Cambodia: Implementation of advanced tax on dividend distribution

Instruction to clarify the scope and imposition of the advanced tax on dividend distribution (ATDD) in Cambodia

Instruction to clarify the scope and imposition

Article Posted date 12 January 2023

The General Department of Taxation (GDT) issued Instruction no. 30408.GDT (14 December 2022) to clarify the scope and imposition of the advanced tax on dividend distribution (ATDD) in Cambodia.

Scope and definition

  • ATDD is essentially a prepayment of annual tax on income (ToI) imposed on an enterprise that distributes a dividend from income which was not yet subjected to ToI.
  • The ATDD paid in the current tax year will be allowed to be used as a tax credit against the annual ToI at year-end.

Tax base

  • ATDD will be imposed on the grossed-up value of the dividend distribution multiplied by the annual ToI rate (i.e., generally at 20%).

Exemptions

ATDD will not apply to the following:

  • Qualified investment projects within the income tax holiday period, including retained earnings accumulated during the income tax holiday period existing before the year 2020
  • Redistribution of the dividend income received which was already subjected to ATDD

Special rules for QIPs entitled to pay tax at a progressive rate (i.e., 25%, 50%, or 75%)

ATDD will be payable as follows:

  • Total ATDD payable x 25% for the first two years
  • Total ATDD payable x 50% for the next two years
  • Total ATDD payable x 75% for the last two years

KPMG observation

Prior to this GDT instruction, there were some grey areas on the applicability of ATTD on the distribution of retained earnings by qualified investment projects accumulated during the income tax holiday period prior to 2020. The GDT instruction has now clarified that such a transaction would not be subject to ATDD.

However, there still appears to be a grey area on whether ATDD will apply to retained earnings accumulated during the income tax holiday period from 2020 onward but distributed by the qualified investment project after the expiration of the income tax holiday period.

Read a January 2023 report [PDF 115 KB] prepared by the KPMG member firm in Cambodia

 

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