Prepayment of Income Tax

Lesson Summary- Prepayment of Income (Profit) Tax for Cambodia Tax

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An enterprise/company liable to the tax on income (profit) and qualified investment project(QIP) liable to the tax on income (profit) at the rate of 9% have the obligation to pay a monthly prepayment of tax on profit at the rate of 1 percent of turnover inclusive of all taxes, except Value Added Tax, realized in the previous month.

The prepayment of income ( profit) tax will be deducted from the tax on income (profit) liability or minimum tax [1] at the annual liquidation of the tax. If Prepayment of Income Tax exceeds the annual income (profit) tax liability or minimum tax, the excess Prepayment of Income Tax can be carried forward indefinitely to offset against the future annual income (profit) tax liability or minimum tax.

From 1 January 2017 (Based on Prakas), taxpayers that maintain proper accounting records are not subject to minim tax. If a taxpayer is not subject to minimum tax, monthly prepayment of income (profit) tax must still be paid. But unused prepayment of income (profit) ax from previous years can be offset against the prepayment of income (profit) tax due in the current tax year and there may not be any physical payment required.

Companies (e.g. Qualified Investment Project (QIP), recognized schools) have been granted tax holidays are to 0% tax on income, so they are not required to pay prepayment of income (profit) tax on turnover derived from the project that has been granted tax incentives.

Tax Base = turnover/1.1

Prepayment of income ( profit)= tax base x 1%

What is subject to Prepayment of Income Tax (Updated on 2021) ?

PIT is applied to income from both principal business activities and subsidiary income.

Incomes from principal business activities refers to incomes from activities  stated in company patent.

Subsidiary incomes are income besides activities stated in company patent, so subsidiary income includes income as follows:

• 1.rental income from immovable property,
• 2.immovable property given for free use to a third party (the income is at market price),
• 3.immovable property given for free use to staff (the income is at market price) unless it is in accordance with the labor law,
• 4.income from royalty,
• 5. sale of scrap, rental of business equipment, income from packaging….

Example 1

Assume XYZ Company has revenues of $2,200 (included VAT) during September 20X1.

Required:

Calculate the prepayment of income ( profit)

Answer

Tax Base for the prepayment of income ( profit)=2,200/1.1=2,000

Prepayment of Income ( profit)= 2,000 x 1%=20$

[1] Annual tax is higher of tax on income (profit) liability and minimum tax liability.