Other non-deductible expenses

Other non-deductible expenses for Cambodia Tax

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For Example of other non-deductible expense, Related party expenses are not deductible expenses if these expenses are not paid within 180 days after the end of the tax year.

Variance of Interest rate from related or unrelated party above interest rate cap determined by General Department of Taxation (GDT) is non-deductible expense.

Example 1

ABC company is subsidiary of XYZ company. ABC performed consulting service for XYZ company. Consulting service are charged $1,000 from XYZ company on 20 December 2018, but this fee is expected to pay on 20 August 2019.

Required

Suggest tax on income (profit) for service fee to XYZ company.

Answer

Consulting fee $1,000 is accounting expense for XYZ company, but this fee is non-deductible expense for tax on income (profit) because this amount is not expected to pay within 180 days (but pay on 10 August 2019).

Example 2

XYZ Company borrowed from Mr.A, shareholder of XYZ at interest rate 15%. Principal amount is $10,000.

Assume interest rate announced by General Department of Taxation (GDT) is 12%.

Required 

1.Calculate Interest expense

2.Suggest interest expense complied with Cambodia Tax Law.

Answer 

1.Interest expense

Interest expense for XYZ Company = $10,000 x 15%=$1,500

Interest expense for tax purpose = $10,000 x 12%=$1,200

2.Suggest interest expense

Interest expense of $1,500 for XYZ company is expense for accounting purpose, but it is not expense for tax purpose. Tax law recognized $1,200 as expense for tax on income (profit), so amount of $300 ($1,500-$1,200) is non-deductible expense.

Note:

1. Interest rate cap from related party (e.g shareholder) by interest rate announced by General Department of Taxation (GDT), so variance (3%=15%-12% example above) of interest rate from related party above interest rate announced by GDT is non-deductible expense.
2. If Interest rate borrowed from unrelated party, so interest rate cap=interest rate announced by GDT x 120%=12% x 1.2=14.4%, so variance of interest rate from unrelated party above interest rate cap is non-deductible expense ( see example 3).

Example 3




ABC Company borrowed from ABC Company, unrelated party,at interest rate 15%. Principal amount is $10,000.

Assume interest rate announced by General Department of Taxation (GDT) is 12%.

Required 

1.Calculate Interest expense

2.Suggest interest expense complied with Cambodia Tax Law.

Answer 

1.Interest expense

Interest expense for XYZ Company = $10,000 x 15%=$1,500

Interest expense for tax purpose = $10,000 x 12% x 120%=$1,440 ( see note 2 above)

2.Suggest interest expense

Interest expense of $1,500 for XYZ company is expense for accounting purpose, but it is not expense for tax purpose. Tax law recognized only $1,440 as expense for tax on income (profit), so amount of $60 ($1,500-$1,440) is non-deductible expense.