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Thailand: Income tax treaty with Cambodia

Thailand: Income tax treaty with Cambodia

Representatives of the governments of Thailand and Cambodia in September 2017 signed an income tax treaty that, once ratified by both countries, would enter into force.


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There is an expectation that the treaty provisions could be effective in January 2018. 

Overview of Thailand-Cambodia income tax treaty provisions

The income tax treaty provides for the following rates of withholding tax:

  • 10% on dividends
  • 10% on interest paid to a financial institution or insurance company
  • 15% on interest paid to all other recipients (with the exception of the government)
  • 10% on royalties (defined to include the use of, or the right to use, industrial, commercial or scientific equipment)
  • 10% on fees for technical services

A treaty provision addresses the rules for permanent establishments (PEs) and provides a PE would arise when a combination of various activities—such as, storage, display, delivery, purchasing of goods etc. (which in isolation would not create a PE)—is not of a preparatory or auxiliary character in relation to the business as a whole. The treaty definition of a PE also addresses specific industries. For instance, conducting certain activities, including the operation of “substantial equipment” for the exploration or for exploitation of natural resources for an aggregated period of more than 90 days within any 12-month period, would create a PE.  In addition, a PE may be created when an insurance enterprise located in one country collects premiums in the other country or insures risks situated in that other country through a dependent agent. Under the treaty, Thailand retains the right to tax capital gains on disposal of shares and debt instruments. 

The treaty includes a “tax sparing provision” that would apply for a period of 10 years after the treaty enters into force. Broadly, this refers to a tax treaty provision whereby a contracting state agrees to grant relief from residence taxation with respect to source taxes that have not actually been paid (i.e., taxes that have been “spared”) due to specific laws and regulations in the source country designed to promote economic development in that country.


Read a November 2017 report prepared by the KPMG member firm in Thailand

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