Primary Financial Service

VAT Exemption of Primary Financial Service for banking and financial institutions

Prior to the passing of Prakas 559, dated 25 May 2017, banking and financial institutions in Cambodia earned their revenue streams were considered as non-taxable supplies for VAT purposes, including documentation and transaction fees.

Under the Prakas 559 definition of Primary Financial Services, fees and charges are subject to VAT, but now General Department of Taxation (GDT) issued Notification 11278 which temporarily suspends the implementation of “Primary Financial Services” as defined in Prakas 559, dated 25 May 2017, so all of their revenue streams were considered as non-taxable supplies for VAT purposes as before.

Prakas 559 has defined Primary Financial Services as “financial services which derive profit on a margin/difference basis including:

1. Money deposit operations, the provision of credit or loans, excluding service fees related to the provision of credit or loan;
2. Initial Public Offering (IPO), securities trading or other financial instruments, and clearance and settlement services with respect to the Cambodia Security Exchange;
3. Money exchange services;
4. Surety and pawn brokerage services; and
5. Trade on gold which has not been processed as jewelry.