Tax Update Instruction No.18574 GDT on Tax Obligations for Share Premium

On June 17, 2025, the General Department of Taxation (“GDT”) of the Ministry of Economy and Finance issued Instruction No. 18574 GDT to provide official guidance on the tax treatment of share premium. This instruction comes in response to ongoing concerns raised by enterprises regarding uncertainty in the implementation of income tax implications related to share premium transactions.

Under this instruction, share premium is defined as the amount received by an enterprise in excess of the par value of shares when new shares are issued. The GDT affirms that this amount is considered a capital contribution by shareholders to the equity of the enterprise and is not considered taxable income under Cambodian tax law. This clarification distinguishes shareholder investment from revenue earned through normal business operations.

However, to ensure that share premium is considered non-taxable income, the instruction sets out the following compliance requirements:

• The share capital and share premium must be fully paid into the enterprise.
• These amounts must be accurately recorded in the enterprise’s accounting books.
• The entries must be supported by valid and complete documentation, which may include the subscription agreements.

Failure to comply with any of these conditions could lead the GDT to consider the increase in the owner’s equity account as taxable income, pursuant to the income tax regulations.

Legal Perspective
From a legal standpoint, the issuance of this instruction is a positive and necessary development in Cambodia’s tax and regulatory framework. It offers meaningful benefits to enterprise owners, shareholders, and other stakeholders engaged in capital structuring and corporate finance as follows:

• Establishes legal certainty by clearly defining the tax treatment of share premium, thereby resolving prior ambiguity and reducing the risk of misinterpretation.
• Facilitates more confident capital raising, allowing enterprises to plan and structure equity financing without fear of unintended tax exposure, provided conditions are met.
• Reduces the likelihood of tax disputes by introducing objective compliance criteria that can be referenced by both enterprises and tax authorities.

Enterprise owners are advised to review their existing equity contribution procedures to ensure they align with the documentation and reporting standards now required by the GDT. Adhering to these guidelines will be essential to maintaining the non-taxable status of share premium and avoiding future compliance risks.