MyanmarLegal Wire

Cambodia Client Alert: Double Taxation Agreements – Latest Developments

5
Feb
2019

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DOUBLE TAXATION AGREEMENTS – LATEST DEVELOPMENTS
 

In December 2018, the Royal Government of Cambodia announced that Double Taxation Agreements (“DTAs”) had been signed with Vietnam and Indonesia, bringing the number of DTAs signed by Cambodia to six. It was also announced that with effect from 1 January 2019, the DTAs signed previously with China and Brunei, and the new DTA with Vietnam, all enter into force.

A summary of the significant features of the two new DTAs and the other four is as follows:

Vietnam Indonesia Brunei China Singapore Thailand
Withholding tax rates on:
Dividends 10% 10% 10% 10% 10% 10%
Royalties 10% 10% 10% 10% 10% 10%
Interest 10% 10% 10% 10% 10% 10%*
Technical service fees 10% 10% 14% 10% 10% 10%
Permanent Establishment time test:
Building Site 183 days 183 days 183 days 9 months 6 months 6 months
Project services 183 days 183 days 183 days 183 days 183 days
*If the recipient is a financial institution

Although DTAs generally appear similar, and are based on OECD and UN templates, each agreement is the result of detailed negotiations between the two parties and there are often some interesting differences between them. As an example, the new DTA with Indonesia specifically includes Cambodian Minimum Tax in Article 2 “Taxes Covered”, and states that nothing in the DTA will prevent the application of Minimum Tax. The equivalent article in the DTA with Vietnam does not mention Minimum Tax. Another interesting difference can be seen in Article 10 concerning dividends, where the Indonesian DTA specifically allows for the imposition of withholding tax on the after-tax profits of a branch (often called “Branch Profits tax”), but the Vietnamese DTA is silent on this matter. This serves as a reminder that a careful analysis of these DTAs is extremely important when making investment decisions, or reviewing the status of existing investments.

Readers are reminded that under Instruction 4084 issued in March 2018, taxpayers wishing to apply reduced rates of withholding tax under a DTA are required to submit an application to the General Department of Taxation (“GDT”). The application must be supported by documentary evidence of the offshore party’s tax residency status, and the transaction for which the reduced rate is considered applicable.

If you have questions about this Alert, need help understanding a DTA, or require assistance with submitting an application to the GDT to utilize a DTA, please contact the undersigned, or your usual VDB Loi adviser.


VDB Loi is a network of leading law and tax advisory firms with offices in Cambodia, Indonesia, Laos, Myanmar and Vietnam. We provide the highest quality solutions for transactions and taxation. Our general areas of practice are corporate, finance, licensing and disputes. Our principal specialized areas of practice are energy, infrastructure, real estate and construction, telecom, and taxation.


You can find more information on our Cambodia office here.

Kind regards,

Robert Porter | DirectorM: +855 10 333 509
T: +855 23 964 430~434
F: +855 23 964 154
W: www.vdb-loi.com
No. 33, Street 294 (corner of Street 29)
Sangkat Tonle Bassac, Khan Chamkarmorn
Phnom Penh 12301
Cambodia
 
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