Granting Fixed assets for uses free of charge

Lesson Summary-Granting Fixed assets for uses free of charge for Cambodia Tax

Granting fixed assets for uses free of charge is taxable income for tax on income (profit). Income is based on market price that fixed asset can generate income.

Accounting income is zero dollar ($0), but tax law required free of charge as income for tax purpose.

Example 1

Assume that ABC Company granted a car to Mr.A to use free of charge one month because Mr.A is owner’s friend of ABC Company. This car can rent to other and get rental fee of $440 (include VAT) per month.

Required

1.How much income for accounting purpose.

2.Suggest tax treatment for tax on income (profit).

Answer

1.Income for accounting purpose

It is zero income ($0) for free of charge of car rental.

2.Tax treatment

Tax law is no free of charge. Income from market rental fee is $400 ($440/1.1), so amount of $400 is subject to tax on income (profit).