20% Capital gains tax to come into effect in Jan next year

The government and the Ministry of Economy and Finance decided to start implementing collecting the tax from Jan 1.

Capital gains tax will apply to all properties and other capital investments such as leasing, stocks as well as foreign currency. It applies to any profits made by transactions within these areas. Only the assets of government and foreign embassies, or the resident residence owned by tax residents (only one fixed residence, and the holding period must not be less than 5 years) will be exempt from capital gains tax.

It is worth noting that tax residents who engage in asset sales activities will be deducted from capital income tax under two options:

1. Without any valid certificate document, capital gains tax=(sales Price- 80% transaction 20%

For example:

the selling price of a house is 800,000,000 riel

Fixed cost expenses = 80% * sales price               

= 80% * 800,000,000 riel= 640,000,000 riel                                                                         

Capital gains = sales price- capital-fixed cost = 800,000,000-640,000,000 = 160,000,000  riel                                                                          Capital gains tax (20%) = 160,000,000 riel*20%                                  

Capital gains tax: 32 millions riel

2. With valid certificate document, the capital gains tax=(sales price - total fee)20%

Deductible capital gains tax expenditure items, including sales contract costs, property tax or unused land tax, stamp duty, land certificate bureau charges, agency fees, property valuation fees, loan interest, maintenance and decoration fees, etc.

For example: "A" bought a house at a price of 400 million riel, sold this house to "B" at a price of 600 million riel, and spent 16 million riel to transfer the property or sell the title certificate and stamp duty on real estate, a commission of 24,000,000 riel was paid, spent 20 000 000 riel to redecorate the house.

"A" has kept all the cost and decoration-related cost documents, so we can choose the following method to deduct the actual cost.

Sale or transfer of capital = 600 000 000 riel

The actual total cost = original price + stamp duty + commission fee + decoration fee= 400 000 000 +16 000 000 + 24 000 000 + 20 000 000460 000 000 riel

Capital gains = sale or transfer of capital-actual total cost= 600 000 000 riel-460 000 000 riel= 140 000 000 riel

Capital gains tax = 140 000 000 riel*20%= 28 millions riel

 Tax residents are obliged to declare and pay capital gains tax to the General Department of Taxation (GDT within three months after the asset transaction. The assets of Phnom Penh must be declared to the General Department of Taxation (GDT, while the assets of other provinces must be declared to the tax bureaus of the provinces and cities.

 It is understood that the Cambodian regulations in 2018 have been drafted to levy a 20% capital gains tax. In 2019, the Ministry of Finance and the the General Department of Taxation (GDT) has stated that Cambodia’s existing tax laws and tax rates will need to be revised or adjusted, including expanding the scope of capital gains tax. It is stipulated that the profits obtained by enterprises or individuals from industrial exchanges must be taxed. The implementation of the personal profits tax policy in August of this year was expected. The purpose of the implementation of the personal profits tax is to prevent tax evasion and to prevent the rich from exploiting loopholes in laws and regulations to conduct land and property transactions in the name of individuals, resulting in a huge loss of government revenue every year.

Cambodia has become a new hot spot for real estate investment due to the advantages of affordable housing prices, low taxes and fees, unlimited purchases, freehold property rights, and US dollar assets. In addition to the personal capital gains tax, what is kind of taxes and fees buyers need to pay in real estate transaction in Cambodia? Compass real estate sorted out the taxes and fees to be paid at all stages of Cambodian real estate.

Details of taxes and fees payable in Cambodia at various stages

1. Purchase stage

Rename fee: You can change your name once before the hard title certificate is processed. The cost is 500-1000 USD.

Attorney's fees / notarization fees: paid by the buyer, about 300-500 USD.

2. Holding stage

House transaction tax: Also known as registration tax, stamp tax, deed tax, transfer tax, all transfers of housing transactions need to be paid, the amount is 4% of the total price of the house, paid in one lump sum. The tax is for hard title certificate only. Only housing with hard title certificate will be charged. Housing with soft title will not be charged.

Cambodia's latest measures point out that from February 2020 to January 2021, houses with a total value of less than $ 70,000 are exempt from this tax. This measure is only for real estate developers registered with the Ministry of Finance or the provincial financial bureaus.

Property tax: property tax, real estate tax. After delivery the house, pay 0.1% of the total value of the house to the Ministry of Economy and Finance. The value is not the market price. The Ministry of Economy and Finance will value the property according to conditions such as type of housing, location, floor, and construction age.

Property tax = Total of property price * 80%- 100 millions reil) * 0.1%

The policy was released in May 2011. Landlords or homeowners have a tax liability for any property valued at more than 100 million riel (approximately US $ 25,000), with a tax rate of 0.1% and pay taxes annually.

Lease tax: It is also called rent income tax. If the housing is bought for rent, it is subject to this tax. Cambodian citizens or resident foreigners (over 182 days of residence) pay 10% of rental income tax; non-resident foreigners (within 182 days) pay 14% of rental income tax and pay monthly.