The General Department of Taxation (GDT) on Thursday said back payments of seniority indemnity for Cambodian employees are tax exempt, while employers can also deduct the payments from their income taxes.

The GDT’s instruction circular, signed by Cambodian Minister of Economy and Finance Aun Pornmoniroth on April 11 and released on Thursday, also says that services in relation to recruiting, training, transporting and managing workers overseas by private agencies are exempt from value-added tax.

Ros Sokhom, managing director of auditing firm Rosoco Limited, on Thursday said the ministry’s circular clarifies conditions for employees who are set to receive the payment, as well as employers who will be paying, establishing that they are free from tax obligations.

“The benefit is going to be for Cambodian employees as they will receive the full amount of seniority payment without being required to pay tax,” he said.

Sokhom added that allowing the back payments of seniority indemnity to be deducted from employers’ current income taxes is a positive move as it reduces the company’s burden.

“The decision makes employees receive full benefits while it also reduces some of the burden for their employers,” he said.

Sokhom continued that it is too early to estimate how much revenue the government is set to lose from the tax exemption, but said it should not be excessive.

The Ministry of Labour and Vocational Training in September issued the prakas on seniority payment indemnity, instructing all employers to provide their employees with the security payments starting this year.

Seniority payments will be made twice per year, with the employer providing employees with a payment equal to 15 days per year of their wages, along with other benefits.