Tax Guide for US Expats Living and Working in Cambodia
Who Is Liable For Income Taxes in Cambodia
Cambodian resident and nonresident individuals are subject to Tax on Salary (ToS). Resident persons are subject to tax on their worldwide income, while nonresident individuals are subject to tax on their Cambodian-source income only.
Resident and nonresident individuals are subject to the Tax on Profit on their self-employment income, dividends, interest, royalties and capital gains.
For tax purposes, an individual is considered to be a resident if he or she has his or her residence or his or her principal place of abode in Cambodia or if he or she is present in Cambodia for more than 182 days in any period of 12 months ending in the current tax year.
Income subject to tax
Employment income. The taxation of the various types of employment income is described below. For a table outlining the taxability of employment income items.
ToS applies to employment income, which includes salary, remuneration, wages, bonus, overtime, compensation, and fringe benefits. Salary from employment activities, advances and loans are assessable, except as provided below. However, fringe benefits are subject to a separate tax regime called the Tax on Fringe Benefits (see Tax on Fringe Benefits). Monthly taxable salary consists of assessable income less deductible expenses and allowances.
Salary received in foreign currency is converted to Cambodian riel in calculating taxable income.
The following categories of employment income are exempt from tax:
- Reimbursement of employment-related expenses
- Indemnity for a layoff within the limit provided in the Labor Law
- Additional remuneration with social characteristics as indicated in the Labor Law
- Flat allowance for mission and travel expenses (per diem for field work done by employees)
- Allowances for special uniforms or professional equipment
- Salaries of members of the National Assembly and Senate, and employees of approved diplomatic and international aid organizations
Self-employment and investment income. Self-employment income, dividends, interest and royalties are subject to the Tax on Profit at the following progressive rates.
Annual taxable profit
Exceeding Not exceeding Rate
KHR KHR (%)
0 6,000,000 0
6,000,000 15,000,000 5
15,000,000 102,000,000 10
102,000,000 150,000,000 15
150,000,000 20
Capital gains. Capital gains on immovable, financial or investment property are subject to the Tax on Profit at the progressive rates listed in Self-employment and investment income.
Deductions
Deductible expenses. Repayments made by employees of advances or loans are deductible from assessable income.
Allowances. An allowance for a spouse and minor dependent children in the amount of KHR 75,000 per person per month is deductible from assessable income.
Tax on Fringe Benefits. The Tax on Fringe Benefits is imposed on taxable fringe benefits provided by an employer, including the providing of, among other items, private use of vehicles, accommodation, food, utilities, household personnel, low-interest loans, discounted sales, educational assistance (except for employment-related training), insurance premiums and pension contributions in excess of the levels provided by the Labor Law.
The Tax on Fringe Benefits is borne by the beneficiary. Fringe benefits are taxable at a rate of 20% of the total value of the benefit provided. For purposes of the tax, the value of the fringe benefit is the fair market value inclusive of all taxes.
B. Other taxes
Net worth, gift, inheritance and estate taxes are not imposed in Cambodia.
C. Social security
The two types of social security schemes in Cambodia are pension and occupational risks. The occupational risks scheme is currently being applied. However, the pension scheme has not yet been implemented. The occupational risks scheme covers work-related accidents, accidents commuting between home and the workplace and other occupational diseases. Employers who have eight or more employees must register with the National Social Security Fund and make an occupational risks contribution of 0.8% of the monthly average wages of the employees. The monthly average wage per employee is capped at KHR 1 million per month. As a result, the maximum occupational risks contribution per employee is approximately KHR 8,000 (0.8% x KHR 1 million). The occupational risks contributions are not refundable.
To learn more about the history, culture, economy and other information about Cambodia
We have been preparing US income tax returns for US Citizens and permanent residents living in Cambodia for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Cambodia and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the Cambodia tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Cambodia Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working in Cambodia, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Cambodia.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email