Cambodia: New Tax Laws to make e-commerce accountable

• Feb 15, 2022

While many businesses selling online in Cambodia are in the process of understanding how to register their organisations with the Ministry of Commerce (MOC) for the payment of taxes, which will start April 1, the wider implications of the new laws regarding taxation are being examined for those wishing to succeed in the rapidly expanding e-commerce market.

According to the General Department of Taxation (GDT) press release, it declared that it’s working with 49 ISPs (Internet Service Providers) to promote its implementation of VAT on e-commerce, obliging them to apply for an e-commerce license at the MOC.

Chairman of the Digital and Technology Committee for EuroCham – an association of European businesses in Cambodia – Matthew Tippetts told Khmer Times that these new laws are clearly designed to “identify e-commerce providers and make sure they pay their tax.”

Tippetts who is also CEO and founder of Clik, a digital payment service provider in Cambodia that is due to launch a new payment service later this year, sees the wider context of this latest development. “This is part of a global movement you see around e-commerce taxation, to make sure that it’s properly taxed,” he said, explaining that in Europe similar tax laws have been implemented, so that “if a Cambodian customer is buying something from Europe, and vice versa, then VAT is paid. It’s about putting in place a level playing field where taxes are collected effectively.”

He notes the obvious motivation for the government to increase its revenue from the burgeoning online industry saying, “It’s understandable the government wants to expand its tax base considering that some of these e-commerce companies are rather large.”

When asked whether these new laws would be fair to the smaller e-commerce businesses Tippetts was clear that there should be no exception to the rules. “I think it’s really about making sure that companies are all treated the same way and get a level playing field,” he said, adding that, “as a retail e-commerce business you should be subject to the same taxation as anybody in your industry, no matter what the size, and that means you should be getting collected 10 percent of your revenues. Historically, I think this has been an issue in Cambodia and other places where a lot of retail businesses are not taxed compliant, and these businesses end up having a 10 percent advantage on other businesses that are tax compliant and this, in turn, creates unfairness in the market.”

The new laws on taxation could also finally address a factor that has prevented the arrival of e-commerce business.

“Why have a lot of the big e-commerce businesses not come to Cambodia? When you see the lack of a legal framework whereby a digital transaction is legally valid and can be defended in court, and you compound that by the fact Cambodia is a small country relative to a lot of the main Asean countries, well the main e-commerce players are not going to focus on Cambodia where there’s a small market and underdeveloped logistics. Now there is the legal framework and e-commerce is growing incredibly fast so you see a lot of new players coming in and a lot of international players paying attention to the market,” Tippetts added.

According to the projections of Statista the revenues from e-commerce are expected to grow annually at a rate of 17 percent annually, reaching approximately $17 billion by 2025.

“E-commerce depends on two main things to grow efficiently,” Tippetts said before revealing the other biggest issue plaguing e-commerce in Cambodia, “as well as digital payments, you need to have logistics.”

He talked about the increase of more short-range services providers that do last-mile deliveries such as Nham24 and Foodpanda, but noted the sometimes “horrendously” expensive costs when shipping internationally from Cambodia which he hopes will go down as the volume of deliveries increases over time.

He also sees a rapid growth in the variety of e-commerce companies that will offer more options for traders in Cambodia. “Obviously, it’s not as easy as in developed Western market where all you have to do is get Shopify and off you go and you have your e-commerce website super-fast,” he said referring to the Canadian giant of e-commerce that offers its services to retailers in 175 countries, adding, “but the market is developing in that direction very quickly.”

Source: https://www.khmertimeskh.com/501025060/new-tax-laws-to-make-e-commerce-accountable/