Cambodia News Brief

Subjects

1. Implementing capital gains tax (CGT) under a double taxation agreement (DTA) framework

2. CGT updates

3. Classifying fixed assets: building structure and computer program depreciation

The following report may be of interest to:

General taxpayers

(Instruction 23862 GDT dated 4 August 2025)

The General Department of Taxation (GDT) has issued Instruction 23862 to clarify how CGT is implemented under DTA frameworks. DTA provisions prevail over those of the Law on Taxation in determining capital gains taxing rights and are based on the gain-earner’s source and residency. Below are the specific guidelines on the taxing rights for each type of sale or transfer.

1. Immovable property: if located in Cambodia, the capital gain is taxed in Cambodia.

2. Movable property: if belonging to a permanent establishment (PE) or fixed place of business in Cambodia, the capital gain is taxed in Cambodia.

3. Ships, boats, aircraft or railway or other land transport means: if operating in international traffic, the capital gain is only taxed in the operating enterprise’s resident country.

4. Shares or similar benefits: if the value of the enterprise's immovable property in Cambodia as compared to the value of its total assets is lower than the conditional percentage set in the DTA, Cambodia will have no taxing rights on the capital gain.

5. Other assets: other than 1 to 4 above, the resident country or jurisdiction generally has the right to collect the CGT.  

To enjoy the CGT exemption under the DTA, especially the 3, 4 and 5 above, taxpayers must submit an online application together with relevant documents to the GDT for review and approval.

(Prakas 496 MEF dated 18 July 2025)

The Ministry of Economy and Finance has issued Prakas 496 to update the rules and procedures for CGT collection. It applies to i) resident physical person taxpayers who realised capital gains from the sale or transfer of capital in Cambodia and foreign countries and ii) non-resident taxpayers who realised capital gains from the sale or transfer of capital in Cambodia.

Under this Prakas, resident physical person taxpayers and non-resident taxpayers are subject to 20% CGT. The term ‘capital’ refers to immovable property, leases, investment assets, goodwill, intellectual property and foreign currencies.

CGT calculation

To calculate the CGT, taxpayers take income from the sale or transfer, deduct expenses and multiply by 20%. Deductible expenses are: (i) for immovable property, a choice between the designated deductible expenses equal to 80% of the sale or transfer income, with no need to provide expense-supported documents, or the actual expenses supported by evidence and (ii) for others, actual expenses only. This Prakas also provides several specific examples for reference.

CGT implementation dates

1. Leases, investment assets, goodwill, intellectual property and foreign currencies: 1 September 2025.

2. Immovable property: 1 January 2026.

Withholding tax (WHT) on dividend distribution

For non-resident taxpayers, undistributed retained earnings, if subject to CGT, are exempt from WHT on dividend distribution at the share transfer. The registered entity to which the shares are transferred must withhold and remit the CGT to the GDT.

Indirect share transfers

This Prakas’ guidance only governed capital gains from direct share transfers, so CGT on indirect share transfers will be guided by a separate regulation.

Taxpayers must submit tax returns and pay CGT to the GDT within three months after realising the capital gains. The GDT has the right to adjust the capital gain and tax calculation under the applicable laws and regulations. Ownership transfer isn’t legalised until there’s evidence that the CGT is paid. Detailed exemptions, shares, property, financial assets and relevant documents are also stated in this Prakas.

Self-declaration regime taxpayers who transfer or sell the capital must comply with income tax provisions. Any provisions contrary to this Prakas are abrogated.

(Instruction 22522 GDT dated 22 July 2025)

The GDT has issued guidelines for classifying and depreciating fixed assets in line with LoT Article 13 and income tax Prakas 578 dated 19 September 2024, Article 33. The guidelines are summarised below.

1. Expenses related to building or construction structures that are components of the building shall be classified as fixed asset class 1 and depreciated following Prakas 578 Article 36 even if the building belongs to a company or is rented.

2. Expenses related to computer programs shall be classified as fixed assets as follows:

a. Pre-installed computer programs or software (not modified, transformed, distributed or resold) on a computer which is the sole product (without separating software and computer prices) shall be classified as tangible asset class 2 and shall be depreciated following Prakas 578 Article 36.

b. Any computer program or software that doesn’t meet the conditions above shall be classified as an intangible asset.

The guidelines also provide specific examples for reference.

For more information, please contact Pov Ratha at ratha.pov@pwc.com or Heng Thy at thy.heng@pwc.com or call +855 (0) 23 860 606.