Cambodia Tax Update : VAT Update – Refund Process Updated
Published: July, 2018
Submission: July, 2018
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It is fair to say that one of most consistent complaints we hear from taxpayers regards the issues associated with applying and obtaining a Value Added Tax (VAT) refund in Cambodia. Until now the VAT refund process was a very lengthy process – sometimes taking years – and often subject to uncertainty and delays.
It appears that the General Department of Taxation (GDT) has taken note of these concerns and in response have acted upon them by issuingPrakas 576 “The Refund of Value Added Tax” (Prakas 576)in June 2018 with the stated purpose of“developing a mechanism to effectively and efficiently refund VAT”.
The key takeaway from Prakas 576 is that for most taxpayers who follow the process correctly the timeframe to receive a VAT refund should beapproximately 40 working days(this timeframe may be shortened for taxpayers who have a Gold Taxpayer Compliance Certificate). The VAT refund timeframe for Diplomatic Missions/Foreign Councils/INGO’s and Technical Co-operation Agencies of other Governments isapproximately 15 working days.
Prakas 576 restates the criteria as to who can request a VAT refund and also outlines the VAT refund process. We examine this in more detail below.
Who can request a VAT refund?
Under the revised taxpayer self-assessment regime it should be noted that only Medium and Large Taxpayers have the ability to request a VAT refund. A Small Taxpayer will only ever have up to 80% of VAT input credit to its VAT output on sales (80:100).
For Medium and Large Taxpayers the following criteria applies:
For Diplomatic Missions/Foreign Councils/INGO’s and Technical Co-Operation Agencies of other governments the following criteria applies:
Prakas 576 provides a workflow of the VAT refund process which you can view at the bottom of this update. We refer to a few key points to note from the VAT refund process below.
Prakas 576 refers to a taxpayer completing the VAT refund request on the VAT monthly tax return and also completing a form to be determined by the GDT. In practice, a taxpayer would tick the VAT refund box in the VAT refund and submit a cover letter to the GDT asking for a refund.
As has always been the case the GDT officers will typically conduct an audit of the underlying supporting documentation of the VAT refund to determine that all the VAT invoices are valid and that the VAT input has been declared in the correct month.
One of the benefits of being a Gold Tax Compliance Taxpayer is that this audit process may be by-passed by the GDT thereby speeding up the VAT refund process.
After receiving a decision from the leadership of the GDT, the Department of Finance and Personnel of the GDT shall prepare a money order and submit it to the National Treasury.
Important Note – Prakas 577 MEF.Prk dated 19 June 2018delegates the power to His Excellency Kong Vibol, General Director of the GDT to approve VAT refunds of less thanKHR2,000,000,000 (USD500,000)for all enterprises. For VAT refunds that exceedKHR2,000,000,000 (USD500,000)the Minister of the Ministry of Economy and Finance will be the final decision maker.
His Excellency Kong Vibol is also delegated the power to approve VAT refunds with no monetary cap for Gold Taxpayers, Embassies, NGO’s and development agencies.
DFDL – Commentary
The introduction of Prakas 576 is a welcome addition to what has historically been an unclear and time-consuming process for a number of taxpayers. One of the issues which is not addressed in Prakas 576 and which in our experience can create issues for taxpayers applying for a tax refund is the internal check by the GDT of the payment of the input credit by a supplier.
Often a taxpayer can have a valid VAT invoice from a supplier but if for some reason that supplier has not properly paid the VAT to the GDT the refund process is stopped. In our view, it is the job of the GDT to recover VAT payments from non-compliant taxpayers and that should not be the role of the taxpayer applying for a VAT refund. We hope that the GDT reconsiders its current practice regarding this issue and not prevent a tax compliant taxpayer obtaining a VAT refund due to the actions of a non-compliant taxpayer.
It should be noted that to ensure a speedy refund the taxpayer should provide the proper accounting books and other documents in a timely manner otherwise the VAT refund process will be suspended until they are produced.
If you have any queries or concerns regarding the above or need assistance with respect to applying or obtaining a VAT refund, please feel free to contact your usual DFDL adviser.
Timeline for Companies:The refund process is expected to be completed within 40 working days, but Gold taxpayers may get the refund more quickly.
Timeline for diplomatic missions or foreign consuls, international organizations and technical cooperation agencies of other governments:The refund process is expected to be completed within 15 working days.
Partner, Cambodia Head of Tax
Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.
The information providedhere is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
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