MLVT Increases the Minimum Wage For 2017

On 29 September 2016, the Ministry of Labour and Vocational Training ("MLVT") issued Prakas No. 414 on the increase in the minimum wage for year 2017. This Prakas is an update to the previous Prakas No. 409/15 on the minimum wage for year 2016.

Starting from 1 January 2017, the minimum wage for workers or employees in the textile, garment and footwear industry has increased by US$5. Therefore, the current minimum wage is US$153 per month. For workers or employees serving a probation period, the minimum wage is US$148 per month. This will be increased to US$153 per month after the probation period.

The minimum wage for these sectors is revised every year in accordance with the principle and mechanism agreed to between three parties: employers's representatives, employees' representatives and government's representatives. However, the level of any minimum wage for other sectors besides textile, garment and footwear industries has yet to be determined.

---

MEF Exempts Workers’/Employees' Allowances from Tax on Salary and Tax on Fringe Benefits

The Ministry of Economy and Finance ("MEF") has issued new Circular No. 011 dated 6 October 2016 on the Implementation of Obligation to Withhold Tax on Fringe Benefits. This Circular is a replacement to Circular No. 002 dated 20 January 2015 on the Implementation of Obligation to Withhold Tax on Salary and Tax on Fringe Benefits.

Based on this new Circular, many benefits that workers/employees receive from their work shall be exempt from tax on salary and shall not be subject to tax on fringe benefits. In implementing this, all factories and enterprises are required to submit their policy or any documents related to allowances and benefits for workers/employees for each specific period of time to the General Department of Taxation.

The preceding Circular 002 encompassed equivalent exemptions, but was generally presumed to be limited to factory employees/workers. Circular No. 011 expressly provides that the employee allowances and benefits apply to "workers and employees of all factories or enterprises", thus embracing all sectors.

---

MOC Sets Procedure for International Registration of Trademarks in Cambodia under Madrid Protocol

On 1 November 2016, a new Prakas No. 368 was issued to implement the procedures for international registration of trademarks under the Madrid Protocol with the Department of Intellectual Property ("DIP") of the Ministry of Commerce.

To register the international registration of trademarks under the Madrid protocol, the applicant must have a Cambodian nationality, a permanent residence or have an industrial or commercial establishment in Cambodia. The application must, at minimum, have the name, address and any related information of the representative of the trademark owner if the brand model is qualified under the requirements. The application form and any references or related documents for the international registration of trademarks shall be in English. The application form is available on: www.cambodiaip.gov.kh. The application will be examined by the DIP. The DIP will notify the International Office on its provisional refusal, acceptance or any invalidation of the application. The applicant is required to respond to the provisional refusal in accordance with Cambodian law and regulations. Furthermore, this Prakas also allows the owner to request for the replacement and transformation of a national registration into international registration under the Madrid Protocol or vice versa.

However, whether the mark was registered with international or national filing, any letter certifying the use or non-use of such registered marks must be submitted to the DIP within one year after the fifth anniversary of the date of registration or renewal of protection period. Upon failure to do so, the registration will be not protected in Cambodia and licenses recorded with the International Office will not be enforceable against any third party in Cambodia.

---

10% of Loan Portfolio Must be in Khmer Riel by End of December 2019

On 1 December 2016, the National Bank of Cambodia ("NBC") issued a new Prakas to promote credit provision in national currency by requiring all banks and financial institutions under its supervision to have at least 10% (ten per cent) of their total loan portfolio provided in Khmer Riel. The final deadline for full compliance by all banks and financial institutions was 31 December 2019.

The main objective of the Prakas is to enhance the usage of Khmer Riel in the economy as a mechanism to support the implementation of the national monetary policy by the central bank. Under the Prakas, NBC also reserves the right to further increase the required portion of credit provision in local currency based on future need.

---

Tax Compliance Regulations Introduced for Multi-activity Enterprises

The Ministry of Economy and Finance ("MEF") has issued a Prakas No. 1127 dated 11 October 2016 to provide updated requirements for enterprises in Cambodia that carry out multiple business activities including one or more Qualified Investment Projects ("QIP").

This Prakas applies to any of the following:

• Enterprises in Cambodia that contain more than one QIP ("Multi-QIP");
• Enterprises in Cambodia that carry out more than one business activity - where those business activities are subject to different rates of Tax on Profit ("Multi-Non-QIP"); or
• Enterprises in Cambodia which carry out both a QIP and non-QIP business activity ("Mixed-QIP's").

Tax Registration Requirements

The above three types of enterprises are required to register each of their business activities separately with the General Department of Taxation ("GDT") within 15 days of commencing economic activity, and obtain a VAT Tax Identification Number ("VAT TIN") for each business activity.

Tax Obligations and Accounting Records

Any of the above three types of enterprises are required to:

• Obtain a corresponding patent tax certificate for each business activity that it carries out;
• Maintain clearly distinguishable investment capital, assets, liabilities, employees/worker, managers and other financial information for each business activity which is carried out by the enterprise;
• Maintain separate accounting records and separate income and expenditure on an individual business activity basis;
• Use correct VAT TIN for each business activity that involves import/export or purchases/sales of domestic goods/services;
• Prepare purchases and sales records and record VAT input and output for each business activity; and
• Submit separate monthly and annual tax returns for each registered business activity.

There are a number of points to pro-rata/income and expense allocation and usage with respect to revenue, expenditure, assets and subsidiary income/expenditure that cannot be clearly attributed to one of the business activities that is undertaken by the enterprises.

The Prakas does not apply to:

• Multi-QIP's that receive approval from the Council for the Development of Cambodia ("CDC") at the same time and whose Tax on Profit ("TOP") exemption starts and ends at the same time;
• Enterprises that carry out more than one business activity (that are not QIP) where those business activities are subject to the same TOP rate; and
• Business activities in Cambodia (QIP or non-QIP) that are registered in separate legal entities.

---

A Claim for VAT Input Credit

The General Department of Taxation ("GDT") of the Ministry of Economy and Finance has issued an Instruction No. 21406 GDT dated 20 December 2016 on the claim for Value Added Tax ("VAT") input credit.

To claim for VAT input credit for purchases of goods or services, taxpayers shall, while filing a monthly tax return, attach therewith a copy of correct invoices issued by sellers or suppliers in a form as prescribed in Instruction No. 1127 GDT dated 26 January 2016 on the use of invoices for taxpayers under Self-Assessment System.

Any enterprises that have not yet completed the tax information update at the GDT will be temporarily not allowed to claim for VAT input credit or VAT refund until the enterprises finish the tax information update with the GDT.

This Instruction also mentions that the non-issuance or issuance of incorrect invoices will be considered to be an obstruction of the implementation of tax provision and shall result in a temporary closure of the business, a tax assessment or a fine of 10 million Khmer Riels (approximate to US$2,500) or imprisonment of up to 1 year or both.

---

Implementation of Tax on Salary Changes

With reference to the 2017 Law on Financial Management on changes to the monthly Tax on Salary bands and the dependents reduction that employees may be eligible for, the Ministry of Economy and Finance issued Instruction No. 017 dated 27 December 2016 providing a summary and working examples of how these changes will be implemented.

Per Instruction No. 017, as from 1 January 2017 all resident enterprises including government institutions, organisations and other enterprises have an obligation to withhold and pay the Tax on Salary for resident employees as below:

Monthly salary in Khmer Riel	Monthly salary Approx. USD equivalent	TOS Rate
0 - 1,000,000	0 - 250	0
1,000,001 - 1,500,000	250 - 375	5%
1,500,001 - 8,500,000	375 - 2,125	10%
8,500,001 - 12,500,000	2,125 - 3,125	15%
12,500,001 upwards	3,125 upwards	20%

To reduce the poverty for government officers, teachers, doctors/nurses, employees and factory workers, Instruction No. 017 doubles the reduction on tax base for minor dependent children and housewife/househusband to KHR 150,000 (approximately US$38) per month from KHR 75,000 (approximately US$19).

Instruction No. 017 is effective for salary payments for the month of January 2017 onwards.

---

Extension of Due Date for Monthly Tax Returns

The Ministry of Economy and Finance issued on 23 December 2016 Prakas No. 1539 concerning the amendment of the due date for filing monthly tax returns and making related tax payments. Under Prakas No. 1539, the due date for monthly tax returns and payments has been changed to the 20th day of the following month for the following tax returns:

• Prepayment of profit tax;
• Tax on salary;
• Withholding tax;
• Value Added Tax;
• Specific tax on certain merchandises and services;
• Accommodation tax; and
• Public lighting tax

Prior to Prakas No. 1539, all monthly tax returns, aside from VAT, were required to be filed with the General Department of Taxation by no later than the 15th day of the following month.

Prakas No. 1539 came into operation on 23 December 2016.

---