The Royal Government of Cambodia just released Sub-Decree 124 ANKr.BK on Tax Incentives for Small and Medium Enterprises in the Priority Sectors dated October 2, 2018.

This is part of efforts of Royal Government of Cambodia to push Small and Medium Enterprises as a main driver of economic growth. Other SME support programs include customs incentives, SME Bank, Techo Startup Center, Skills Development Fund, and Khmer Enterprise.

We provide tax incentives as below.

Definition

SMEs are defined:

• "Small-sized Enterprises” is any business having an annual revenue turnover of 250 million Riel to 700 million Riel (around US$62,500 to US $175,000), or a enterprise considered as a small taxpayer according to the laws and regulations or having 10-50 employees.
• “Medium-sized Enterprises” is any business having annual revenue turnover of 700 million Riel to 4 billion Riel (US$175,000 to US$1,000,000), or an enterprise categorized as a medium taxpayer according to the laws and regulations or having 51-100 employees.

Priority sectors

To receive benefits, SMEs shall fall in priority sectors:

1. Agricultural production or agro-industry
2. Food production and processing
3. Manufacturing of goods consumed locally, waste recycling, and goods for tourism sector
4. Manufacturing of finished goods or spare part or assembling parts for other manufacturers
5. Research and development related to information technology (IT) including supply of service of innovative IT- based management
6. Enterprises located in SME cluster zones and enterprises which develop these clusters.

Tax incentives

Tax incentives for SMEs are as followed:

1. Exemption Tax on Income for three years starting from the date enterprises are newly registered for tax or the date that enterprises update tax information after this Sub-Decree comes into effect
2. Exemption Tax on Income for five years starting from the date enterprises are newly registered for tax or the date that enterprises update tax information after this Sub-Decree comes into effect and if one of following conditions are met:

• Utilize higher 60% local raw materials
• Increase employees by at least 20% or
• Is located at Small and Medium Enterprise Cluster.

3. Exemption Prepaid of Tax on Income and Minimum for the exemption period of Tax on Income
4. Deductible expenses:
5. Expenses on accounting software based on information technology are allowed for deduction of 200%
6. Expenses on accounting or technical training to employees are allowed for deduction of 200%

Investment in machine or innovative technology devices are allowed for deduction of 150%.

Advance Grand Formula Co., Ltd is a Cambodian tax agent under license number – TA202204002.

Should you need any further information or support, please contact us at: tax@advancegroupkh.com.