The General Department of Taxation (GDT) has said it will work with 49 businesses that provide online services in Cambodia to promote the implementation of value-added tax (VAT) on e-commerce transactions, in a move that responds to the recent boom in the online market.
The GDT said in a February 8 press release that the enforcement of VAT is in line with Sub-Decree No 65 on the implementation of the VAT on e-commerce, which applies to the supply of digital goods and services as well as other e-commerce activities in Cambodia carried out by non-resident suppliers outside of the Kingdom.
E-commerce activities in the Kingdom shall comply with the provisions on VAT in force, it stressed.
In a bid to allow sufficient time for taxpayers to prepare for this obligation, the GDT issued Notification No 776 dated January 17, authorising a delay in the implementation of Prakas No 542 – on Rules and Procedures for Applying Value Added Tax to E-Commerce, the release said. The prakas is now due to take effect on April 1.
Speaking at a meeting with representatives of the 49 businesses on February 7, GDT director-general Kong Vibol noted that the online market continues to gain strong momentum, but that a large number of businesses are not registered for tax and seemingly unaware of their tax obligations.
Hence strengthening the management of e-commerce activities means ensuring a fairer playing field and fiscal compliance in the sector, he said.
Vibol said the GDT “intends to spread the word and strengthen the cooperation of enterprises such as Internet Service Providers [ISP] in the Kingdom of Cambodia to join the Royal Government”.
“And in the event that enterprises do not register or fulfil their tax obligations, the necessary measures to block electronic transactions will be taken.”
Vibol said he welcomes all forms of input from and technical cooperation with businesses to improve the implementation of VAT on e-commerce transactions and ensure that the collection of tax revenue increases sustainably.
Cambodia e-Business Association (CEA) vice-president Mom Varin told The Post on February 8 that selling products or conducting other business through Facebook or similar channels has become a hugely popular and highly competitive space.
Although e-commerce standards are in development, many challenges stand in the way of meaningful progress, especially those stemming from global competition concerning prices, manufacturing and shipping, as well as taxes. Further discussions are required to effectively widen the market, he said.
He argued that while implementing VAT on e-commerce or other applicable online activities within the country may seem straightforward, the international nature of the trade adds another dimension of complexity.
“This means that if we add 10 per cent on top of the price of a product for VAT, if it ends up with a higher rate when compared to analogues from Vietnam, Thailand or China, then that would be a problem. We have to take this into consideration,” he said.
While acknowledging that paying taxes to the state is the duty of every citizen and business owner, Varin suggested the state consider the international dimension of e-commerce, and introduce initiatives geared towards spurring Cambodian exports that also support the local online business ecosystem and sharpen its competitive edge in foreign markets.
