Payment of Intangibles Royalty

Withholding Tax on  Royalty Payment of Intangible Asset to Non-Residents

Royalty Payment of intangible assets to non-resident (foreign) individual or companies  are subject to withholding tax (WHT) at 14% (standard rate).

Intangible assets included licenses, franchises, copyrights, patents, trademarks, trade names, software etc. Payments to these intangible assets are called ” Royalty”.

Before royalty payment to non-residents, resident companies in Cambodia have responsibility to withhold tax on royalty otherwise resident companies in Cambodia will pay withholding tax on behalf of non-resident individual or companies.

Example 1

Assume ABC Coffee Company in Cambodia bought franchise Brand Love Coffee of $30,000 from non-resident XYZ Coffee Company outside Cambodia.

Required

Calculate withholding tax on royalty from non-resident XYZ Coffee Company if any. 

Answer

WHT base = 30,000

Withholding tax on royalty=$30,000 x 14%=$4,200

Note:

-ABC Coffee Company will pay $25,800 ( $30,000-$4,200) to XYZ Coffee Company if XYZ Coffee Company allowed ABC Coffee Company withhold tax on royalty.
-ABC Coffee Company will pay $30,000 to XYZ Coffee Company if XYZ Coffee Company did not allow ABC Coffee Company withhold tax on royalty, so ABC Coffee Company will pay $4,200 ( WHT) on behalf of XYZ Coffee Company. In conclusion, total cash payment by ABC Coffee Company is $34,200 ( $30,000+$4,200).