VINAYA LAW FIRM

Taxation: Prakas on the Revision of the Instruction for the Implementation of Withholding Tax on the Distribution of Dividends

Date of publication: 29-04-2019


Category: Legal updates


Audience: All


Prakas on the Revision of the Instruction for the Implementation of Withholding Tax on the Distribution of Dividends

        On April 05, 2019, the Ministry of Economy and Finance issued a new Prakas, which is Prakas No. 372 សហវ.ប្រក on the Revision of the Instruction for the Implementation of Withholding Tax on the Distribution of Dividends. The purpose of this Prakas is to amend the previous Prakas (Prakas No. 518 សហវ.ប្រក on the Instruction for the Implementation of Withholding Tax on Distribution of Dividends) issued by the same Ministry since May 05, 2017, which provided guidance on the implementation of withholding tax (“WHT”) on dividend distributions from a resident taxpayer in Cambodia to the non-resident shareholder.

        Whereas the content of the two Prakas is almost entirely the same, the main change brought by the new Prakas is with regards to a WHT imposed on the sale or transfer of shares that are related to retained earnings, stipulated in Article 7 of both Prakas. A comparison between the two Prakas under Articles 7 are as below:

  1. 1. Prakas 518 (2017): Any sale of shares or distribution of share capitals that were converted from retained earnings are subject to a WHT of 14%.
  2. 2. Prakas 372 (2019):

a. Conducts below are considered as sharing of dividends and are, therefore, subject to a WHT of 14%:

(1) For any transfer, in whole or in part, of shares or share capitals: the retained earnings that were related to the transferred shares, whether or not the retained earnings have been converted into shares or share capitals are subject to WHT.

(2) For any decrease of shares or share capitals: the amount that was decreased (which cannot be higher than the retained earnings) are subject to WHT.

b. a taxpayer that has already paid WHT related to the transferor decrease of shares or share capitals as stated above will not be required to pay WHT again.