What is Cambodia Minimum Tax

Summary Lesson-What is Cambodia Minimum Tax

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The Minimum Tax is a separate and distinct tax from the tax on profit/income (TOP/TOI). This tax is subject to the real regime taxpayers ( small, medium or large taxpayers) before Minimum Tax is exception for the qualified investment project (QIP) granted by the Council for Development of Cambodia (CDC). For new legislation, minimum tax (MT) for all taxpayers is exemption if they  maintain proper accounting records but minimum tax is taxable if taxpayers including QIP did not keep proper accounting records.

If the qualified investment project (QIP) is not subject to minimum tax (MT) , but taxpayer (QIP) will be required to pay Prepayment of Profit ( income) Tax (PPT/PIT) every month after the conclusion of TOI deferral period.

The Minimum Tax is imposed at the rate of 1% of the annual turnover inclusive of all taxes except for VAT.

Minimum tax is due if the minimum tax liability exceeds the tax on income (profit) liability. For end of year, taxpayers will calculate tax on income/profit (TOI) liability and minimum tax (MT) liability, and compare TOI and MT which one is higher, then taxpayer will pay higher amount for annual tax after deducting PPT and withholding tax credits.

Assume TOI is higher than MI, then Payable Profit Tax = TOI – PPT

PPT is imposed at 1% of turnover all taxes except for VAT.

Example 1

ABC company has annual turnover of $110,000 (included VAT). Calculate minimum tax liability.

Answer 

Minimum Tax Base = Annual Turnover /1.1=$110,000/1.1=$100,000

Minimum Tax liability= Minimum Tax Base x 1% =$100,000 x 1%=$1,000.

Example 2

Assume tax on income liability is $20,000 and minimum tax liability is $10,000 for XYZ Company.

Required:

If prepayment of profit (income) tax ( PPT) is $10,000, calculate profit tax payable ( income tax payable).

Answer 

Because Tax on income (TOI) liability is higher minimum tax (MT) liability ( $20,000 > $10,000), so ABC will pay higher amount ( $20,000).

Profit Tax Payable = TOI -PPT=$20,000-$10,000=$10,000