From 8 September 2021 non-resident entities who provide digital goods/services or e-commerce activities to Cambodian consumers and who expect to have sales of USD15k or more before the end of the year, over three consecutive months, have 30 days to register for VAT with the General Department of Taxation (GDT) in Cambodia.

From 2022 onward the same non-resident entities, as described above, expect to have sales of USD62.5k or more in 2022 or future years, or expected sales in any calendar year of USD15k or more for three consecutive months, will need to register for VAT within 30 days.

Once registered for VAT non-resident entities will need to invoice customers in Cambodia with respect to B2C and B2B transactions. The VAT registered non-resident will need to file monthly VAT declarations and pay the 10% VAT on B2C sales to the GDT.

Registered taxpayers who receive digital goods/services or e-commerce activities from a non-resident (B2B transaction), whether the non-resident has registered for VAT or not, will need to pay 10% VAT to the GDT on behalf of the non-resident under a VAT reverse charge mechanism.

Detailed Analysis

In April of this year, Sub-decree No. 65 S.E on the Implementation of Valued Added Tax on E-Commerce (“Sub-decree 65”) was enacted with the stated purpose of introducing the conditions and mechanism for the collection of VAT on the provision of digital products, services and e-commerce activity by non-resident entities to consumers in Cambodia. Please refer to our earlier update here.

The issuance of Sub-decree 65 was a response by the Cambodian authorities to the growth of e-commerce trade in the Kingdom which has allowed overseas suppliers to provide digital goods and services to customers in Cambodia without the need to have a brick and mortar office in-country thereby making it difficult to tax these transactions. This type of special circumstance was contemplated in Article 75(2) of the Law on Taxation.

Article 75(2) of the Law on Taxation provided the ability to the Cambodian Government to issue a Sub-decree to impose special conditions concerning the liability to collect, declare and pay VAT where the supplier of the taxable supply that is consumed in Cambodia is not engaged in business in Cambodia or where there are other obstacles relating to the collection of VAT from the supplier.

Prakas 542 MEF.P on the Rules and Procedure for the Implementation of VAT on E-Commerce (“Prakas 542”) was passed on the 8th of September 2021 and as its name suggests it provides further detail on how Sub-decree 65 will be implemented. We provide further detail on the salient points of Prakas 542 below.

Who is Impacted?

Those parties primarily impacted by the recent regulatory updates are non-resident suppliers of digital goods, services and e-commerce activity (“Non-resident E-Supplier”) and importantly those registered taxpayers in Cambodia (“Taxable Person”) who transact with the aforementioned non-resident suppliers under a B2B transaction. The obligations for both Non-resident E-Suppliers and Taxable Persons are far-reaching and the failure to comply with these obligations could result in severe penalties.

Non-resident E-Supplier in Cambodia

Under a Prakas 542 a Non-resident E-Supplier who expects to have annual turnover to its Cambodia consumers (both individual and business) of Khmer Riel 250 million (approximately USD62.5k) or expected turnover within any three consecutive months that end in the current calendar year that exceed Khmer Riel 60 million (approximately USD15k) are now obliged to register for VAT within 30 days.

Practically what this means is that from September 2021 Non-resident E-Suppliers need to ask themselves will my revenue generated from sales to Cambodia customers exceed USD15k by the end of 2021? If the answer is yes then those suppliers would have 30 days to register for VAT – if the answer is no then the suppliers can wait until 1 January 2022 and then make an assessment at that time whether they will have turnover in 2022 of more than USD62.5k or expect to have turnover in any three consecutive months in 2022 that exceeds USD15k.

For those Non-resident E-Suppliers who do meet the threshold to register for VAT the new Prakas outlines the process and documentation that is required. Practically speaking Non-resident E-Suppliers may need to use a registered Tax Agent in Cambodia to complete the Tax Registration process for them which requires the following documents, (if not in Khmer or English language translated documents are required), to be submitted:

  • VAT registration application,
  • Non-resident taxpayer registration documents,
  • Valid identification documents of owner or representative (ID card or passport),
  • Two current 35 x 45mm passport photos not older than 3 months of the director or representative,
  • Bank account details of the non-resident issued by or printed from the bank.

The fee to register for VAT is Khmer Riel 400,000 (approximately USD100) and should there need to be any updates to the information provided the fee for such updates is Khmer 200,000 (approximately UDS50).

Upon completion of the VAT registration process the Non-resident E-Supplier shall receive the following:

  • A simplified VAT registration certificate,
  • Tax registration certificate,
  • Notice on tax compliance.

If a Non-resident E-Supplier fails to register for VAT, whether voluntarily or at the invitation of the tax authority in Cambodia, the tax authority can unilaterally register the Overseas E-Supplier and issue a tax re-assessment of the taxes that they believe have not been paid – along with penalties and interest. Obstruction of the tax law includes failure to register with the tax authority and an entity that obstructs the implementation of the tax law is liable to a fine from 5 million Khmer riel (approximately USD1,250) to 10 million Khmer riel (approximately USD2,500) and/or to imprisonment from 1 month to 1 year.


Once registered for VAT in Cambodia the Non-resident E-Supplier will need to issue tax invoices for each transaction it makes to consumers in Cambodia. That would include transactions with individuals (B2C) and transactions with Taxable Persons in Cambodia (B2B).

Invoices issued by the VAT registered Non-resident E-Supplier would need to include:

  • The name, address, and VAT registration number of the Non-resident E-Supplier
  • Name and address of the customer, and in a B2B transaction their VAT registration number
  • Invoice number and date of issuance,
  • Description of the good/service
  • The taxable value and VAT (in a B2B transaction) or the total value of the supply inclusive of VAT (in a B2C transaction).
  • In a B2C transaction the Non-resident E-Supplier would need to declare and pay the VAT charged to the GDT by the 20th of the month following the month in which the supply was made. A supply is determined to be made at the earlier of when the invoice was issued, goods delivered or payment received.

In a B2B transaction, the Non-resident E-Supplier would need to show the VAT charged as a separate line item in the issued invoice and declare the VAT charged in its monthly VAT declaration however the obligation to actually pay the VAT charged by the Non-Resident E-Supplier to the GDT rests with the Taxable Person under the VAT reverse charge mechanism.

Taxable Person

The VAT reverse charge mechanism is novel to Cambodia and increases the compliance obligation significantly for those Taxable Persons in Cambodia who transact with Non-resident E-Suppliers. An important point to note is that the obligation for a Taxable Person to apply the VAT reverse charge exists regardless of whether the Non-resident E-Supplier has registered for VAT in Cambodia or not.

Under the VAT reverse charge mechanism a Taxable Person who receives a supply of digital goods, services or e-commerce activities from a Non-resident E-Supplier, regardless of whether or not they are registered for VAT, will need to declare and make the payment of the VAT to the GDT by the 20th of the following month in which the supply takes place.

This works in a similar fashion to the withholding tax regime in Cambodia whereby a registered taxpayer who makes payments of Cambodian sourced income to a non-resident is obliged to withhold and pay withholding tax to the GDT on their behalf. In practice, however, the compliance obligation for a Taxable Person under Prakas 542 seems to be somewhat higher than that of a Withholding Agent.

Under Prakas 542 a Taxable Person would need to undertake the following:

When dealing with a Non-resident E-Supplier that has not registered for VAT, the Taxable Person would need to make a judgment as to whether or not the supply constitutes a digital good, service or e-commerce activity.

The latter is a little complex as can be seen by the extensive and non-exhaustive list of e-commerce activities annexed in Sub-decree 65 which can include for example tangible products purchased online, online advertising, customer support, online consultancy, data-warehousing, streamed content, online shopping portals etc.

Tax advisors and internal finance personnel will now be required to learn very quickly what constitutes e-commerce activities to ensure that the requirement to pay the VAT reverse charge is adhered to by their clients and businesses respectively.

A Taxable Person will also need to be aware that for VAT invoices issued by Non-resident E-Suppliers who have registered for VAT that they will also be responsible for paying the 10% VAT to the GDT, on behalf of the VAT registered Non-resident E-Supplier, under the reverse charge mechanism.

When it comes to the Taxable Person actually declaring and making the payment of the VAT reverse charge there is also currently uncertainty as to how this is done. A bank receipt could be provided evidencing that the VAT reverse charge has been paid to the GDT but there is currently no provision in the monthly VAT declaration to show the VAT reverse charge details.

VAT Input Credit

A Taxable Person is allowed to claim a VAT input credit on the supplies it receives from a Non-resident E-Supplier provided that the Taxable Person has paid the VAT reverse charge to the GDT. Interestingly a VAT input credit appears to be allowed even in the event that the Non-resident E-Supplier has not registered for VAT which is re-enforced by the obligation under Article 40 of the Sub-decree on VAT, requiring a tax invoice or bill of entry for import, being deliberately excluded from the criteria under which an input credit can be claimed in Article 8 of Prakas 542.


The enactment of Sub-decree 65 and Prakas 542 in Cambodia were inevitable when we look at global development trends with respect to the taxation of e-commerce as governments around the world become more concerned around tax leakages arising from the inability to tax a supplier who does not have a physical presence in their jurisdiction.

It will be interesting over the coming months to see how many of the large players in the e-commerce sector feel compelled to register for VAT in Cambodia under this new development. Concerns still linger with respect to the interplay of the VAT registration requirement under Prakas 542 and the expansive definition of permanent establishment (PE) under Cambodia’s Tax on Income regulations which provide that a non-resident taxpayer who carries out e-commerce activities is considered to have a created a PE if the goods or services are supplied or used in Cambodia.

By specifically stating that VAT registration is required for Non-resident E-Suppliers who do not have a PE in Cambodia the new e-commerce regulations appear to have knocked back the wide expanse of the PE definition. If the tax authority wishes to encourage compliance and VAT registration by the large e-commerce players we suggest that it should clarify this issue which could be seen as a deal breaker for some when it comes to the registration obligation.

Some may also see the liberal allowance of obtaining VAT input credit in the instance that a Non-resident E-Supplier does not register for VAT as not incentivizing voluntary VAT registration. If a VAT input credit was not allowed, in the scenario where the Non-resident E-Supplier was not VAT registered, the tax registered consumer in Cambodia would need to bear the cost of making the VAT reverse charge but would not be allowed the input credit thereby dis-incentivizing it to transact with unregistered Non-resident E-Suppliers.

What is also problematic is the additional compliance obligation that is now place on those registered taxpayers who in a number of cases may be the unwitting consumer of an e-commerce activity that would be captured under the expansion list of e-commerce activities in Sub-decree 65. Failure of a registered taxpayer to pay the VAT reverse charge from September 2021 is going to result in re-assessed tax, penalties and interest and the potential to be unable to obtain a corresponding VAT input credit. The stakes are quite high and it will be incumbent for tax advisors and internal finance teams alike to educate themselves on the types of transactions that will create a VAT reverse charge obligation for their clients and businesses respectively.

We understand and sincerely hope, that further clarification will be forthcoming over the coming weeks from the GDT regarding the implementation of Prakas 542.