The Ministry of Economy and Finance (MEF) has issued Prakas No.346 on Capital Gains Tax which applies to all capital gains. This Prakas outlines [defines] capital gains tax, provides guidance for calculating capital gains, and even discusses the penalty for failure to pay.
Prakas 346 was to take effect from 1 July 2020 of this year but on 9 of Oct 2020, the General Department of Taxation (GDT) announced that it’ll be in effect from 1 January 2022 in order to give taxpayers sufficient time to understand how the new Prakas will apply on (CGT).
This new Prakas is important to anyone- that may recognize capital gain [taxable income] as income from the sale or transfer of capital assets.
Capital Gains and Capital Assets [definition]
According to the Prakas; a capital asset is defined as immovable property, an investment asset, lease, foreign currency, intellectual property, and goodwill.
Capital gains are the taxable income derived from the proceeds of sale or transfer of the capital asset less allowable expenses.
Capital Gains Tax [CGT] is due on the immovable property when any of the following conditions are present
- Sale or transfer of said capital asset.
- When registration is made with relevant authorities on the transfer of ownership or possession rights of a capital asset;
- The capital asset was transferred by a court judgment
Consequences of failure to pay CGT
The taxpayer is required to file a prescribed tax return and pay the relevant CGT at the tax office within three months upon the recognition of the capital gains.
It is important to note, Article 17 emphasizes that failure to pay the relevant CGT is incomplete in the right to ownership or transfer of capital property.
Calculating Capital Gains Tax [ immovable property]
- Determination-based method: A taxpayer can deduct 80% of the sale/transfer proceeds as the assumed total cost of such immovable property.
- Actual-expense-based method: Actual expense related to estate and extracted by appropriate supporting documents, including invoices, receipts, agreements, are allowed as deductible expenses.
Actual expense based deduction could include but are not limited to:
- Commission fees
- renovation and maintenance
- property evaluation fees
- land management fees:
What’s happening next
Prakas-346 will be active from 1 January 2022 as announced by the GDT. Resident and non-resident taxpayers with recognized capital gains will need to pay monies owed to the General Department of Taxation.
How ASEANTAX can help you
Here at ASEANTAX, we know that a lot of people like learning more about the system [the government]. As we acquire and collect a lot of data, laws (and attached Prakas), regulations, etc., we thought it made a lot of sense to put it all together in one place so that people would have an easily accessible resource where you can learn more about some of the complexities of taxation here in Cambodia. You can read more about the Law Library, which we have created as an additional free resource for our customers.
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Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice.