Non-Garment, Textile and Footwear Enterprises and Establishments: Back Pay of Seniority Payment for Services Rendered Prior to 2019

The MLVT has announced the postponement of the implementation of the back pay of seniority payment for any non-garment enterprises and establishments to December 2021 via its Guideline No.042/19 dated 22 March 2019 ("Guideline").

Seniority payment is a payment provided by employers to employees holding undetermined duration contracts for the services rendered. This bi-annual payment is in effect from 2019 onward. The back pay of seniority payment is a payment provided to employees for their services rendered prior to 2019.

According to this Guideline, the back pay of seniority payment has been decreased from 15 days as originally stated in Prakas No. 443 MLVT on the Calculation of Seniority Payment dated 21 September 2018 ("Prakas 443") to 6 days per annum. The payment schedule remains unchanged, meaning that bi-annual payments are to be made in June and December, 3 days per each payment.

During this delay in the implementation, a total amount of the back pay shall be paid to the employees or their heirs if the employees are retired, dead or terminated for reasons other than serious misconduct. The employees who resign or are terminated for serious misconduct are not entitled to this back pay of the seniority payment.

For seniority of work performed from 2019 onward, the seniority payment provided under Prakas 443 will be implemented as regulated, being the bi-annual payment in June and December of 7.5 days per payment.

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Market Interest Rates for Loans for Fiscal Year 2018

On 13 March 2019, the General Department of Taxation ("GDT") released Notification No. 4630, which provides the "market rates" for determining the caps on interest rate deductions for borrowings in Khmer Riel ("KHR") and United States Dollar ("USD") for the 2018 financial year as follows:

1. For borrowings denominated in KHR, the market rate is 9.44% per annum based on the average interest rates of the 8 large local commercial banks.  The other 3 large local commercial banks do not provide loans denominated in KHR.
2. For borrowings denominated in USD, the rate is 8.35% per annum based on the average interest rates of the 11 large local commercial banks.
   

Thus, any interest expense related to respective borrowings in KHR and USD which exceeds the market interest for the 2018 financial year shall be a non-deductible expense for 2018 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 as follows:

-  Not exceed 120% of the market interest rate on the borrowing from a non-related party; and

-  Not exceed the market interest rate on the borrowing from a related party.

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Delegation of Function to Sign on Public Services Documents

The Ministry of Labour and Vocational Training ("MLVT") has delegated its functions to sign on related public services documents to the municipal and provincial governors, as stipulated in Prakas No.045/19 LVT/PrK.DAS dated 1 February 2019.

From 1 February 2019 onward, the above governors, instead of the Minister in charge of labour over their competent territory, are authorised to execute signatures on the following four documents:

1. Cambodian employment card and work permit;
2. Letter of acknowledgement on the shop steward election;
3. Registration and permission on enterprise – establishment forms; and
4. Letter of approval on overtime work.

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New Deadline Extension for Online Registration with the Ministry of Commerce

On 30 January 2019, the Ministry of Commerce ("MOC") issued Notification No. 0384 MOC. CRD, announcing a new extended deadline for re-registration online to 31 December 2019.

All companies, enterprises, representative offices, subsidiaries and agencies, which were registered with the MOC before 4 January 2016 and have not yet re-registered, have until 31 December 2019 to re-register through the MOC's business registration portal at "www.businessregistration.moc.gov.kh". However, along with the application for re-registration, all companies, enterprises, representative offices, subsidiaries and agencies are required to attach evidence proving that their Annual Declaration for Commercial Enterprise ("ADCE") for years 2015, 2016, 2017 and 2018 have already been submitted.

Companies, enterprises, representative offices, subsidiaries and agencies which have not yet filed the ADCE are required to pay the fee for filing the ADCE, and the penalty for failure to file the ADCE to the MOC before submitting their re-registration application.

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