Cambodia and Thailand have officially signed a double taxation agreement (DTA) that protects each country’s nationals from dual taxation and aims to encourage bilateral investment and strengthen economic ties.

Finance Minister Aun Porn Moniroth and Thai Foreign Minister Don Pramudwinai signed the agreement yesterday in the capital, in the presence of Prime Minister Hun Sen and Thai Prime Minister Prayut Chan-o-cha, who is conducting a state visit.

While full details of the DTA between the two countries have yet to be released, the agreement follows Cambodia’s aggressive push to shield investors from being onerously taxed twice on multinational operations, and to improve compliance with Asean standards.

In July, members of Cambodia’s General Department of Taxation (GDT) met in Bangkok to meet with their Thai counterparts to hammer out the draft during a two-day consultation workshop. According to Thai newspaper the Nation, a draft of the agreement was hastily ratified by Prayut’s cabinet before his arrival.

The Nation also reported that the agreement follows similar Thai DTAs, that once ratified allows income tax to be levied on where an individual or company counts the bulk of earnings based on a six-month residency period and will last 10 years. Excessive tax paid in a taxpayer’s home country will be deducted as exemptions or a tax credit.

Additionally, income tax levied on air transport will also be waived, while the taxing of dividends, interests, royalties and fees for technical services arising from capital assets will have to conform to agreed rates.

Clint O’Connell, head of tax practice for DFDL Cambodia, noted that while this is the fourth DTA that Cambodia has signed since May 2016, none have been ratified.

However, he said the Cambodian and Thai governments have been trying to push an agreement through for years and it has been seen as a priority issue given their geographic proximity and the volume of cross-border investment.

“We would expect a DTA to provide clarity to Thai investors in Cambodia on issues such as taxing rights, the elimination of double-taxation, and the reduction of withholding taxes on cross-border transactions which should help to encourage foreign direct investment,” he said.

Data from Thailand’s Ministry of Commerce show that over 200 Thai companies have invested in Cambodia’s agriculture, manufacturing, tourism, retail and digital finance sectors. Additionally, data from the Council for the Development of Cambodia shows nearly $122 million worth of Thai investment was approved last year.