Non-Resident VAT E-Commerce Update
Instruction No. 2520 GDT on the Adjustment on the Implementation of Value Added Tax on E-Commerce Transactions (Instruction 2520) was issued by the General Department of Taxation (GDT) on the 24th of January 2023. Instruction 2520 repeals the earlier Instruction 20522 on the Implementation of Value Added Tax on E-Commerce that was issued on the 8th of December 2021.
Instruction 2520 takes effect sixty (60) days from the date of its signing and while it restates a number of the points that were originally addressed by Instruction 20522 it does contain some key changes which we outline below.
Scope of Instruction 2520
The scope of VAT on E-Commerce transactions remains unchanged and is intended to apply to the provision of digital goods, services and e-commerce activities that are carried out electronically by non-resident suppliers, who do not have a permanent establishment in Cambodia, to business (B2B) and individual (B2C) customers in Cambodia. The VAT E-Commerce regime also applies to e-platform operators who supply services, receive payment and deliver digital goods and services to purchasers via an electronic platform on behalf of non-resident suppliers.
The main obligations introduced under the VAT E-Commerce regime include a simplified VAT registration requirement for those non-resident e-commerce providers whose sales to Cambodian customers exceed a prescribed threshold and a reverse charge obligation for self-assessment taxpayers who receive digital goods/services or e-commerce activities from non-resident suppliers.
Non-resident e-commerce providers who supply digital goods, services and/or e-commerce activities to customers in Cambodia and who expect to receive annual turnover from Cambodian sales of 250 million Khmer Riel (approximately USD62.5k) or 60 million Khmer Riel (approximately USD15k) in any three-consecutive month period, in a tax year, are required to register for VAT in Cambodia within 30 days using the simplified VAT registration process.
A key update provided in Instruction 2520 details that non-resident e-commerce providers who supply digital goods, services and/or e-commerce activities to their Cambodian subsidiaries or branches are exempted from having to register under the simplified VAT registration process even if the turnover from those supplies meet the thresholds outlined above. Please be aware that a notification is still required to be made by Cambodian subsidiaries and branches to the GDT in the above circumstances.
B2B and B2C Transactions
A non-resident supplier who has registered for VAT in Cambodia under the simplified VAT registration process is required to submit monthly VAT declarations and payments to the GDT by the 20th (for manual filing) or 25th (for e-filing) of the following month. A VAT-registered non-resident would need to collect and pay 10% VAT that it invoices with respect to B2C transactions and record both B2C and B2B transactions in its monthly VAT declaration.
With respect to B2B transactions a VAT registered non-resident is not obliged to apply 10% VAT to invoices that it issues for B2B transactions. However the important point to note is that to qualify as a B2B transaction the business customer in Cambodia must provide their tax identity number (TIN), name, and bank account information to the VAT registered non-resident who in turn will include that information to the GDT in their monthly VAT declaration.
The requirement to provide bank account information under Instruction 2520 seems a little less onerous then previously stated in Instruction 20522 where a business customer had to provide their bank account details and ensure that payment to the VAT registered non-resident was made through the same bank account number.
Cambodia is still somewhat at odds with most overseas jurisdictions that require a business customer to provide only their TIN and business name for a B2B transaction. The requirement to disclose business customers bank account information to the GDT can cause issues for some multinational entities who are required to abide by stringent privacy requirements when it comes to the disclosure of such information to third parties.
A business customer in Cambodia who receives a credit note for a B2B transaction from a VAT registered non-resident, for a supply that was declared in a earlier month, can make an adjustment to take into account the revised amount in the credit note. As the VAT for the B2B transaction would have been originally declared to the GDT by the business customer through the reverse charge declaration form the adjustment created by the credit note would need to be included in a future reverse charge declaration.
For the purpose of completing their monthly VAT declaration, VAT registered non-resident suppliers are required to use the exchange rate issued by the National Bank of Cambodia on the last working day of the month in which the supply was made to determine the Khmer Riel value that needs to be included in the declaration.
Taxpayers under the self-assessment regime who collect taxes under the Reverse Charge mechanism shall prepare a declaration and pay VAT in Khmer Riel in accordance with Prakas No. 824 MEF.P., dated November 2, 2022.
Instruction 2520 also references non-taxable supplies, time of supply rules, invoicing, registration requirements and fees, taxpayer updates, payment options for non-residents and deregistration. These are largely unchanged from the previous regulations and for more information on these topics we have included links to earlier updates below.
The DFDL tax team has a vast depth of experience with regard E-Commerce and VAT and, as always, we stand ready to answer any questions that you may have on this or other tax issues of concern.
For further information regarding the matter, please contact Clint O’Connell, Partner, Head of Cambodia Tax Practice Group, [email protected]