Mock Exam

MOCK EXAM PAPER

CAMBODIAN TAXATION
QUESTIONS

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours

All FIVE questions are compulsory and MUST be

attempted.

Tax rates and rebate are on page 2.

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SUPPLEMENTARY INSTRUCTIONS

1. Calculations and answers need only be made to the nearest USD or Riel.
2. All apportionments should be made to the nearest month.
3. All working should be shown.
4. All computations should indicate by the use of ‘0’ any item of income or expense
that is tax exempt, not taxable or does not require adjustment, as appropriate.

TAX RATES AND REBATES

The following tax rates and rebates are to be used in answering the questions.

Value Added Tax (VAT)

Standard rate: 10%

Tax on Profit (ToP)

Standard rate: 20%

Tax on Salary (ToS)

Rebate for dependent children and non-working spouse: Riel 75,000 per person per
month.

ToS rates for residents

Monthly taxable salary (Riel) Cumulative tax at Rate

for amounts up to: top of band

0 – 500,000 0 0%
500,001 – 1,250,000 37,500 5%
1,250,001 – 8,500,000 762,500 10%
8,500,001 – 12,500,000 1,362,500 15%
12,500,001 and up 20%

ToS rate for non-residents

Flat rate: 20%

Tax on Fringe Benefits (ToFB)

Flat rate: 20%

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ALL FIVE questions are compulsory and MUST be attempted

Question 1

Greener Wares Co., Ltd. (GW) is a trading company registered with the Ministry of
Commerce that has obtained a Tax Identification Number from the General Department
of Taxation in Cambodia. GW is a real regime taxpayer and its fiscal year is from 1
January to 31 December. For the year ended 31 December 2010, GW had total sales
of USD1,200,000 excluding tax, and a net profit before tax of USD300,000, after
crediting/charging the following:

Income

i. Interest income of USD1,000 – This comprises interest received from a

Cambodian bank of USD940 and USD60 of Withholding Tax withheld by the
bank.

ii. Accounting gain on disposal of motor vehicle of USD8,700 – GW sold one old
van at USD9,000 in cash, exclusive of tax.

iii. Dividend income of USD18,000 – GW received a cash dividend from Gold

Dragon, a Cambodian company providing inland transportation. The dividend
was distributed from last year’s profit, on which Gold Dragon paid Tax on Profit
at 20%.

Expenses

iv. Employee expenses:

- Salary costs, including bonuses, of USD256,000 – The bonus amount of
USD25,000 was accrued in the year 2010 and paid to employee in March
2011.
- Increase in provision for annual leave in 2010 is USD39,000.

v. Interest expense on a loan borrowed from a local bank of USD40,000.

vi. Donation expense of USD5,000, which included USD3,000 that was donated to
the Cambodian Red Cross. The remaining USD2,000 was distributed directly to
family of Koh Pich victims.

vii. Year end increase in trade debtor provision of USD6,000 (Balance Sheet), and
bad debts written off during the year of USD5,600.

viii. Foreign exchange loss, which comprised:

- Realised exchange loss from payment of taxes of USD1,300
- Unrealised exchange loss of USD1,900.

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ix. Accounting depreciation of USD8,000 for the year 2010. Fixed assets subject to
tax depreciation are categorised by classes as follows:
- Class 1: Historical costs of USD47,000
- Class 2: Un-depreciated value brought forward from 2009 of USD4,950
- Class 3: Un-depreciated value brought forward from 2009 of USD1,000.

In addition, GW had additional fixed assets in 2010 as follows:

- A new canteen that was built on the top floor costing USD6,300; it was
finished by the end of March 2010.
- A new van costing USD34,000 that was purchased on 1 October 2010.

Prepayment of Tax on Profit for the year 2010 was fully paid based on the total sales
(USD1,200,000).

Required:

(a) Compute the (additional) Tax on Profit liability, including the calculation of
tax depreciation, in USD of Greener Wares Co., Ltd. for the fiscal year ended 31
December 2010. (26 points)

(b) State TWO key differences between the real regime and estimated regime
system of taxation. (4 points)

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Question 2

Mrs. Tung Nalin, age 42, is a Cambodian citizen and lives in Phnom Penh. She is
married and has a 15-year-old son. Her husband is currently unemployed and helping
to look after their only son, who attends Sisowat high school.

She is working in a local bank (the Bank) as a branch manager and based in Siem
Reap. She is a key member of the management team. Her salary was USD1,200 per
month for September 2011. In addition, she was entitled to the following compensation
and reimbursements:

i. Overtime compensation of USD380 for the time that she worked over her normal
working hours in September 2011, which was paid in the same month.

ii. A bonus equal to 25% of her monthly salary for the outstanding performance of
the Siem Reap branch in September 2011 to be paid in October 2011.

iii. Additional compensation for living away from home equal to USD250 per month.

iv. House rental in Siem Reap of USD380 per month paid by the Bank directly to
the landlord on the first day of each month.

v. Health insurance premium of USD360 per annum per employee. The insurance
is applicable to all employees and is paid annually to the insurer every
September.

vi. Reimbursement of USD160 for a return flight ticket to Phnom Penh for her home
visit trip in September 2011. The reimbursement is consistent with the Bank’s
employment policies.

vii. Petrol cost of USD240 that was refunded to her in September 2011 for use of
her personal car when visiting the Siem Reap branch’s customers living around
Siem Reap city.

Since not all branch managers of the Bank own a car, the Bank is considering buying a
car and hiring a driver for each branch. In addition, the Bank has also proposed to
upgrade the health insurance policy of management-level employees so that their
insurance package covers dental treatment, which is not provided in the existing
package.

ASSUMPTION

Under the tax regulations, the term ‘Tax on Salary’ refers to both Tax on Salary and
Tax on Fringe Benefits. For exam purposes, the use of the term ‘Tax on Salary’ refers
to Tax on Salary alone. Tax on Fringe Benefits should be written as Tax on Fringe
Benefits.

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Required:

(a) Compute the total remuneration that are subject to Tax on Salary for Mrs.
Tung Nalin for September 2011 in USD. Explain why each type of remunerations
is taxable or not taxable. (12 points)

(b) Assuming the exchange rate is USD 1 = Riel 4,014, calculate the Tax on Salary
liability of Mrs. Tung Nalin for September 2011. (2 points)

(c) If the Bank buys a car and hires a driver for each branch, briefly explain TWO
conditions where the motor vehicle used by the branch managers would not be
subject to Tax on Fringe Benefits. (4 points)

(d) Compute the Tax on Fringe Benefits liability of Mrs. Tung Nalin for September
2011. (4 points)

(e) Assume that the proposal to upgrade the management level employees’ health
insurance is approved and the insurance premium was paid to a local insurance
company in September 2011. The total premium cost is USD800 per management
employee per annum.

Required:

Briefly explain the tax implications of the change in the health insurance policy
provided to Mrs. Tung Nalin. (3 points)

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Question 3

(a) State when a taxpayer is required to register with the General Department of
Taxation (GDT) as a Value Added Tax (VAT) registered taxpayer. (3 points)

(b) Explain the difference between a zero-rated supply and a VAT-exempt supply.
(2 points)

(c) Good Luck trading Co., Ltd (GLT) has registered with the GDT as a VAT-registered
taxpayer since 2009. For the month of August 2011, GLT recorded the transactions
below:

USD
Sales to local VAT-registered companies 25,000
Sales to local individual customers 10,000
Export sales 16,000
Local sales of fixed assets 800
Purchase of motor vehicle with more than 20 seats for sales team 27,000
Office rental 2,900
Local lawyer fee 800
Purchase of petrol for company car 1,460
Purchase of air conditioners and installation fee 1,100
Admission fee to visit theme park* 500

All amounts are stated exclusive of VAT and all payments to external parties were
made to VAT-registered taxpayers and supported by VAT invoices.

* No VAT invoice was given, but GLT was provided a standard entrance ticket.

Required

Compute the amount of VAT payable or receivable of GLT for the month of
August 2011. (10 points)

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Question 4

(a) State THREE sources of income of non-residents that is subject to

Withholding Tax (WHT) in Cambodia and when the WHT is triggered. (4 points)

(b) Cambodia Computer Control System Co., Ltd (CCCS) is a new technology
company in Phnom Penh. The management team intends to purchase an advance
inventory control system (both the hardware and the software) from an Australian
company based in Sydney. Based on the agreement, CCCS is required to make an
interim payment equal to 50% of the total contract value when the contract is signed.
The remaining 50% will be paid when the system is delivered, which will include both
software and hardware.

Required

Explain the WHT implications on the above transactions. (6 points)

(c) The accountant of CCCS suggests revising the contract to clearly separate the total
contract value into the cost of the software and the cost of the hardware of the
advance inventory control system.

Required

Explain the WHT implications if the accountant’s suggestion is adopted. (5

points)

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Questions 5

(a) State the THREE conditions for determining if a business establishment must
register as a real regime taxpayer. (3 points)

(b) Briefly explain the general procedures of a comprehensive tax audit for real
regime taxpayers. (5 points)

(c) Briefly state the potential penalties and interest imposed in respect of the
under-payment of taxes and their relevant rates. (4 points)

(d) State what source of information a tax officer could use to assess tax under a
unilateral tax assessment. (3 points)

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