Introduction

Value Added Tax (VAT) is part of business life. The consideration of the implication of VAT over business activities is extremely essential and should be pre-planned accordingly.

In Cambodia, for every day-to-day operation of a business, VAT applies to any supply of goods or services ranging from trading, construction, manufacturing, and service providing. There is a simple standard rate of 10% except for some exempted products or services.

Unlike the sale tax imposed in certain countries, in Cambodia, VAT is a creditable tax. In this respect, VAT can be refundable or claimable from Government through defined procedures and timeframe as specified in Prakas from the General Department of Taxation.

Definition

According to Law on Taxation 2003, VAT is chargeable on taxable supplies made by a taxable person in the course or furtherance of any business carried on by him. Supplies may be of goods or services. A taxable supply is a supply of goods or services made in Cambodia, other than an exempt supply. A taxable supply is either standard-rated or zero-rated. As above mentioned, the standard rate is 10%

Implication

Trading Business in Cambodia is generally required to register for VAT certificate which specifies the location of the business and its purpose. In highly regulated products such as medicine, the trading business also require to apply for import licenses in addition to VAT certifi cate for eligible for importation.

Certain supplies, which fall within the classification of standard rate supplies, are charged at a rate of 10%, and Zero-rated supplies are taxable at 0%. A taxable supplier whose outputs are zero-rated but whose inputs are standard-rated will obtain repayments of the VAT paid on purchases or importation as specified in Prakas from the Ministry of Economy and Finance (MoEF).

An exempted supply is not chargeable to VAT. A person making exempted supplies is unable to recover VAT on inputs. The exempted supplier thus has to shoulder the burden of VAT. Of course, the company may increase its product prices to pass on the charge, but they cannot issue a VAT invoice which would enable a taxable customer to obtain a credit for VAT, since no VAT is chargeable on their supplies.