Guide to Property Taxes in Cambodia: Understanding Obligations and Benefits
As an investor in the real estate sector in Cambodia, understanding taxes imposed on real estate is a crucial part of the investment. Earlier this year in May 2023, the Royal Krom No. NS/RKM/0523/004 (“Law on Taxation”) declared a new amendment made to existing taxation laws in Cambodia. The Royal Krom was put into force starting in May 2023. With several changes toward real estate taxes, it demands those with interests in this sector to carefully review of changes. Considering the amendment by the Royal Krom addresses new changes to taxation law as a whole, CBRE Cambodia offers a helpful guide on real estate taxes in Cambodia.
An Overview of Cambodia Real Estate Taxes
- Immovable Property Tax:
This common property tax is officially known as the Tax on Immovable Properties or TOIP in Cambodia. The TOIP applied to properties including houses, buildings, land, other residential infrastructure, construction, etc. The annual rate for TOIP is 0.1% of the property’s value applied for the property over 100 million riels or $25,000. TOIP is calculated by taking 80% of the tax base, established by the Ministry of Economy and Finance, deducting with the 100 million riels, and calculating 1% of the total amount. One important note for TOIP is that for properties under the value of 100 million riels, state-owned lands, agricultural and industrial lands are not obliged to pay this tax.
- Capital Gains Tax:
According to Cambodian taxation law, capital gains on all real estate properties are required to pay a tax rate of 20%. Sales and transfer of immovable properties or real estate investment are all applied to capital gains tax. Taxpayers must pay within 3 months of acquiring the sale of the real estate properties. This process requires either the seller or buyer to pay 20% of the capital gain tax, therefore taxpayers can simply deduct 80% of the sale from the entire sale value to pay for the capital gain tax.
- Stamp Tax:
Under taxation law in Cambodia, all transfers of properties or company shares are subject to tax. This tax can be referred to as stamp tax or property transfer tax. Stamp tax in Cambodia is classified into “transfer of asset” which is subject to 4% tax rate and “transfer of shares” subject to a 0.1% tax rate. The newly amended taxation law states that companies, either directly or indirectly, owned real estate with a worth of more than 50% of the company’s total assets will be considered as a real estate company. In this case, companies will be subjected to a 4% stamp tax rate.
- Unused Land Tax:
Investors should also be aware of the unused land tax. This tax is applied to land that is vacant without having any buildings or abandoned buildings. Unused land areas are determined by the committee evaluating unused land. In the case that the land has been classified as unused land, taxpayers will not be subjected to pay TOIP. Therefore, owners of unused land are required to make an annual payment of a 2% tax rate per square metre of the unused land value price.
- Immovable Property Rent Tax:
Income that is made from rental properties in Cambodia is subject to immovable property rent tax. However, rental tax rates differ according to the taxpayers. Local taxpayers are subject to 10% tax on their gross rental income, while foreigners have to pay up to a 14% tax rate on their gross rental income. Similarly, to TOIP and unused land tax, the immovable property rent tax must be paid annually.
Obligations and Regulations on Real Estate Tax
All taxpayers in Cambodia must be obliged to taxation laws. Additionally, Royal Krom No. NS/RKM/0523/004 (“Law on Taxation”) also reinforced strict measures on any violations or obstruction of tax implementation. Learn more about the obligations of tax implementation in Cambodia below:
- Annual Payment Obligations:
The timeframe for property taxes to be paid in Cambodia is rather simple and efficient. Annually, taxpayers have to be responsible for paying TOIP, unused land tax, and immovable property rental tax. Besides that, taxpayers need to pay the capital gain tax during the sale of the property. The stamp tax is usually required to be paid on the completion date of the transfer process or when the property owner submits an application requesting a hard title for the property.
- Common Procedure on Tax Payment:
Commonly, the procedure for paying taxes for real estate property in Cambodia requires these documents:
- A copy of the family book or residence book/letter
- Property owner’s National ID card or birth certificate or passport
- Tax form on property’s specific details or Tax Form PT01
- Tax application form or Tax Form PT02
Some other documents that are necessary depend on the type of tax as well. Here are a few other documents that may be required for the process:
- Copy of Patent Tax Certificate
- Copy of last year’s tax receipt
- Copy of property transfer application or sale contract
- Tax form for unused land tax, immovable property rental, or stamp tax issued by the General Department of Taxation
Taxpayers can easily submit their required documents and make payments at any tax branch or bank partner. For a more convenient process, taxpayers can now use the e-Tax service that is made public by the General Department of Taxation official website or with the GDT Taxpayer App.
- Penalties for Violations of Tax Implementation
The newly amended law imposed strict regulations on tax implementation to combat rising tax leakage transactions, and to impose penalties enforcement on obstruction of tax implementation. Here are some reviews of the increase in penalties for tax implementation obstruction:
- Fine penalties of 5,000,000 riels or USD 1,250:
for failure to register with the Tax Administration, file tax returns, or inform the Tax Administration of any changes in the registration
- Fine penalties of 10,000,000 riels or USD 2,500:
for failure to issue an invoice, use a recording system determined by GDT, provide requested information or reports, keep accounting records or other documents, and not permit the Tax Administration to check accounting records or documents.
- Fine penalties of 50,000,000 riels to 100,000,000 riels or USD 12,500 to USD 25,000 or a prison sentence from 1 month to 1 year:
for attempting tax assessment and collection obstruction, producing fake documents or reports, etc., concealing or intentionally destroying accounting records, issuing fake invoices, and not permitting the Tax Administration to assess and collect taxes.
Additionally, new criminal law is also introduced along with the Royal Krom No. NS/RKM/0523/004 (“Law on Taxation”). Those who are found guilty of pretending as a tax agent without a certified licence, failure to pay collected tax, tax collection without permission, or having criminal liability for legal entities are to be fined up to 10,000,000 riels or USD 2,500 or served up to 3 years prison time.
Tax Benefits from Real Estate Investment
Although expenses accrued by taxes are mandatory, benefits from paying real estate taxes are also evident. Here are some benefits of paying property taxes:
- Property Registration: The registration for tax applications will also make property registration more convenient and efficient
- Home Loan: Applying for a home loan for a new property provides greater chances of getting a larger loan
- Filing for Tax Returns: Tax returns is a great deduction to expense toward property taxes, along with other tax benefits gained from real estate investment
Real estate tax payment implementation is mandatory across the globe, yet the tax rate for real estate in Cambodia remains investor-friendly compared to neighbouring countries. In addition, the government provides a structural and regulative system to monitor the investment environment in the real estate sector. If you are looking for a more detailed consultation on real estate investment in Cambodia, contact the CBRE team for professional guidance and the best offers available on the market.
Click here to read about: What to do before Putting a Residential Property up for Sale?