According to a release from Cambodia's General Department of Taxation on 27 December 2018, the income tax treaty with Vietnam has entered into force. However, according to a notice subsequently published by Vietnam, the treaty entered into force on 20 February 2019. The treaty, signed 31 March 2018, 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 distribution and capital gains tax, and tax on salary. It covers Vietnamese personal income tax, business income tax, and extra 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 includes the provision that a permanent establishment will be deemed constituted when an enterprise carries on activities (including the operation of substantial equipment) in a Contracting State for the exploration or for the exploitation of natural resources for a period or periods aggregating more than 90 days within any 12-month period.
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.
The following capital gains derived by a resident of one Contracting State may 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.
Both countries apply the credit method for the elimination of double taxation. Provisions are also included for a tax sparing credit for tax that would have been payable but has been exempted or reduced in accordance with the respective country's laws on promoting economic development.
The treaty applies from 1 January 2020.
Note the effective date has been updated as per the notice published by Vietnam.
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