Guide to Property Taxes in Cambodia: Understanding Obligations and Benefits

Introduction

Property tax in Cambodia is a government levy imposed on the ownership of property, including land and buildings. It is a crucial aspect of the real estate sector, contributing significantly to the country’s revenue, which is used for infrastructure development and public services. As an investor or property owner, understanding the type of tax in Cambodia applicable to your property is vital to ensure compliance and avoid penalties.

At CBRE Cambodia, we are committed to providing you with detailed and accurate information to navigate the complexities of property taxation in Cambodia. This comprehensive guide aims to simplify the intricate tax laws, explain how to calculate property tax in Cambodia, and highlight the benefits of compliance.

Types of Property Taxes in Cambodia

Annual Property Tax (Tax on Immovable Property – TOIP)

What is the Annual Property Tax?

The Annual Property Tax, officially known as the Tax on Immovable Property (TOIP), is a yearly tax levied on the ownership of immovable properties such as land, houses, buildings, and other constructions.

Rate and Threshold

• Tax Rate: 0.1% of the property’s assessed value.
• Threshold: Applicable to properties valued over 100 million riels (approximately $25,000). Properties under this value are exempt.

How is the Property Assessed?

The property value is determined based on the market price, which is evaluated and established by the Prakas of the Minister of Economy and Finance. The assessment considers factors such as location, type of property, and market conditions.

Calculation Example

• Assessed Property Value: $100,000
• Calculation: (($100,000 × 80%) – $25,000) × 0.1%
• Taxable Amount: ($80,000 – $25,000) = $55,000
• Annual Property Tax Due: $55,000 × 0.1% = $55

This means that for a property valued at $100,000, you would pay $55 annually as property tax.

Transfer Tax

What is the Transfer Tax?

The Transfer Tax, also known as registration tax or stamp duty, is imposed on the transfer of property ownership, whether through sale, exchange, or any other means of transferring rights over a property.

Tax Rate and Applicability

• Tax Rate: 4% of the property’s transactional value.
• Applicability: Payable within three months of the property transfer, typically by the buyer unless otherwise negotiated.

Calculation Example

• Property Sale Price: $200,000
• Calculation: $200,000 × 4% = $8,000
• Transfer Tax Due: $8,000

When purchasing a property for $200,000, the buyer is required to pay $8,000 as transfer tax.

Unused Land Tax

What is the Unused Land Tax?

The Unused Land Tax applies to land that remains undeveloped or unutilized, including non-constructed land and vacant constructed land as determined by the Unused Land Appraisal Committee (ULAC).

Tax Rate and Applicability

• Tax Rate: 2% of the land’s market value.
• Applicability: Levied annually on land classified as unused.

Calculation Example

• Land Market Value: $50,000
• Calculation: $50,000 × 2% = $1,000
• Unused Land Tax Due: $1,000

If your land is valued at $50,000 and is deemed unused, you must pay $1,000 annually as unused land tax.

Stamp Duty and Registration Fees

What are Stamp Duty and Registration Fees?

These are fees charged during the registration of property ownership and the transfer of property rights, formalizing property transactions and ensuring legal recognition.

Rates and Purpose

• Stamp Duty Rate: Ranges from 1% to 2% of the property’s value.
• Purpose: To maintain accurate records of property ownership and support administrative processes.

Capital Gains Tax

What is Capital Gains Tax?

Introduced in April 2020, the Capital Gains Tax is a flat rate tax of 20% applied to the profit gained from selling immovable property. Its implementation was delayed to January 2022 due to the COVID-19 pandemic.

Applicability and Calculation

• Applicability: Individuals selling property at a profit.
• Calculation: Capital Gains Tax = (Sale Price – Purchase Price) × 20%

Calculation Example

• Purchase Price: $150,000
• Sale Price: $200,000
• Capital Gain: $200,000 – $150,000 = $50,000
• Tax Due: $50,000 × 20% = $10,000

Property Rental Tax (Immovable Property Rent Tax)

What is Property Rental Tax?

Income earned from rental properties is subject to the Immovable Property Rent Tax.

Rates for Residents and Non-Residents

• Cambodian Nationals: 10% of the gross rental income.
• Non-Residents: 14% of the gross rental income.

Calculation Example

For Cambodian Nationals:

• Monthly Rent per Unit: $800
• Number of Units: 5
• Annual Rent per Unit: $800 × 12 = $9,600
• Total Annual Rent: $9,600 × 5 = $48,000
• Tax Due: $48,000 × 10% = $4,800

For Non-Residents:

• Tax Due: $48,000 × 14% = $6,720

How to Calculate Property Tax in Cambodia

Detailed Steps for Calculation

1. Determine the Tax Base (Assessed Value):
   • The tax base is established by the Prakas of the Minister of Economy and Finance.
   • It involves the property’s market price, size, type, and location.
2. Apply the Relevant Tax Rate:
   • Use the specific rate for the type of tax (e.g., 0.1% for Annual Property Tax).
3. Deduct Applicable Exemptions:
   • Subtract any exempted amount (e.g., $25,000 for properties valued under this amount).
4. Calculate the Tax:
   • Use the formula:
     Property Tax = ((Tax Base × 80%) – $25,000) × 0.1%

Sample Calculation

Let’s calculate the Annual Property Tax for an apartment building:

• Building Type: Reinforced concrete structure
• Age: Less than 10 years
• Location: Toul Kork district
• Land Size: 30m × 40m
• Building Size per Floor: 15m × 20m
• Number of Floors: 4
• Land Price per sqm: $1,700

Calculate Land Price:

• Land Price = 30m × 40m × $1,700 = $2,040,000

Calculate Building Price:

• Ground Floor (E0): 15m × 20m × $250 = $75,000
• First Floor (E1): 15m × 20m × $200 = $60,000
• Second Floor (E2): 15m × 20m × $150 = $45,000
• Third Floor (E3): 15m × 20m × $150 = $45,000

Total Property Value (Tax Base):

• Tax Base = $2,040,000 (Land) + $225,000 (Building) = $2,265,000

Calculate Property Tax:

• Property Tax = (($2,265,000 × 80%) – $25,000) × 0.1%
• Property Tax = ($1,812,000 – $25,000) × 0.1% = $1,787,000 × 0.1% = $1,787

Tax Payment Deadlines and Penalties

Annual Payment Obligations

• Annual Property Tax, Unused Land Tax, and Property Rental Tax: Must be paid annually by September 30th.
• Capital Gains Tax: Payable within 3 months of the property sale.
• Transfer Tax: Required at the completion date of the transfer process or when requesting a hard title for the property.

Common Procedures on Tax Payment

Required Documents

• Identification: National ID card, birth certificate, or passport.
• Family Book or Residence Letter.
• Tax Forms:
  • Tax Form PT01: Details about the property.
  • Tax Form PT02: Tax application form.
• Additional Documents (as applicable):
  • Copy of Patent Tax Certificate.
  • Previous year’s tax receipt.
  • Property transfer application or sale contract.
  • Specific tax forms issued by the GDT.

How to Pay

• In-Person: At local tax branches or partner banks such as ACLEDA Bank, Canadia Bank, Vattanac Bank, or Cambodia Public Bank.
• Online: Through the e-Tax service on the General Department of Taxation’s official website or the GDT Taxpayer App.

Penalties for Violations of Tax Implementation

Under the newly amended Royal Krom No. NS/RKM/0523/004 (“Law on Taxation”), strict measures have been reinforced to combat tax evasion and obstruction. Here are the penalties:

Fine Penalties of 5,000,000 riels (Approximately $1,250)

• For failure to register with the Tax Administration.
• Not filing tax returns.
• Not informing the Tax Administration of any changes in registration.

Fine Penalties of 10,000,000 riels (Approximately $2,500)

• For failure to issue invoices.
• Not using a recording system as determined by the GDT.
• Not providing requested information or reports.
• Failure to keep accounting records or other documents.
• Not permitting the Tax Administration to check records or documents.

Fine Penalties of 50,000,000 to 100,000,000 riels (Approximately $12,500 to $25,000) or Imprisonment from 1 month to 1 year

• For obstructing tax assessment and collection.
• Producing fake documents or reports.
• Concealing or intentionally destroying accounting records.
• Issuing fake invoices.
• Not permitting the Tax Administration to assess and collect taxes.

Additional Criminal Penalties

• Individuals pretending to be tax agents without certification.
• Failure to pay collected tax.
• Unauthorized tax collection.
• Legal entities may face fines up to 10,000,000 riels (Approximately $2,500) or imprisonment up to 3 years.

CBRE Cambodia emphasizes the importance of compliance to avoid these severe penalties.

Benefits of Complying with Property Tax in Cambodia

Financial Benefits

• Avoidance of Penalties: Timely payments prevent additional fees and legal consequences.
• Home Loans: Compliance enhances your eligibility for larger loans when applying for a new property.

Legal Benefits

• Property Registration: Proper tax registration facilitates more convenient and efficient property registration processes.
• Secure Ownership: Ensures your ownership rights are protected under Cambodian law.

Social Contribution

• Infrastructure Development: Taxes fund public infrastructure projects like roads, schools, and hospitals.
• Public Services: Supports essential services and contributes to the country’s development.

Common Challenges and FAQs

Challenges Faced by Taxpayers

• Understanding Complex Tax Laws: Navigating the intricacies of tax regulations can be daunting.
• Property Valuation Disputes: Differences between assessed value and market value.
• Keeping Up with Regulatory Changes: Staying informed about new laws and amendments.

Frequently Asked Questions

1. What currencies are used in Cambodia?

Two currencies are used: the Khmer Riel (KHR) and the US Dollar (USD).

2. What property is taxed in Cambodia?

Property tax applies to immovable properties valued over $25,000 (KHR 100 million), including land, houses, buildings, and infrastructure. Properties under this value, state-owned lands, agricultural land, and industrial land are exempt.

3. When must property taxes be paid in Cambodia?

Property taxes must be paid annually by September 30th.

4. How is property tax paid in Cambodia?

Payments can be made at local tax offices or through banks like ACLEDA Bank, Canadia Bank, Vattanac Bank, or Cambodia Public Bank. Online payment is also available via the GDT’s e-Tax service or Taxpayer App.

5. How is property tax calculated?

Property tax is calculated using the formula:

Property Tax = ((Tax Base × 80%) – $25,000) × 0.1%

6. Sample Calculation for Property Tax

Refer to the detailed sample calculation provided earlier in this guide.

7. What is the property transfer tax?

A 4% tax imposed on the transfer of property ownership, payable within three months of the transfer.

8. Sample Calculations for Property Transfer Tax

Using the tax base from the sample calculation:

• Transfer Tax = $2,265,000 × 4% = $90,600

9. What is the tax for unused land?

A 2% tax on the market value of land classified as unused by the ULAC.

10. What is the taxation for property rentals?

• Cambodian Nationals: 10% of gross rental income.
• Non-Residents: 14% of gross rental income.

11. Sample Calculations for Property Rental Tax

Refer to the calculation examples provided earlier.

12. What is capital gains tax?

A 20% tax on the profit from selling immovable property, applicable from January 2022.

13. Conclusion

Understanding these taxes is vital when purchasing property in Cambodia. CBRE Cambodia is here to assist you with professional guidance to ensure a smooth and risk-free property investment.

Conclusion

Navigating the complexities of property tax in Cambodia is essential for property owners, investors, and developers. Compliance ensures legal protection, financial benefits, and contributes to the country’s development.

At CBRE Cambodia, we are dedicated to providing expert advice and the best offers available in the market. Our team is ready to assist you with detailed consultations on real estate investment in Cambodia.