Cambodia delays VAT registration rules for foreign digital businesses

Cambodia has delayed the introduction of new VAT rules impacting online sales supplied by foreign digital businesses until April 1, 2022.

The original introduction date of Cambodia’s changes to its VAT rules was January 1, 2022, but in mid-January the new effective date of April 1, 2022, was announced. The delay provides affected foreign digital businesses more time to register for VAT in Cambodia.

In early 2021, Cambodia followed the path of its South-East Asia neighbours, Malaysia and Singapore (rules effective in both jurisdictions since January 2020) and Thailand, where a rule change came into effect in September 2021.

Cambodia’s plans are contained in a recent Sub-decree no. 65 (dated April 8, 2021) and issued by the Royal Government of Cambodia on the implementation of VAT for foreign digital businesses or e-commerce. The new requirements (officially Prakas 542) complement the earlier sub-decree. However, the original effective date for the new VAT rules on the cross-border supply of digital services to consumers in Cambodia was to be January 1, 2022 (now April 1, 2022).

This helpful update from Acclime in Cambodia also lists the type of transactions that will be affected. They include, among others, electronic downloads (e.g. software), application hosting, provision of customer support from offshore, online shopping and web-based broadcasting.

Cambodia VAT on foreign digital businesses

According to the Khmer Times, Cambodia’s government has been mulling over such a move to tax digital services by foreign businesses for some time. 

The government aims to collect tax from these businesses that are currently not registered in Cambodia and therefore have no VAT obligations. By placing the obligation on such digital businesses to register and then collect and remit VAT on their sales to customers in Cambodia the government expects a significant revenue boost.

As a consequence of the COVID-19 pandemic the number of internet users increased dramatically in 2020. The Khmer Times article states that “more than 16 million people, including mobile and fixed internet users, were registered as internet subscribers last year, a year-on-year increase of 40 percent.” For context, the population of Cambodia is also 16 million. 

Acknowledgement: With thanks to Hugh Darwell and team at Acclime Cambodia.

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