Cambodia is subject to frequent revision of laws and regulations – Yoko Kikushima, Seri Fukuda

Cambodian subsidiary of Tsuji & Hongo tax accountant corporation that emphasizes communications in Japanese, provides various support services including accounting and tax returns in compliance with both Cambodian and Japanese regulations.
We interviewed Ms. Kikushima, who is the accountant and Ms. Fukuda the director for hot topics and things to keep in mind when conducting business in Cambodia. (Interviewed at: August, 2017)

Interviewee Profile

Yoko Kikushima, Seri Fukuda: Certified Public Accountant/Director, Director of HONGO TSUJI TAX CONSULTING.

Movement towards the conclusion of a tax treaty is progressing

Could you tell us about the current state of accounting system and tax system in Cambodia? Also, are there new moves that you are paying attention to?

(Yoko Kikushima) A recent tax-related topic is the progress of the conclusion of a tax treaty to prevent double taxation. Cambodia has come to an agreement with Singapore and China in 2016 and Brunei in 2017. Although none of the agreements have yet come into force and the details of the conclusions are not effective, I have heard that they are also moving towards conclusions with Thailand and South Korea.

As tax treaties become effective, there will be great tax benefits for foreign-affiliated companies entering Cambodia. Talks on tax treaties with Japan are not being discussed yet, but since the discussions for tax treaties is taken up at the public-private joint meeting, future movements are expected.


Many companies face the high tax payment amount of withholding tax

Regarding accounting and taxation, what are the problems that companies face when operating in Cambodia?

(Seri Fukuda) The amount of withholding tax is high. Usually, the service provider will be responsible for withholding tax. However, in Cambodia, it is the common practice for the payer to cover this. For example, if you have a corporate contract for an employee’s residence, you must pay a 10% withholding tax on the rent. On the other hand, if you provide economic benefits other than salary to employees, you will be taxed 20% on the equivalent of their economic profit. This means that you will be taxed a total of 30% on the rent. Also, taxes are not recognized as expenses.


Can you tell us about the points companies should note who are considering business in Cambodia?

(Fukuda) When calculating the cash flow for business, there is a possibility that the budget may differ greatly unless it reflects the amount of withholding tax.

It is also important for staff to acquire good communication skills

Could you tell us about problems and the efforts your company has faced in developing human resources in Cambodia?

(Kikushima) We are training our staff on the job for the practice of accounting and taxation. The assistant managers and senior associates will directly train the newly joined staff. Cambodians are generally honest and straightforward people, I feel that those who without practical experience in the field or other companies, have a faster absorption of accounting and taxation practices and have a higher retention rate.


Improvement in the quality of tax officials, professional expertise in accounting firms will be required

What do you think of the prospects for accounting and taxation industry in Cambodia? What do you think is required for the development in this field?

(Kikushima) The knowledge of tax officials was limited in many cases. In the past, during tax investigations, we have had cases where their indications were irrelevant with the current taxation rules, there were many cases that we had to explain to them the latest taxation rules and to have the indicated matters reduced.

Recently, the tax bureau and their officers have gathered enough knowledge and experience, and the problems we do have are a matter of difference in interpretation of the laws. I feel that expertise and experience values are becoming increasingly necessary in negotiations with the tax departments. We believe accounting firms will require a higher level of expertise and a negotiation force in the future.


What role do you want your company to play?

(Kikushima) We entered Cambodia in 2011, and we are one of the Japanese firms who have been doing business here for a relatively long time. Although we have sufficient experience and business records, the taxation authorities’ way of thinking and interpretation concerning taxations are changing every year. For some items which were previously thought to be not taxable are often judged as taxable during tax investigations. I hope to raise the experience value within the company more than ever to reduce the client’s tax risk as much as possible, and help Japanese companies conduct business smoothly in Cambodia.

As an accounting firm operating in Cambodia, our duty is to help businesses focus on their main business. Those who are assigned to the local office or subsidiaries are familiar with their own business, but there are many cases where they have not had much experience in accounting and tax fields. For them to concentrate on their business, we would like to be able to support our clients in the accounting and taxation fields.


Do you have a message for our readers?

(Hukuda) Cambodia’s tax system also has positive sides. One of them is the low corporate tax rate. In Japan, it varies depending on the size of the company, but the effective tax rate of corporate tax is between 30 to 34%. Cambodia’s corporate tax rate is uniformly 20% and up to 14% lower comparing with Japan. I would be pleased if companies considering entering Cambodia would know such facts, and it would be great if we could vitalize the Cambodia economy together.