Interest Expense
Interest Expense for Cambodia Tax
In practice, company may borrow cash from various sources such as banks, friends, owners or other companies, so companies will pay interest to them. How much interest expenses are deductible and non-deductible interest expenses during current year. Non-deductible interest expenses are temporarily, so amount that is non-deductible expense this year may deduct for next year.
Maximum deductible interest expense during year is limited to an amount equal to 50% of adjusted income without taking into account any interest income or expense, plus the interest income.
Example 1
XYZ Company borrowed money from various sources to expand its operation.
Below is interest information for XYZ Company in year 2018.
- -Interest expenses during 2018 are $3,000.
- -Interest incomes during 2018 are $2,600.
- -Interest expenses brought forward from previous years (before 2018) are $19,100.
Required
Profit before interest adjustment (E37 in tax on income (TOI) form) per Law on Cambodia Tax is $32,000.
- Calculate Maximum deductible interest expense during the period.
- Calculate Amount to be added / deducted from taxable income.
- How much interest expense should be carried forward?
Answer
Maximum deductible interest expense during year is limited to an amount equal to 50% of adjusted income without taking into account any interest income or expense, plus the interest income.
1.Calculate Maximum deductible interest expense during the period.
Based on calculation table (G7) above, Maximum deductible interest expense for tax on income (profit) in Cambodia is $18,800.
2.Calculate Amount to be added / deducted from taxable income.
Based on calculation table (G11) above, Amount to be deducted from taxable income for tax on income (profit) in Cambodia is $15,800.
3.How much interest expense should be carried forward?
Based on calculation table (G12) above, interest expense should be carried forward for next year is $3,300.