Salary Tax in Cambodia: A Comprehensive Guide for Residents and Expatriates
Cambodia’s salary tax – often referred to as tax on salary – is a monthly tax on employment income, established by the Law on Taxation. This tax applies to salaries, wages, bonuses, overtime pay, and even fringe benefits received by an employee. Unlike some countries, Cambodia does not impose a separate “personal income tax” on individuals; instead, employment income is taxed via this salary tax system. In this guide, we’ll break down the legal framework, tax residency rules, rates, calculations, and compliance obligations for salary tax in Cambodia, providing clarity for both Cambodian citizens and foreign professionals.
Legal Framework: Law on Taxation and Sub-Decree No. 196 (2022)
Cambodia’s salary tax is governed by the Law on Taxation and detailed regulations from the General Department of Taxation (GDT). Article 42 (new) of the Law on Taxation defines “salary” broadly to include wages, remuneration, bonuses, overtime, and other compensation or fringe benefits provided to an employee (directly or indirectly) for performing employment activities. This means virtually all forms of compensation from an employer are considered taxable income.
To keep the tax system up-to-date, the government issues sub-decrees and GDT instructions. Sub-Decree No. 196 (ANKr.BK dated 28 September 2022) is a crucial update that revised the tax rate thresholds for salary tax, effective January 1, 2023. Under this sub-decree, new progressive tax brackets apply to resident individuals, and the non-taxable threshold was increased to provide slight relief to low-income earners. The Ministry of Economy and Finance also issued Instruction 017 (December 27, 2022) to guide employers on implementing these new rates, ensuring a smooth transition to the 2023 tax brackets.
In essence, Cambodia’s legal framework for salary tax comprises: the Law on Taxation (establishing definitions and obligations), Sub-Decree 196 (2022) setting out current tax rate tables, and various GDT guidelines (like tax instructions and exchange rate rules) that provide practical details for compliance.
Tax Residency in Cambodia: Resident vs Non-Resident Taxpayers
Tax residency is a fundamental concept that determines how an individual’s income is taxed in Cambodia. According to Cambodian tax law, an individual is considered a resident taxpayer if they either are domiciled in Cambodia, have their principal place of abode in Cambodia, or are physically present in Cambodia for more than 182 days in any 12-month period. In practice, 182 days is roughly six months – so living in Cambodia for half the year or more generally triggers tax residency. All others are classified as non-resident taxpayers.
This distinction is important because resident and non-resident taxpayers are taxed differently:
Resident individuals are subject to Cambodian tax on their worldwide employment income. This means a Cambodian resident’s salary from both Cambodian and foreign sources could be taxable in Cambodia (though reliefs are available for foreign taxes paid, as discussed later).
Non-resident individuals are taxed only on Cambodian-sourced income (income earned for work performed in Cambodia).
For example, a Cambodian citizen or expat who spends most of the year in Cambodia will be treated as a resident for tax purposes, whereas a foreign employee on a short-term assignment (say 3–4 months) remains a non-resident taxpayer. Importantly, residency is determined by days of presence or domicile, not by visa status or nationality. Even foreign professionals can become Cambodian tax residents if they pass the 182-day threshold.
Implications of Residency Status
Being a tax resident generally results in a lower tax burden on Cambodian salary income because of progressive rates and personal allowances. However, residents are expected to report global salary income. Non-residents, by contrast, face a higher flat tax rate on local income and are not eligible for certain deductions or the lower tax brackets.
For expatriates, this means: if you initially work in Cambodia for only a few months, your employer will withhold tax at the flat non-resident rate (20%). If your stay extends beyond 182 days, you become a resident and subsequent salary is taxed at progressive rates. It’s wise for foreign employees and employers to track days of stay. In cases where an expatriate’s status changes mid-year, consult a tax professional on how to adjust withholding – typically, once residency is established, the progressive rates apply going forward. Planning your contract duration and understanding this cutoff can help in tax planning for cross-border staff.
Progressive Salary Tax Rates for Residents (2023)
Resident taxpayers benefit from a progressive tax rate system on monthly salary. The rates in effect (as of 2023, per Sub-Decree 196) are as follows:
0% on the portion of monthly salary from KHR 0 to 1,500,000 (approximately USD 0 to $360) – this portion is tax-free.
5% on the portion from KHR 1,500,001 to 2,000,000 (~$361 to $482).
10% on the portion from KHR 2,000,001 to 8,500,000 (~$483 to $2,050).
15% on the portion from KHR 8,500,001 to 12,500,000 (~$2,051 to $3,739).
20% on any portion over KHR 12,500,000 (over ~$3,739).
These brackets are applied in tiers. For instance, if a resident employee has a taxable salary of KHR 10,000,000 in a month, the tax would be calculated as 0% for the first 1.5 million, 5% for the next 500,000, 10% for the slice from 2 million up to 8.5 million, and 15% for the remainder above 8.5 million. Tax computation can be simplified using a formula or table of deductions for each bracket. The PwC Cambodia tax guide provides a handy calculation formula for each range – e.g., a salary in the 15% bracket would incur tax = (Salary – 8,500,000) × 15% + 675,000. These formulas essentially account for the tax on lower portions automatically.
Note: The non-taxable threshold (0% band) was raised to KHR 1.5 million under the 2022 sub-decree, up from the previous 1.3 million riels. This change effectively reduces tax by KHR 10,000 per month for those earning above the threshold. It’s a modest relief aimed at low-to-middle income workers.
Flat Tax Rate for Non-Residents
All non-resident taxpayers (anyone who doesn’t meet the residency criteria) are taxed at a flat 20% rate on their Cambodia-sourced salary income. This flat rate is applied on the gross salary without the progressive slabs or the personal reliefs that residents enjoy. The 20% tax on a non-resident’s employment income is considered a final tax – meaning it generally satisfies their Cambodian tax obligation on that income, with no further annual filing needed by the employee.
For example, if a foreign employee spends 4 months working in Cambodia and earns a monthly salary equivalent to KHR 8,000,000, the employer will withhold 20% of that amount (KHR 1,600,000) each month as tax. The employee’s Cambodian tax on salary is “fixed” at that flat rate. Non-residents are not eligible for the 0% band or lower rates, and no dependent deductions apply in their case. This higher rate for non-residents reflects the tax system’s design to tax short-term and transient workers at a consistent rate.
It’s important for foreign professionals to determine at the outset whether they will be a non-resident or resident for the tax year. If there is any uncertainty (for instance, if a short contract might get extended past 182 days), employers should monitor the situation. In some cases, an initially non-resident worker may later qualify as a resident, at which point the taxation method would switch to the progressive system. Always communicate changes in your work duration or status to your payroll or HR department so the correct rate is applied.
How to Calculate Tax on Salary in Cambodia
Calculating the tax on salary involves a few steps, especially for residents who can claim allowances. Here’s a step-by-step guide on how to calculate tax on salary for a typical month:
Determine Gross Monthly Salary: This includes all cash compensation for the month – basic pay, overtime, bonuses, commissions, and any taxable allowances. Essentially, it’s the total remuneration before any tax. For example, let’s say gross salary = KHR 4,000,000.
Subtract Allowable Deductions: If the employee is a resident with dependents, subtract the dependent rebate. Cambodia offers a deduction of KHR 150,000 for each dependent child or non-working spouse from the taxable salary base. A “dependent child” must be under 14 years old, or under 25 if a full-time student, and a spouse counts only if not earning an income (often referred to as a housewife/husband). Notably, each child can only be claimed by one parent – if both parents work, only one of them gets to use the child deduction. For our example, if the employee has a non-working spouse and one young child (2 dependents total), the deduction would be 2 × 150,000 = KHR 300,000.
After deducting dependents, also subtract any specific allowances exempted by law. For instance, certain factory worker allowances (like some meal or transportation stipends) can be excluded from the taxable base under a special circular. However, for most employees, such exclusions won’t apply unless specified by regulation or employment sector.
Obtain the Taxable Salary Base: This is Gross Salary – Dependent Rebate – Exempt Allowances. Using the example: KHR 4,000,000 – 300,000 = KHR 3,700,000 taxable salary.
Apply Progressive Tax Rates (Residents): Determine which tax brackets the taxable salary falls into and apply the progressive rates. In the example, KHR 3.7 million falls in the “10%” bracket (since it’s between 2,000,001 and 8,500,000 KHR). You would tax the amount over 2,000,000 at 10%, plus the fixed amount due for the lower brackets. Using the formula approach: ((3,700,000 – 2,000,000) × 10%) + KHR 25,000 = (1,700,000 × 0.10) + 25,000. That equals 170,000 + 25,000 = KHR 195,000 tax for the month. (The KHR 25,000 in the formula represents the tax that would have been due on the band up to 2,000,000 at 5%. This matches doing it tier-by-tier.)
If the taxable base is above 8.5 million or 12.5 million, continue similarly with the 15% and 20% portions. For income below 1.5 million, the tax would simply be zero after deducting dependents.
Apply Flat Rate (Non-Residents): If the individual is a non-resident, skip the progressive calculation – simply take 20% of the gross salary as the tax. For example, a non-resident earning KHR 4,000,000 would incur tax of 0.20 × 4,000,000 = KHR 800,000. No further deductions or steps.
In summary, resident employees reduce their salary by any eligible dependent deduction and then calculate tax according to the brackets, whereas non-residents take a straight 20% of gross. Many employers use automated payroll systems or GDT-provided tax tables to simplify this math. The GDT has published official Tax on Salary tables and formulas which employers can follow to compute the tax exactly for any salary range.
Tip: Always calculate in the local currency (KHR). If you are paid in US dollars or another currency, Cambodian tax rules require converting that income to riels for tax purposes. The GDT mandates using the official exchange rate of the National Bank of Cambodia (NBC) on the 15th day of each month for converting monthly salaries to KHR. Employers should be mindful to apply this official mid-month rate to ensure the tax calculation is correct. (If the 15th falls on a non-working day and no rate is issued that day, use the rate from the previous day.)
Deductions and Allowances for Dependents
Cambodia’s salary tax system provides a small measure of relief for taxpayers supporting a family. As mentioned, resident taxpayers can deduct KHR 150,000 per month for each dependent. Dependents include:
Children under 14 years old (or under 25 if in full-time education at a recognized institution).
A non-working spouse (commonly a homemaker spouse with no income).
This deduction effectively expands the 0% tax bracket for those taxpayers. For example, a working parent with two young children would get a KHR 300,000 deduction, meaning the 0% tax threshold for them is effectively 1,800,000 KHR instead of 1,500,000 KHR in that month.
To claim these deductions, proper documentation is important. Typically, the employee should inform their employer of the dependents and provide proof, such as a copy of the family book or birth certificates for children, and perhaps a declaration that the spouse has no income. In case of older children studying, evidence of school enrollment might be required. Only one parent can claim each child – spouses should coordinate to not double-claim. Employers will usually have an internal form or procedure for employees to declare their dependents for tax purposes at the start of employment or each year.
It’s worth noting that these dependent rebates have not increased in recent years (KHR 150,000 has been the standard amount). They remain modest, but every bit helps. Ensure you take advantage of them if you qualify, as they can reduce your monthly tax significantly, especially at lower income levels. For instance, as illustrated in a DFDL example: a resident employee earning KHR 2,000,000 with 1 spouse and 3 children (4 dependents) could reduce their taxable salary by KHR 600,000 (4 × 150,000) and end up owing zero tax in that scenario.
Employer’s Responsibilities: Withholding and Reporting
In Cambodia, the onus of salary tax compliance falls largely on the employer. The tax is administered on a pay-as-you-earn (PAYE) basis. This means each time salaries are paid (usually monthly), the employer must withhold the applicable tax from the employee’s salary and take care of remitting it to the tax authorities. Key responsibilities of employers include:
Withholding Tax Each Payday: Employers calculate the salary tax according to the rules above for each employee and deduct that amount from the salary payment. This ensures the employee receives their net-of-tax salary, and the tax portion is set aside for the government.
Monthly Tax Declaration: By law, employers must file a monthly tax return for the Tax on Salary with the General Department of Taxation. This return details the total salaries paid and taxes withheld for all employees in that month. Even if an employer has only one employee, the salary tax return still needs to be filed.
Payment to GDT: The employer must remit the withheld salary taxes to the GDT by the deadline. The deadline is typically no later than 20 days after the end of the month in which the salaries were paid. For example, taxes on January salaries must be paid by February 20. (In the past, the deadline was the 15th of the following month for some taxpayers, but under current regulations and for standard self-assessment taxpayers, the 20th is generally applicable. Always confirm if you fall under a different category, such as a small taxpayer, which might have different due dates.)
Employee Payslips and Records: Employers should provide employees with payslips showing gross pay, tax deductions, and net pay. They must also maintain payroll records and tax calculation worksheets in case of a tax audit. These records should include evidence for any dependent deductions claimed (copies of relevant documents).
One major advantage for employees is that individual employees do not need to file annual personal tax returns on their salary income. If you only earn employment income, your employer’s monthly filings fulfill your tax obligations. There is no annual reconciliation return for salary tax in Cambodia – unlike some countries where you file an individual tax return, Cambodia’s system treats the employer’s monthly submission as final.
However, if an individual has other sources of income (like business income or rental income), they may have to handle those under different tax filings (such as a personal tax on income or profit). But purely for employment income, once the employer withholds and remits the tax, the compliance is considered complete for the employee.
Employers failing in their duties (late payment or filing, under-withholding, etc.) can face penalties, including fines and interest on late tax payments. Additionally, non-compliance could expose the company to legal issues or jeopardize its tax compliance status. Therefore, companies typically invest in knowledgeable HR or accounting staff or consult professional payroll services to meet these obligations accurately.
Fringe Benefits Taxation in Cambodia
Apart from cash salary, many employees (especially in higher positions or expat roles) receive fringe benefits – perks such as housing allowance, company car, domestic help, school fees for children, etc. In Cambodia, fringe benefits are subject to a separate tax called the Tax on Fringe Benefits (TOFB). The fringe benefits tax is levied at a flat 20% rate on the gross value of the benefits provided.
Key points about fringe benefits and their taxation:
What counts as a Fringe Benefit? Cambodia defines fringe benefits broadly. Examples include: employer-provided accommodation or housing allowance (including paid utilities or a domestic helper), education assistance (e.g. paying an employee’s children’s school tuition, unless it’s a job-required training), private use of company vehicles, low-interest loans or discounted sales of company property to an employee, excessive per diem or meal allowances beyond normal practice, employer contributions to non-mandatory pension schemes or extra insurance, and entertainment or club membership expenses provided to employees. In short, if an employer is providing something of value to an employee other than cash salary for work, it likely qualifies as a taxable fringe benefit.
Who Pays the Fringe Benefit Tax? The employer is responsible for paying the 20% fringe benefit tax to the GDT. This tax is typically considered an employer’s cost. The employee doesn’t directly pay it (and it’s not deducted from the employee’s salary), but it is a tax on the benefit they enjoy. For example, if a company provides an expat manager with an apartment valued at $1,000 per month, the company would owe $200 in fringe benefit tax each month for that housing perk.
Fringe Benefit Tax is Final: The 20% tax on fringe benefits is a final tax – it does not get further grossed-up into the employee’s income for salary tax purposes. In fact, Article 42 of the Tax Law includes fringe benefits in the definition of salary, but then the law levies a separate fringe benefit tax on them in lieu of the normal salary tax. This avoids double taxation. Practically, cash salary is taxed according to the progressive table, while fringe benefits are taxed at 20% flat.
Exempt Benefits: Some benefits are exempt from taxation – typically those required by law or minimal amenities. For instance, mandatory employer contributions to the National Social Security Fund (NSSF) are not considered fringe benefits. Likewise, modest meal or travel allowances provided to all staff might be considered part of salary (and taxed as salary if in cash) or exempt if falling under specific labor-related allowances. It’s best to check GDT guidelines or prakas (regulations) on which benefits are non-taxable. Generally, the list provided in the Law on Taxation covers most taxable benefits, and anything not listed might be exempt or considered de minimis.
In planning compensation packages, employers often weigh the fringe benefit tax. Some employers may gross-up the benefits (i.e., cover the tax on behalf of the employee) as part of the cost of employing expatriates or senior staff. Others might choose to give a cash allowance (taxed as salary at progressive rates) instead of in-kind benefits, depending on which is more tax-efficient. From an employee perspective, be aware that lucrative perks like housing, car, or school tuition do carry an additional tax cost to the employer.
If you’re an employee negotiating a benefits package, it’s useful to know that a portion of those perks incurs 20% tax. While you won’t pay it directly, it’s part of the employer’s budget for your compensation. Transparency with employers on how benefits are handled (and whether any will reduce your cash salary or not) is advisable.
Tax Reliefs and Foreign Tax Credits
Cambodia provides mechanisms to avoid double taxation of income and to offer relief in certain situations:
Foreign Tax Credit for Residents: If a Cambodian resident taxpayer earns salary income from abroad (for example, they are on a short assignment overseas or have a remote job paying from another country) and they paid income tax on that salary to another country, Cambodia allows a tax credit. Specifically, taxes paid to a foreign country on foreign-source salary can be credited against the Cambodian salary tax due on that same income. The credit is limited to the lower of the actual foreign tax paid or the amount of Cambodian tax attributable to the foreign income. In simpler terms, Cambodia will not make you pay double tax on the same income: you pay either the foreign tax or the Cambodian tax, whichever is higher, but not both fully.
Example: Suppose a Cambodian tax resident receives consulting fee income from abroad equivalent to KHR 100 million in a year and pays $5,000 income tax in that foreign country. If that income were taxed in Cambodia, it would fall under the 20% bracket (annual scale) so roughly $5,000 of Cambodian tax would also be due. Cambodia would allow the $5,000 foreign tax as a credit, meaning the person ends up not paying tax again to Cambodia on it (assuming documentation is provided). If the foreign tax was only $3,000 whereas Cambodian tax would be $5,000, the individual would pay the $3,000 abroad and still owe $2,000 to Cambodia to bring the total tax up to the Cambodian level. Documentation such as tax payment receipts or withholding certificates from the foreign jurisdiction must be provided to claim this credit.
Double Taxation Agreements (DTAs): As of 2025, Cambodia has signed a number of DTAs (double taxation avoidance agreements) with other countries – primarily in Asia (e.g. Singapore, Thailand, China, Brunei, Vietnam, and others). However, not all are in force, and Cambodia notably does not have a DTA with countries like the United States or UK. Where a DTA exists, it may provide certain tax relief or preferential rates for residents of the treaty partner country (for example, exemption or reduced rates on certain income types, or tie-breaker rules for residency). For individual salary, DTAs often establish which country gets taxing rights for employment income and may cap what the source country can tax if the person is not present beyond a certain period. These treaty benefits are not automatic – one usually must apply and prove tax residency of the treaty partner country to get the relief.
Tax Residency Certificate: If you are a Cambodian resident who needs to claim treaty benefits or prove to a foreign tax authority that you pay taxes in Cambodia, you can obtain a Tax Residency Certificate from the GDT. Per GDT Instruction (No. 4084), a Cambodian resident can apply for such a certificate, which is valid for one year and renewable annually. This certificate is often required when claiming foreign tax credits or treaty benefits abroad, as it certifies you are a resident taxpayer of Cambodia for the period. For expats, this might be useful if, for example, your home country requires proof that you’re taxed as a resident in Cambodia so that they can exempt your foreign income under a treaty.
Other Tax Credits or Incentives: Cambodia’s tax system offers various incentives mostly geared toward businesses (such as tax holidays for Qualified Investment Projects or special economic zone incentives). For individual employment income, aside from the foreign tax credit, there are no general tax credits. The system relies on the exclusion of certain income (e.g., some scholarships or insurance payouts might be non-taxable) and the dependent deductions discussed earlier. There is no concept of a standard personal allowance beyond the dependent rebate, nor credits for things like charitable donations under the salary tax regime (charitable contributions might be deductible under profit tax if one is self-employed, however).
In short, while Cambodia taxes residents on worldwide income, practical relief is available to ensure you’re not taxed twice if you’ve already paid tax on foreign income. If you’re an expatriate paying tax in Cambodia and also having to file in your home country (like US citizens do), you’ll likely use foreign tax credits in your home country’s return to offset the Cambodian tax paid. Always consult a tax advisor familiar with both jurisdictions in such cases.
Guidance for Expatriates Working in Cambodia
Cambodia has become a popular destination for foreign professionals, and it’s crucial for expatriates to understand how income tax in Cambodia applies to them. Here are key points and tips for expats:
Work Permits and Registration: First, ensure you are working legally with the proper visa and work permit. While immigration compliance is separate from tax, the absence of a proper work permit could complicate tax matters. Employers typically register expat employees with the tax authorities, obtaining a Tax Identification Number (TIN) for each employee. As an expat, you should provide any required documents (like passport, visa, employment contract) to facilitate your registration in the tax system.
Tax Residency Status: Determine if you will be a resident or non-resident (as discussed above). If you plan to reside in Cambodia long-term (over 182 days in a year), you will be taxed as a resident on your worldwide salary income. If you are on a short stint, you’ll be non-resident taxed only on Cambodian earnings. This status can affect how your home country taxes you as well. U.S. expats, for example, remain taxable on worldwide income by the U.S., but can use the Foreign Earned Income Exclusion or foreign tax credits to avoid double taxation. Other nationalities might be able to claim non-resident status in their home country if they become resident in Cambodia. It’s a two-sided equation.
Tax Rates and Obligations: As an expat employee, the practical side is that your employer will handle the monthly withholding and filing of your salary tax. You should, however, review your payslips to ensure the correct rate is being applied (5%, 10%, etc., if you’re a resident; or 20% flat if non-resident). If you notice no tax withheld at all and your salary is above the threshold, raise this with your employer – compliance is important for your legal status and future tax clearance (for example, when renewing visas or exiting the country, outstanding tax issues can be a problem).
Dependent Deductions for Expats: Yes, expats can claim the same KHR 150,000 deductions for a non-working spouse and children, if they are residents. Make sure to inform your employer if your family is with you and you qualify. Keep in mind, the child must reside with you and meet the age criteria, etc. If your spouse also works in Cambodia, neither of you can claim the other as a dependent. Often, expatriate packages mean both spouses might work, so this deduction is commonly not applicable, but if one spouse doesn’t have employment, do utilize it.
Documents for Tax Compliance: While employees don’t file returns, it’s wise to keep copies of important documents: your employment contract, monthly payslips, tax payment receipts (or the monthly tax filing your employer gives you), and any Tax Residency Certificate if you obtained one. Should you need to demonstrate tax compliance (e.g., to get a residency certificate or to your home tax authorities), these will be valuable.
Tax Clearance When Leaving: Cambodia has historically required foreign employees to obtain a tax clearance certificate when permanently departing the country, especially if they had a long-term work permit. Check the current procedure with the GDT or a tax consultant – you may need to ensure all monthly taxes have been paid and perhaps get a letter from the tax office to avoid issues at immigration on departure (though this is less formalized than in some countries). Employers sometimes handle this as part of end-of-contract HR processes.
Social Security Contributions: Note that as of recent years, Cambodia introduced the National Social Security Fund (NSSF) obligations for employers and employees. These are separate from salary tax. If you are an employee, your employer may deduct a small percentage for NSSF (typically for occupational risk, healthcare, and pension schemes gradually being implemented). NSSF contributions are not tax, and currently, Cambodia does not allow a tax deduction for NSSF from salary tax (salary tax is calculated on gross salary before NSSF). Just be aware of this deduction on your payslip and that it serves a different purpose (entitling you to certain medical or benefits coverage).
No Annual Filing (for most): As an expat employee, you do not file an annual Cambodian tax return for your salary. If you have other income (like you started a small business on the side or have rental income in Cambodia), you might have separate tax filings for those (e.g., patent tax and profit tax for the business, or tax on property for real estate). But for employment income, your employer’s monthly filings are it. This simplifies life – just ensure they are doing it correctly.
Home Country Taxes: Don’t forget your home country obligations. For example, Americans must file an annual U.S. tax return regardless of where they live, reporting worldwide income. You can claim foreign tax credits for the Cambodian tax paid. Other countries like Australia, UK, etc., may cease taxing you if you become non-resident there, but have specific criteria. Align your Cambodian tax residency with your home country’s residency rules to optimize your overall tax situation. Professional advice is invaluable here.
In essence, Cambodia is welcoming to foreign professionals, and the tax regime for expats is straightforward – know your residency status, let your employer handle the calculations, and keep records. The relatively low top tax rate (20%) can be attractive, and the cost of living adjustments via benefits can be managed with fringe benefit planning. Stay compliant to ensure your work permit renewals and eventual exit are hassle-free.
Tax Considerations for Self-Employed Individuals and Consultants
Not everyone working in Cambodia is a formal employee; many are self-employed, freelancers, or consultants. It’s important to clarify how taxation works for these individuals, since “salary tax” strictly applies to employer-employee relationships. Here’s how it breaks down:
Consultants and Contractors: If you are working in Cambodia as an independent consultant or contractor (for example, you provide services to a company but are not on their payroll), your income is not subject to salary tax withholding. Instead, such income falls under the scope of the Tax on Income (TOI) – essentially the profit tax regime that applies to businesses and sole proprietors. In practice, you would typically register as a taxpayer (as a sole proprietorship or enterprise) and be taxed on your net profit from business at the standard rate (20% for most cases). Cambodia uses the same progressive rates for personal business income annually as for salary, but effectively, once your profit is beyond 150 million KHR per year, you pay 20%. There are quarterly prepayments and an annual tax return involved for TOI, which is more complex than salary tax.
Deemed Employment: Be aware that some consultants may be reclassified as employees by the tax authorities if the nature of your work is essentially like that of an employee. For instance, if you work exclusively for one company, under their control and supervision, and you don’t have a registered business, the GDT could determine that those consulting fees are actually a salary in disguise. There are rules to assess this, and if deemed an employee, the company should have withheld salary tax. To avoid this ambiguity, many consultants formalize their business (get a tax patent, charge VAT if applicable, etc.) or ensure they work through a company.
Withholding on Services: If an individual consultant does not register and the paying company treats them as a supplier, the company might apply a withholding tax on the service fees. For domestic payments to resident individuals, the standard withholding tax on services is 15% (if the service provider is not a registered taxpayer). This 15% is not exactly “salary tax” but a form of advance tax on income. For non-resident service providers, withholding is 14% or 15% depending on the nature (per withholding tax rules). The bottom line is, if you are a freelancer, clarify with your clients how you should be paid and taxed. If they are withholding something from your invoice, ask what it is so you can credit it against your eventual tax due.
Sole Proprietorships and SMEs: Many local Cambodian professionals operate small businesses or consultancies. These individuals may fall under the self-assessment regime and pay Tax on Profit annually. For example, a freelance software developer earning income from various clients would report revenue and deduct allowable expenses (perhaps a home office, equipment costs, etc.) and pay 20% on the net profit. There are simplified regimes for very small taxpayers, but as of recent reforms, most active businesses need to follow the standard regime if their revenue is above certain thresholds.
Record Keeping: If you’re self-employed, maintain good records of your income and expenses. Unlike salary tax (where the gross income is taxed without deductions except dependents), under profit tax you can deduct business-related expenses to arrive at net profit. Common deductions include office rent, salaries paid to staff, supplies, business travel, etc., as long as you have proper invoices. Keep those invoices because the GDT may ask for them if they review your filings.
Social security and other obligations: Self-employed individuals are not yet clearly mandated into the NSSF system (as of now, NSSF mainly covers employees of enterprises). But this is evolving. Also, self-employed professionals should consider registering for VAT if their services are subject to it and exceed the threshold (currently, businesses with turnover above a certain amount must charge 10% VAT). Consulting services to Cambodian companies usually are subject to VAT if the provider is registered.
Example: To illustrate, consider a consultant (resident) who earns the equivalent of KHR 300 million in a year from various projects, and has business expenses of 100 million (net profit 200 million). Under the annual progressive rates, the first 150 million would be taxed at gradually 0%-15%, and the amount above 150M (50 million) at 20%. This yields a tax somewhat similar to what an employee earning that amount of salary would pay. The consultant would need to file an annual profit tax return by March 31 of the following year (Cambodia’s tax year is calendar year) and pay any balance due. They would also have made quarterly prepayments (often 1% of turnover per quarter, which can be credited against the annual tax).
In summary, self-employed individuals and consultants do not pay “salary tax” via withholding. Instead, they should register and comply under the profit tax system. Given the complexity, it’s highly recommended to engage a tax agent or advisor in Cambodia to handle registration and filings if you go this route. The compliance (bookkeeping, monthly and annual returns) is heavier than for a regular employee.
If you are a consultant who is hired through an agency or a brief contract, clarify whether the company will treat you as an employee (withholding salary tax) or as an independent contractor (no withholding, but possibly subject to other taxes). Misclassification can lead to tax penalties, so it’s better to get it right from the start.
Other Relevant Taxes on Income in Cambodia
In addition to the tax on salary, individuals and companies in Cambodia may encounter several other taxes on income or related to employment. Here’s a brief overview to complete the picture:
Corporate Income Tax (Tax on Profit): Companies (including those owned by individuals) are subject to Corporate Income Tax (CIT), officially called Tax on Income (TOI). The standard CIT rate in Cambodia is 20% of net profit. This rate applies to most businesses (there are higher rates for oil, gas, and mineral exploitation at 30%, and QIP investments may enjoy 0% for a period). While this is not a tax on individual salary, it’s relevant if you operate your own company or if you are comparing corporate vs individual tax burdens. Profit is calculated after allowable deductions (business expenses, depreciation, etc.). Companies must file annual tax returns and make monthly prepayments and year-end adjustments.
Minimum Tax: Cambodia imposes a Minimum Tax equal to 1% of a business’s annual turnover (sales). This functions as a floor on tax payments. If a company’s 20% profit tax liability is less than 1% of its revenue (perhaps because it had slim profit or a loss), it may still owe the minimum tax. However, if proper accounting records are maintained and the company is in compliance (and perhaps audited), the minimum tax can be considered as an advance that is waived if profit tax exceeds it. For compliant companies, effectively they pay the higher of the 20% on profit or 1% of revenue. Minimum tax mainly affects businesses with very low profit margins or those trying to avoid tax through deductions.
Withholding Taxes: Various payments to both residents and non-residents attract withholding tax. For instance, dividends to non-residents (if any individual gets dividends from a Cambodian company) are subject to 14% WHT, interest and royalties have WHT of 15% for residents and 14% for non-residents, and service fees paid to non-resident entities are 14%. These are more relevant for companies and investors, but if you’re an individual receiving interest from a bank, note that interest is usually subject to 6% withholding (for residents) at source. Rental payments to individuals can also involve withholding (10% on property rent paid by a lessee who is an enterprise). As an employee, you typically won’t deal with these, but as a self-employed or investor, you might encounter them.
Capital Gains Tax: A Capital Gains Tax (CGT) on individuals has been in the pipeline in Cambodia. Initially slated for implementation in 2020 and then 2022, the introduction of capital gains tax has been delayed. Most recently, the government announced a further delay until the end of 2025 for implementing the capital gains tax on physical persons. Once in effect, this tax would impose 20% on gains from the sale of capital assets, which include real estate, stocks, investment assets, goodwill, etc., of individuals. For example, if a Cambodian resident sells a piece of land at a profit, that gain would be taxed at 20%. Currently, such transactions (if not done via a company) often incur just transfer taxes or unused land taxes, but not an explicit capital gains tax. Keep an eye on this space if you plan to sell property or large assets – the rules (including calculation methods and any exemptions like a principal residence exclusion) will be defined once the CGT goes live. Businesses already effectively pay tax on gains as part of their profit tax, but this CGT specifically targets individuals not otherwise taxed on such transactions.
Other Payroll-Related Taxes: While not a tax on income per se, employers have to pay into several government funds. For instance, there’s an Accommodation Tax (lodging tax) of 2% in the tourism sector, and some specific industry levies. Another notable one is the Salary Tax on Fringe Benefits we discussed (20%). Additionally, the government has a withholding for the new pension scheme (as of 2022-2023) where employers and employees each contribute 2% of wages (increasing gradually) to a pension fund – this is separate from tax and administered by NSSF.
Value Added Tax (VAT): If you run a business or even as a consumer, note that Cambodia has a 10% VAT on most goods and services. Salaries are not subject to VAT, but if you are a consultant billing a client, your services could be subject to VAT if registered. VAT is a tax on consumption, not on income, but it interacts with business finances.
In summary, the Cambodian tax landscape includes tax on salary (the focus of this article), corporate tax on profits, withholding taxes, and upcoming capital gains tax, among others. For a regular employee, the relevant piece is mainly salary tax. For someone doing business or investing, being aware of these other taxes is crucial. It’s always beneficial to seek local tax advice when making significant financial transactions in Cambodia to ensure all tax angles are covered.
Practical Compliance Tips for Salary Tax in Cambodia
Ensuring compliance with Cambodia’s tax regulations will save you from penalties and give you peace of mind. Here are some practical tips for both employees and employers:
Maintain Proper Payroll Documentation: Employers should keep detailed payroll records each month. This includes employment contracts, payslips, calculation sheets for salary tax, and supporting documents for any deductions (like copies of IDs for dependents or proof of student status). Employees should keep their payslips and understand how their tax was computed. Good documentation helps in case of any GDT audit or if questions arise about whether the correct tax was paid.
Use the Official Exchange Rate: If salaries are paid in USD (which is common in Cambodia), always use the official exchange rate from the National Bank of Cambodia on the 15th of each month to convert USD to KHR for tax calculation. The GDT requires this, and using any other rate (especially one that undervalues the KHR amount) can lead to underpayment of tax and penalties. Many companies download the rate from the NBC or GDT website each month for consistency. For example, if 1 USD = 4,000 KHR (NBC rate on 15th), a $1,000 salary should be treated as KHR 4,000,000 for tax purposes.
Meet Filing and Payment Deadlines: Mark your calendar for the monthly tax return deadline (usually the 20th of the following month). Employers should ensure tax is declared and paid on time to avoid late fees. The GDT imposes interest on late tax payments and flat penalties for late filing. If the 20th is a weekend or holiday, plan to submit a bit earlier (typically the deadline doesn’t extend unless officially announced, so practically you file by the last working day before the 20th in such cases).
Separate Fringe Benefit Calculations: If you provide or receive fringe benefits, handle the Tax on Fringe Benefits separately from the normal salary tax. Compute 20% on the gross value of benefits and ensure the employer remits that as well (often on the same monthly return but in different sections). Both employer and employee should be clear on which items are taxed as fringe benefits versus salary. Misclassifying could either result in over-taxation or under-taxation.
Stay Updated on Tax Law Changes: Tax laws are dynamic. Sub-Decree 196 of 2022 is a recent example that changed tax brackets effective 2023. Keep an eye on updates from the GDT, Ministry of Economy and Finance, or professional tax advisories each year, especially around the national budget announcements. Any changes to rates, thresholds, or rules (like the planned capital gains tax or new pension contributions) could affect payroll calculations. Subscribing to a reputable local tax news source or consulting firm’s newsletter (e.g., DFDL, PwC, KPMG Cambodia updates) can be useful.
Consult Tax Professionals When in Doubt: If you’re unsure about any aspect – be it determining residency for a travelling employee, handling an unusual compensation item, or dealing with a foreign tax credit – consult a tax professional. Cambodia has several accounting and law firms with tax expertise. This is particularly important for companies with expat employees or complex pay structures, and for individuals who have multiple income sources. Professional advice can ensure compliance and also optimize tax outcomes (for instance, structuring part of compensation as a qualified allowance, or ensuring an expat can claim a home country exclusion).
Use GDT’s Online Services: The General Department of Taxation has been modernizing. Employers can now file returns and pay taxes through the GDT’s online system (known as the “E-Filing” portal). Using the online system can streamline compliance – it often provides prompts for required fields, and you can schedule payments via approved banks. Embracing these digital tools can save time and reduce errors. Ensure your company is registered for online filing and that staff are trained to use it.
Coordinate HR and Finance: In companies, the HR department (which knows about employees, contracts, dependents) should coordinate closely with the finance/tax department (which does the filings). Changes in an employee’s status (marriage, new child, departure, etc.) should be communicated so the tax calculations adjust accordingly. If an expat hits 183 days, HR should alert finance that the tax status will change from non-resident to resident. Good internal communication is a simple but effective compliance strategy.
Keep Personal Copies: As an employee, while you don’t file taxes personally, it’s wise to keep copies of your key tax documents. For example, ask for a copy of the annual summary of taxes withheld or a Tax Clearance Certificate if your company obtains one for you. This could be useful if you need to prove tax payment to another authority or if there’s a dispute. For expats, if you paid significant Cambodian taxes, you might need proof to claim foreign tax credits back home.
By following these tips, both employers and employees in Cambodia can navigate the salary tax system smoothly. Compliance not only avoids penalties but also contributes to Cambodia’s development, as tax revenues fund public services and infrastructure. CBRE Cambodia, in its corporate advisory role, always emphasizes that understanding local regulations – tax included – is key to a successful and responsible business operation or employment stint in the Kingdom.
This comprehensive overview of salary tax in Cambodia should serve as a clear guide for anyone earning income in the country. Always remember that individual circumstances can vary, and while this guide covers general rules as of 2025, you should seek personalized advice for specific situations. Cambodia’s tax authorities (GDT) also provide information and assistance for taxpayers, and keeping informed will ensure you stay on the right side of compliance while maximizing the available benefits.