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Brunei-Cambodia

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Update - Tax Treaty between Brunei and Cambodia

The income tax treaty between Brunei and Cambodia was signed on 27 July 2017. It is the first of its kind between the two countries.

Taxes Covered

The treaty covers Brunei income tax imposed under the Income Tax Act and petroleum profits tax imposed under the Income Tax (Petroleum) Act. It covers Cambodian tax on profit including withholding tax, additional profit tax on dividend distributions, and capital gains tax, and tax on salary.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected projects for a period or periods aggregating more than 183 days within any 12-month period.

Limited Force of Attraction Provision

Article 7 (Business Profits) includes a limited force of attraction provision whereby taxing rights are granted to a Contracting State on profits attributable to the sale of goods or merchandise or other business activities carried on in that Contracting State by a resident of the other State if the same or similar goods or merchandise or business activities are also sold or carried out by a PE maintained by that resident in the first-mentioned Contracting State.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 10%
  • Royalties - 10%
  • Technical Fees - (managerial, technical, or consultancy services) - 14%

Limitations on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 13 (Technical Fees) will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims, or other rights in respect of which the income is paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of share deriving more than 50% of the value directly or indirectly from immovable property situated in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation. The treaty also provides for a tax sparing credit for tax that is exempted or reduced in accordance with the laws and regulations or other special incentive measures of a Contracting State designed to promote economic development.

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged. It will apply in Brunei in respect of withholding taxes from 1 January of the year following its entry into force and in respect of other taxes from 1 January of the second year following its entry into force. It will apply in Cambodia from 1 January of the year following its entry into force.

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