Value Added Tax-Summary

Value Added Tax-Summary

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The self-assessment regime taxpayers who are making taxable supplies are obliged to register for VAT, and collect VAT from the supplying of goods or services to their customers. The term “good” means tangible property other than land or money. The term “service” means the provisions of something of value other than goods, land, or money.
Taxable supply
The term taxable supply means:

1. The supply of goods or services by a taxable person in the Kingdom of Cambodia. The taxable person is any taxpayer under the Real Regime Tax System and others as specified by regulations;
2. The appropriation of goods for his own use by a taxable person;
3. The making of gift or supply at below cost of goods or services by a taxable person;
4. The import of goods into the customs territory of the Kingdom of Cambodia.

Non-taxable supplies
Non-taxable supplies are as follows:

1. Public postal service;
2. Hospital, clinic, medical, and dental services and the sale of medical and dental goods incidental to the performance of such services;
3. The service of transport of passengers by wholly state owned public transportation system;
4. Insurance services;
5. Primary financial services;
6. The imports of articles for personal use that are exempted from customs duties;
7. Non-profit activities in the public interest;
8. The imports or the purchases of goods for use in the exercise of their official function of foreign diplomatic and consular missions, international organizations and agencies of technical cooperation of other governments.

Rates of tax
The rates of VAT are as follows:

• 0% This rate applies only to goods exported from the Kingdom of Cambodia and services consumed outside Cambodia. Exports are defined as including international transportation of passengers and goods.
• 10% This standard rate applies to all supplies other than exports and non-taxable supplies.

Calculation of tax due

• The VAT paid on import of goods or the VAT on locally purchase of goods or services for the business is called “Input Tax”.
• The VAT charged on supplying of goods or services to customers is called “Output Tax”.
• VAT payable ( credit) = VAT Output –VAT  Input – VAT credit from previous months

Non-deductible Input Tax
Non-deductible input tax are the VAT paid on:

• Entertainment, amusement and recreation expense unless the taxable person carries on a business as a provider of entertainment, amusement or recreation;
• Purchases or imports of automobiles, unless the taxable person carries on the business of dealing in, or hiring such automobiles; or
• Purchases or imports of certain petroleum products, unless the taxable person carries on the business as a supplier of such petroleum products.

The taxable person must file the monthly VAT return in the form prescribed by the tax administration by the 20th of the month following the month that the supplies have been made.

Example

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ABC is registered company in Cambodia, and company manufactured and sold furniture. We assume average exchange rate and salary exchange rate for March are 4,000 KHR and 4,100 KHR respectively. VAT credit from February, 2018 is 4,000,000 KHR. Below are transactions for March, 2018.

ABC’s Transactions	USD
Export to other countries	10,000
sale to local wholesaler included VAT	50,000
sale to local users included VAT	3,000
Import machinery for manufacturing furniture (taxable base)	8,000
Import materials included VAT	15,000
Phone 023 service expense	200
Internet service	110
Clearance cost for import and export	900
Wine for staff party	800
Heavy Truck ( included VAT)	50,000
Small Truck  ( included VAT)	30,000
Lexus car ( included VAT)	80,000
Diesel expense	2,000
Office Rental included VAT	1,000
Warehouse Rental from individual	400
consulting service from overseas company	800
Consulting service from local company	900
Monthly mobile phone expense	100
Lunch with customers	1,000
Office supply from registered Bookstore as company	500
Electricity expense	300
Water Supply expense	100
Received prepayment from customers, but ABC will deliver goods on April	8,000
ABC issued Credit Note for goods returned	1,100
Owners withdraw furniture ( 2 units) for personal uses*	–

*We assume that market price included any taxes of furniture per unit is 600, but cost of furniture per unit is $500.

Required:

Based on professional judgment for above transactions, calculate VAT payable or credit.

Solution

ABC’s Transactions	USD	VAT Out	VAT input	Explain
Export to other countries	10,000…	0		0% export
sale to local wholesaler included VAT	50,000…	4,545.45		50,000/11=50,000/1.1*10%
sale to local users included VAT	3,000….	272.73		3,000/11
Import machinery for manufacturing furniture (taxable base)	8,000….		800.00	8,000 x 10%
Import materials included VAT	15,000…		1,363.64	15,000/11
Phone 023 service expense	200……..		18.18	200/11
Internet service	110………		10.00	110/11
Clearance cost for import and export	900…….		81.82	900/11
Wine for staff party	800……		0	Entertainment cannot claim VAT
Heavy Truck ( included VAT)	50,000..		4,545.45	50,000/11
Small Truck  ( included VAT)	30,000..		2,727.27	30,000/11
Lexus car ( included VAT)	80,000..		0	cannot claim VAT
Disel expense	2,000…..		0	cannot claim VAT
Office Rental included VAT	1,000…..		90.91	1,000/11
Warehouse Retnal from individual	400……..		0	supplier is not company
consulting service from overseas company	800…….		0	import service
Consulting service from local company	900…….		81.82	900/11
Monthly mobile phone expense	100…….		0	cannot claim VAT
Lunch with customers	1,000….		0	cannot claim VAT
Office supply from registered BookStore as company	500…….		45.45	500/11
Electricity expense	300…….		0	exemption , VAT
Water Supply expense	100…….		0	exemption , VAT
Received prepayment from customers, but ABC will deliver goods on April	8,000…	727.27		8,000/11
ABC issued Credit Note for goods returned	1,100….	(100.00)		1,100/11
Owners withdraw furniture ( 2 units)	$0…….	109.09	————	Withdraw 600 x 2/11
Total as USD	………..	5,554.55	9,764.55
Average rate ( $1=KHR 4,000)		4,000	4,000
Total as KHR	…………..	22,218,181.82	39,058,181.82

VAT payable ( Credit) = VAT output – VAT input – VAT Credit from previous months

VAT output = 22,218,181.82

VAT input = 39,058,181.82

VAT Credit from previous months =4,000,000

S0 VAT Payable ( credit)=22,218,181.82-39,058,181.82-4,000,000=  ( KHR 20,840,000), so VAT credit =KHR 20,840,000

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