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On 27 February 2018, the Amendment to the Cambodian Criminal Code was passed with the inclusion of a new criminal act – the act of insult (in verbal, physical, written, drawing, or object form) to Majesty the King – to the existing Article 437. The new article imposes criminal liability on both physical persons and legal entities.
The punishment for violation by physical persons includes a 1- to 5-year imprisonment and a fine of up to KHR 10,000,000 (approx. US$2,500). The punishment for violation by legal entities include a fine of up to KHR 50,000,000 (approx. US$12,500), together with one or more additional penalties including its dissolution, placement under the court surveillance, prohibition from carrying on certain activities, closure, seizure of its property in connection with the crime, and broadcasting the sentencing decisions in print media and audio-visual communication forms. This Amendment came into effect immediately after it was passed.
On 21 February 2018, the Ministry of Labour and Vocational Training issued Prakas No.084/18 on Public Holiday on National Day of Remembrance ("Prakas 084/18"). Prakas 084/18 establishes a new public holiday on the 20th of May every year, allowing all employees of all enterprises or establishments as prescribed under Article 1 of the Labour Law to have one day of paid public holiday. Should any public holiday fall on Sunday, the employees shall be given one extra day off on the following day.
On 19 February 2018, the Ministry of Interior and the Ministry of Labour and Vocational Training issued Inter-Ministerial Prakas No.719 on Strengthening of Labour Inspection on the Use of Foreign Labour in Cambodia ("Prakas 719"). Prakas 719 aims to regulate inspection works related to the use of foreign labour.
According to Prakas 719, the Foreign Labour Mixed Inspection Group has jurisdiction to inspect the use of foreign labour in enterprises, establishments, casinos, and entertainment clubs, and foreigners who come to invest or work in Cambodia. Moreover, foreign owners, directors, investors, and workers are mandated to cooperate in providing necessary documents.
On 15 February 2018, the General Department of Taxation ("GDT") released Notification No. 2126, which provides for the "market rates" for determining the caps on interest rate deductions for borrowings in Khmer Riel ("KHR") and United States Dollar ("USD') for financial year 2017.
Thus, any interest expense related to respective borrowings in KHR and USD which exceeds the market interest for financial year 2017 shall be a non-deductible expense for 2017 Tax on Income calculation after the adjustment of the allowed interest rate pursuant to paragraph 3 of GDT's Instruction No. 151 dated 22 January 2014.
The Ministry of Economy and Finance has issued Prakas No.025 on the Reclassification of Taxpayers under the Self-Assessment Regime (or the Real Regime of Taxpayers) dated 24 January 2018 ("Prakas 025").
Prakas 025 aims to replace the classifications of taxpayers defined in the previous Prakas No.1819 on the Classification of Taxpayers under the Self-Assessment Regime (or the Real Regime of Taxpayers) dated 25 December 2015. It sets out new criteria for the classification of taxpayers between the small, medium and large categories.
With reference to the 2018 Law on Financial Management on changes to the monthly Tax on Salary ("TOS") bands, the Ministry of Economy and Finance issued Instruction No.002 dated 15 January 2018 ("Instruction 002") providing a summary and working examples of how these changes will be implemented.
Pursuant to Instruction 002, commencing on 1 January 2018, all resident enterprises including government institutions, organisations and other enterprises have an obligation to withhold and pay the TOS for resident employees at the designated rates.
On 29 December 2017, the Royal Government of Cambodia issued Sub-Decree No.245 on Management of Community-based Kindergarten ("Sub-Decree 245") with the aim of setting out the management of community-based kindergartens at commune, Sangkat administration with quality, effectiveness, and sustainability.
Children from the age of three to six years are to be provided with opportunities to receive equal and inclusive education services with this management in place. The management includes, but is not limited to, the creation and the closing of community-based kindergartens, and the annexation of such kindergartens to any public institution. It also includes the mechanisms, procedures, and conditions that must be set out by the Ministry of Education, Youth and Sport ("MOEYS") in recruiting new teachers. Sub-Decree 245 also seeks to set community-based kindergarten development programs as the priority of MOEYS.
On 29 December 2017, the Royal Government of Cambodia issued Sub-Decree No.246 on Digital Signature ("Sub-Decree 246"). Sub-Decree 246 intends to rule and enforce the usage of digital signature in all transactions within the Kingdom of Cambodia in a highly secured and efficient way.
Sub-Decree 246 seeks to delegate to the private sector the governing works in relation to digital signature, such as designing the mechanism of electronic signature, and the issuance of the digital signature certificate to the digital signature users. The private persons who obtain the license from the Ministry of Posts and Telecommunications of Cambodia ("MPTC") shall become the Certifying Authorities. Any electronic mail with a digital signature certified by a Certifying Authority shall have the same legal effect as a written letter. For all online transactions, there shall be the practice of attaching a digital signature in accordance with Sub-Decree 246, unless provided otherwise.
MPTC is authorised to monitor the use of digital signature, and to issue the digital signature certificate to the ministries, institutions, national and sub-national authorities. The General Department of Information and Communication Technologies assists the MPTC with the management and issuance of licenses on Digital Signature Certification ("Licenses") to the Certifying Authorities, as well as the supervision and surveillance over such Licenses.
On 27 December 2017, the Securities and Exchange Commission of Cambodia ("SECC") issued Prakas No.016/17 on the Implementation of Listing Rules of Debt Securities ("Prakas 016/17") to implement the rules related to listing of bonds in the Cambodia Securities Exchange ("CSX").
Prakas 016/17 sets out conditions and procedures for the listing of debt securities. Any person intending to issue debt securities shall first apply to have his / its credit rating examined, by submitting necessary corporate and securities documents like certified credit rating reports, or profitability and cash flow ratio reports. The SECC will decide and notify the applicant of its decision within 10 working days.
In addition, after debt securities are issued to the subscribers, the applicant for the listing of debt securities shall apply to officially register the debt securities with the SECC within seven working days.
According to the Prakas, the registered debt securities may be de-registered on various grounds, including: (i) the applicant's violation of SECC's conditions for listing of debt securities; (ii) failure to submit annual reports after each fiscal year to the SECC; (iii) decline of credit rating; and (iv) the amount of listed debt securities has fallen below KHR 500,000,000 (US$12,500).
On 26 December 2017, the Securities and Exchange Commission of Cambodia ("SECC") issued Prakas No.015/17 on Fee Reduction for Derivatives Trading Operation for 2018 ("Prakas 015/17") to determine the fee on derivative trading operations for 2018 in accordance with the Law on the Issuance and Trading of Non-Government Securities.
According to Prakas 015/17, the fee on derivatives trading operation that the derivative brokers must pay to the SECC at a rate of 0.3% of the principle investment amount has now been reduced to KHR 4000 or US$1 per trading unit (Lot) for 2018.
On 26 December 2017, the Securities and Exchange Commission of Cambodia ("SECC") issued Prakas No.014/17 on the opening of branches of central counterparty companies and derivative brokers ("Prakas 014/17"), to set out conditions and procedures for the authorisation to open such branches.
Any company intending to open a branch of central counterparty company and derivative broker must submit the required application form and attachments to the SECC.
The company shall ensure that its branch of central counterparty company or derivative broker conducts such business separately from its other businesses, by having an information system equipment, a separate human resources department, and appropriate information barriers in the branch.
The authorisation to open a branch is valid for one year. Any request to extend the validity of the authorisation must be made at least 30 days prior to its expiry date.
On 9 December 2017, four Double Taxation Agreements ("DTAs") were ratified by Royal Krams. The DTAs aim to clarity how an income derived in one state by a resident of the other state is taxed. It also aims to reduce the possibility that a specific income could be subject to double taxation.
The four DTAs were bilateral agreements between Cambodia and Brunei, China, Singapore, and Thailand. So far, only the DTAs with Singapore and Thailand have entered into force.
It is worth noting that in the absence of any procedures, DTAs come into operation only when the General Department of Taxation formally announces the enforcement of specific DTAs. According to the GDT Announcements, Cambodia's DTAs with Singapore and Thailand are fully enforceable and are applicable from 1 January 2018.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only
intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.
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