The income tax treaty between Cambodia and Thailand entered into force on 26 December 2017. The treaty, signed on 7 September 2017, is the first of its kind between the two countries.
The treaty covers Cambodian tax on profit, including withholding tax, additional profit tax on dividend distributions and capital gains tax, and tax on salary. It covers Thai income tax and petroleum income tax.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel if the activities continue for the same or connected project within a Contracting State for a period or periods aggregating more than 183 days within any 12-month period.
The treaty also includes the provision that a permanent establishment will be deemed constituted when an enterprise carries on activities (including the operation of substantial equipment) in the other Contracting State for the exploration or for exploitation of natural resources for a period or periods aggregating more than 90 days within any 12-month period.
Note - Article 10 (Dividends) also provides that the treaty does not prevent a Contracting State from imposing tax on the disposal of profits out of a Contracting State in accordance with the provisions of its domestic law, but such tax may not exceed a rate of 10%.
The following capital gains derived by a resident of one Contracting State may specifically be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State, although the treaty also provides that this does not prevent Contracting States from taxing the gains or income from the sale or transfer of shares or other securities.
Both countries apply the credit method for the elimination of double taxation. A provision is also included to provide for a tax sparing credit for tax that is otherwise payable in that other State but has been exempted or reduced in accordance with incentive laws and connected regulations designed to promote economic development in that other State. This provision will apply for 10 years, which may be extended by mutual agreement between the competent authorities.
The treaty applies from 1 January 2018.
Note - Article updated to reflect the treaty's entry into force.
We’re here to answer any questions you have about the Orbitax products and services.
We’re committed to providing high value, low cost tax research and management solutions.
Our Twitter account is where you can find latest information, news updates, offers and lots more.