Cambodia: a new tax regulation risks cutting the power on e-commerce activity

Less than six months after introducing a sub-decree to push non-resident e-commerce firms to register for value-added tax (VAT) with the Cambodian tax authority, the government has upped the ante.

The two new e-commerce policies – a November 30, 2021 deadline for the companies to register with the Ministry of Commerce (MoC) and a reverse charge VAT mechanism relating to business-to-business (B2B) transactions – signal the government’s seriousness in tightening tax measures.

For both policies, the penalties for failing to comply are severe, involving the termination of service and fines, demonstrating the authority’s frustration in trying to get the companies to obey the law.

A statement issued by MoC last week revealed how foreign companies or branches, sole proprietors and businesses that operate e-commerce platforms in Cambodia had yet to apply for e-commerce permit or license despite numerous workshops and training.

Going by the terse tone of the statement, these platforms are likely to see an end to their operation starting December 1 this year, said Ministry of Posts and Telecommunications secretary of state So Visothy.

“The firms who provide e-commerce business activities in Cambodia have to comply with the law and regulation. If they fail to comply or do not pay tax to the government, it is illegal for them to operate in Cambodia.

“[They] are subject to legal action by MoC or Ministry of Economy and Finance (MEF). We have the right to cooperate with the authorities to close down the illegal business operation,” he told The Post via a social messaging app.

The growth of the e-commerce market has been exponential reflecting the Kingdom’s economic growth and lower middle income status.

In addition, the number of e-commerce players, both big and small, have mushroomed in the past one year, with many taking to social media platforms to solicit for business and promote service.

This year, the World Bank forecasts gross domestic product per capita to be $1,606, rising 2.6 per cent after dipping last year. With that, disposable income has expanded to 464,000 riel ($113) in 2017, according to market and consumer data research firm Statista Inc.

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Author: Sangeetha Amarthalingam

Source: The Phnom Penh Post

Publication date: 30 September 2021

October 06, 2021