Cambodia’s e-commerce situation under the epidemic in 2021. E-commerce in Cambodia is expected to reach $25.1 billion in sales this year, according to figures released by online statistics agency Statista. Among them, the fashion retail industry accounted for the largest share, followed by electronics and media, then food and personal care. Total e-commerce sales are expected to reach $35.4 billion by 2025.
Over the past year, the Cambodian e-commerce market has grown exponentially, directly reflecting Cambodia’s economic growth. Especially in the rapid development of e-commerce under the epidemic, many people use social media platforms to seek business and promote services.
Although Cambodia has held several pieces of training and seminars on taxation policies, a statement issued by the Ministry of Commerce last week indicated that there are still many foreign companies or branches operating e-commerce platforms in Cambodia, as well as private enterprises that have not yet applied for e-commerce permit or license.
The Cambodian government has recently tightened its tax policy, using a “reverse charge” method to require local merchants who obtain digital products and services through cross-border e-commerce to declare value-added tax. The policy imposes severe penalties on e-commerce companies that do not comply, including suspensions and fines, indicating that the authorities are strengthening the enforcement of the tax system for e-commerce companies.
According to the instructions of the Ministry of Posts and Telecommunications, platforms that have not yet obtained permits and licenses may stop operating from December 1 this year, as the deadline for applying for licenses is November 30. The companies engaged in e-commerce business in Cambodia must comply with Cambodian laws. If they do not comply or pay taxes to the government, they are operating illegally in Cambodia and the authorities have the power to shut down illegal business operations.
Regarding the Ministry of Commerce, it is mentioned that although the Ministry of Commerce and the Ministry of Finance and Economics are expected to take some crackdown actions after December 1, and strictly require electronic merchants to cooperate with related policies such as taxation, this action may encounter obstacles. It is also possible that the government will not take tough measures from the outset, especially for Cambodian operators, as the government considers social and economic well-being under special impacts such as the epidemic.
Since it was first announced in May this year and called for non-resident e-commerce operators to register, the department has received many inquiries about the need to register or apply for a license.
In this regard, the relevant regulations are that small operators with an annual income of fewer than 250 million riels (about 62,500 US dollars) can be exempted from registration. Other areas, including seasonal farming or temporary family businesses, online private tutoring, and booking services, are also exempt from registration.
This is a very contradictory situation. Because from the point of view of the Ministry of Commerce and the Ministry of Economy, then action must be taken, because the running of the country needs funds to help the economy, but on the other hand, the authorities also need to be compassionate and empathetic, because people’s livelihoods are being affected by the epidemic influence.
In the analysis of cross-border e-commerce taxation laws, some experts said that in the next few months, observing the e-commerce giants who are forced to register and pay VAT in Cambodia under the promotion of the new policy may find interesting phenomena. .
In addition, non-resident taxpayers engaged in e-commerce activities will be defined as having created a “permanent establishment” in Cambodia, which will directly affect the taxation benefit division between the taxpayer’s country of residence and the country of source of income.
Therefore, experts believe that the government should pay attention to this situation, and if the tax authorities want large e-commerce companies to actively participate and pay VAT, he suggested that the issue of “permanent establishments” should be clarified.
