Prakas No. 525 on Withholding Tax on Domestic and International Interest Loan was issued by the Ministry of Economy and Finance on the 19 of June 2020.

The objective is reduce paid by the withholding tax rate on interest payments made by Cambodian Banks and Microfinance Institutions (“MFI’s“)to domestic and overseas lenders and help them to reduce interest payment of Cambodian people and firms who borrow fund from banks and MFIs and suffer from spread of Covid-19 pandemic.

In accordance with article 25 new and article 26 new of Law on Taxation, withholding tax rate on interest payment to residents and non-residents are 15% and 14%. Banks and MFIs who make new loans from residents or non-residents shall:

• Withhold 5% on interest payment to residents and non-residents from April to December 2020
• Withhold 10% on interest payment to residents and non-residents for 2021
• Withhold standard rate on interest payment to residents and non-residents 2022 onwards

Banks and MFIs who retain existing old loans from residents or non-residents shall:

• Withhold 10% on interest payment to residents and non-residents from April to December 2020
• Withhold standard rate on interest payment to residents and non-residents 2021 onwards

The reduce withholding tax shall be treated as state charge.

To receive above benefits, banks and MFIs shall have following supporting document:

• Loan agreements certified by lawyers of lenders and borrowers
• Transfer document pertaining to loan
• Evidence of loans in accounting records

The above supporting documents are not required to be submitted with tax returns but shall be preserved for the purpose of tax audit.

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.