Tax Incentives in Cambodia
IMF Working Papers, March 29, 2018
Source details
- Canonical URL
- Tax Incentives in Cambodia
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Bibliographic details
- Authors: Manuk Ghazanchyan, Alexander D Klemm, Yong Sarah Zhou
- Published: March 29, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484347522.001
Summary findings
- Cambodia offers a number of tax incentives to investors comparable to regional peers.
- The paper reviews these incentives to assess their costs and benefits, including their likely effectiveness in attracting capital and in supporting the diversification strategy.
- An important incentive, the tax holiday, differs materially from practice elsewhere in offering a deferral rather than exempting from tax and may not be very effective.
- Other features of the tax system, such as the high withholding rate on dividends, imply relatively high effective tax rates for foreign investors.
Analysis of the tax holiday
- The tax holiday in Cambodia functions as a deferral rather than an exemption.
- Because it is a deferral, its effectiveness in attracting investment may be limited relative to tax holidays that provide full exemptions.
Other tax-system features affecting investors
- High withholding rate on dividends contributes to relatively high effective tax rates for foreign investors.
- Effective tax rates for foreign investors are influenced by the interaction of tax holidays (as deferrals) and withholding tax provisions.
Policy recommendations discussed
- Weigh revenue and other costs of tax incentives against the need for a competitive tax system.
- Consider shifting from tax holidays toward investment allowances.
Content in this bundle
- Tax Incentives in Cambodia, WP/18/71, March 2018