Irregularities in VAT payments REF#8520

Under the prevailing tax law and regulations, a taxable person is entitled to VAT refund if the purchase is made for businesses purposes with proper VAT invoices. To claim a refund, taxpayers must make sure they fulfill the eligibility criteria according to Prakas 576 on ‘Value Added Tax Refunds’ enacted by the Ministry of Economy and Finance in June 2018.

To submit a VAT refund request, taxpayers must have excess VAT input credit for three or more consecutive months. Taxpayers can submit a request each month if they are exporters or registered as an investment enterprise, that is to say a Qualified Investment Project (QIP). Taxpayers must provide evidence on the amount of input VAT that has been paid.

Taxpayers have to create their request and have to provide supporting documents. After submitting their VAT refund request on the platform, the request will be reviewed by the Department of Administration and General Affairs at the General Department of Taxation.

However, we have learned from our members that the VAT refund to the applier may be denied by GDT, if the supplier fails to remit the collected VAT to GDT.

The current Tax laws do not mandate the taxable entity, that is applying for a VAT refund, to confirm whether the supplier has appropriately paid the collected VAT.

This creates a confidence issue for the Tax authorities and, more broadly, for the Cambodian market. Indeed, by creating a new implicit condition, it strengthens the unpredictability of the tax regulations and opens the door to the practice of always adding new requirements, even though they are not required by law. Plus, in this particular case, the taxpayer should not be responsible for policing its suppliers. This also strengthens the distrust taxpayers have in the Tax authorities because it implies they cannot do their job properly. This creates a situation of distrust where companies are unwilling to invest more in Cambodia. After all, the VAT refund tool is one of the best incentives provided by the Government to attract investment.