Logo of Phnom Penh Post newspaper Phnom Penh Post - Income-tax threshold to rise

Income-tax threshold to rise

Garment workers produce shirts at a factory in Takhmao, Kandal province, in 2014.
Garment workers produce shirts at a factory in Takhmao, Kandal province, in 2014. Scott Howes

Income-tax threshold to rise

Cambodian workers, especially those in the garment industry or employed by the government, can expect a little extra cash on hand next year as the National Assembly reviews draft legislation that would raise the lowest taxable income threshold from $200 to $250.

Mey Vann, director of the financial industry department at the Ministry of Economy and Finance, said the proposed tax amendment – expected to pass and come into effect in January – is necessary to close the gap between low-income and high-income earners.

“The tax amendment is aimed to incorporate a policy that balances different income levels,” he said. “The increase from $200 to $250 will mostly affect the lowest salary earners like government employees and garment workers, so we decided to amend the tax so that they can avoid being taxed.”

Clint O’Connell, head of Cambodia Tax Practice for foreign investment advisory and tax firm DFDL, explained that under current law, taxable income kicks in for anyone earning over $200 a month at 5 percent. The amendment would raise this threshold to $250, while pushing the top of the income tier to around $375, from $312.

While raising the higher threshold will likely put a small dent in the government’s coffers and operating flow, he said that the reform should “provide some additional breathing space” for Cambodians on the lower side of the income spectrum.

“The increase in the tax band effectively results in workers who earn $250 per month receiving an additional $2.50 in the hand that would have otherwise been paid by their employers to the tax authorities as tax on salary,” he said.

Coupled with the General Department of Taxation’s announcement in October that the fringe benefit tax – part of an employer’s monthly salary tax obligation – would be reduced from 20 percent to zero across all industries, O’Connell believes this “should encourage increased compliance for those employers who are transitioning into the formal regime of taxation”.

While an extra $2.50 per month may not seem like much, Michael Gordon, a partner at tax firm KPMG Cambodia, said that any benefit given to low-income earners was a progressive step. “Any move to decrease the tax burden at the lower levels is welcomed,” he said.

“Increasing the levels of salary before tax is applicable is a welcome move.”

This will be the second time in the last two years that the government has raised the tax threshold for low-income workers. The move is seen as complementary to hikes in the minimum wage, which was raised to $153 a month in September, and increased basic living costs.

Rath Minea, acting president of the National Independent Federation Textile Union of Cambodia (NIFTUC), said the proposed increase in the salary tax threshold was a welcomed reform, especially as many garment workers effectively earn more than the minimum wage when overtime pay is factored in.

He said even small increases in worker hours could easily have tipped them into the $200 a month tax band.

“Even though the tax break is small, maybe only $1 or $2, it is necessary for workers to receive this extra income,” he said.

Additional reporting by Hor Kimsay

MOST VIEWED

  • Hong Kong firm done buying Coke Cambodia

    Swire Coca-Cola Ltd, a wholly-owned subsidiary of Hong Kong-listed Swire Pacific Ltd, on November 25 announced that it had completed the acquisition of The Coca-Cola Co’s bottling business in Cambodia, as part of its ambitions to expand into the Southeast Asian market. Swire Coca-Cola affirmed

  • Cambodia's Bokator now officially in World Heritage List

    UNESCO has officially inscribed Cambodia’s “Kun Lbokator”, commonly known as Bokator, on the World Heritage List, according to Minister of Culture and Fine Arts Phoeurng Sackona in her brief report to Prime Minister Hun Sen on the night of November 29. Her report, which was

  • NagaWorld union leader arrested at airport after Australia trip

    Chhim Sithar, head of the Labour Rights Supported Union of Khmer Employees at NagaWorld integrated casino resort, was arrested on November 26 at Phnom Penh International Airport and placed in pre-trial detention after returning from a 12-day trip to Australia. Phnom Penh Municipal Court Investigating Judge

  • Sub-Decree approves $30M for mine clearance

    The Cambodian government established the ‘Mine-Free Cambodia 2025 Foundation’, and released an initial budget of $30 million. Based on the progress of the foundation in 2023, 2024 and 2025, more funds will be added from the national budget and other sources. In a sub-decree signed by Prime Minister Hun Sen

  • Two senior GDP officials defect to CPP

    Two senior officials of the Grassroots Democratic Party (GDP) have asked to join the Cambodian People’s Party (CPP), after apparently failing to forge a political alliance in the run-up to the 2023 general election. Yang Saing Koma, chairman of the GDP board, and Lek Sothear,

  • 11th Chaktomuk Short Film Festival draws to close

    Cambodia's 11th Chaktomuk Short Film Festival wrapped up successfully on November 28 after a four-day run, with the film “Voice of the Night” awarded top prize for 2022. Sum Sithen, the organiser of the short film festival, told The Post that the number of attendees to the