Unofficial Translation/GMAC

Kingdom of Cambodia
Nation Religion King
Ministry of Economy and Finance
No. 741 MoEF.BrK
Prakas
On
Rule and Procedure for Implementation of Income Tax and Other Taxes Related to the
Activity of Cut, Make and Trim of Qualified Investment Project

Senior Minister
Minister of Economy and Finance

- Having seen the Constitution of the Kingdom of Cambodia

- Having seen Royal Decree NS/RKT/0913/903 dated 24 September 2013 on Appointment of
Royal Government of the Kingdom of Cambodia
- Having seen Royal Decree NS/RKT/1213/1393 dated 21 December 2013 on Adjustment to the
Composition of the Royal Government of the Kingdom of Cambodia
- Having seen Royal Decree NS/RKT/0416/368 dated 04 April 2016 on Adjustment to the
Composition of the Royal Government of the Kingdom of Cambodia
- Having seen Royal Code 02/NS/94 dated 20 July 1994 promulgating the Law on Organization
and Functioning of the Council of Ministers
- Having seen Royal Code NS/RKM/0196/18 dated 24 January 1996 promulgating the Law on
Establishment of Ministry of Economy and Finance
- Having seen Royal Code NS/RKM/0297/03 dated 24 February 1997 promulgating the Law on
Taxation
- Having seen Royal Code NS/RKM/0303/010 dated 31 March 2003 promulgating the Law on
Amendment to the Law on Taxation
- Having seen Royal Code NS/RKM/0508/016 dated 13 May 2008 promulgating the Law on
Public Financial System
Having seen Sub-decree 75 OrNKr.BK dated 25 May 2017 on Adjustment to Sub-decree 488
dated 16 October 2013 on Organization and Functioning of the Ministry of Economy and
Finance
- According to the necessity of the Ministry of Economy and Finance;

Decide
Article 1 Purpose
The purpose of this Prakas is to provide an incentive for local industries to promote exports and
create jobs for workers in the Kingdom of Cambodia.

Article 2 Objective
The objective of this Prakas is to introduce a rule and procedure for implementing income tax and
other taxes related to the activity of cut, make and trim of qualified investment projects.

Article 3 Scope
This Prakas covers qualified investment projects in the garment, textile, footwear, bag, hand bag
and hat sector in the Kingdom of Cambodia that carry out the activity of supplying Cut, Make and
Trim service as per a contract for exports.
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This Prakas does not apply to local supporting industry or contractor that supplies goods or services
for supporting the export of garment, textile, footwear, bag, hand bag and hat enterprises as
stipulated in Prakas 311 MoEF.BrK dated 19 March 2014.

Article 4 Definition
For the purpose of this Prakas:
1- The term “Cut, Make and Trim” abbreviated to “CMT” refers to the supply of Cut, Make
and Trim service as per a contract with the goods owner to export finished products.
2- The term “goods owner” refers to non-resident who signs a contract on Cut, Make and Trim
with an enterprise that supplies CMT service.
3- The term “CMT raw material” refers to raw materials and/or other supplying materials of
the goods owner that the CMT service supplying enterprise imports into the Kingdom of
Cambodia for supplying CMT service to the goods owner in which the goods owner still
keeps the legal ownership.

Article 5 Conditions for supplying CMT service

The enterprise that supplies CMT service shall comply with the following conditions:
1- Notify the General Department of Taxation of its CMT service operations within 30 days
after signing a contract with the goods owner by attaching the CMT service contract
indicating the detail of the scope of work, service fee and payment conditions.
2- Possess, keep and maintain accounting records and information related to CMT service in
accordance with the Cambodian International Financial Reporting Standard (CIFRS) and tax
provisions.
3- Have supporting documents as stipulated in Article 9 of this Prakas.

Article 6 Incentive for income tax

For tax purposes, the activity of CMT shall be considered the activity of producing [goods] for
exports that receive an incentive on income tax the same as qualified investment project that
produces [goods] for exports.

Article 7 Obligation of income tax and Value Added Tax for CMT service activity
1- Income tax
The enterprise shall separately record the revenues and expenses related to CMT service as
follows:
A- Taxable income:
- CMT service fee: shall monthly submit the detail of CMT service fee to the tax
administration (as in the sample attached herewith)
- Revenue from the sale of failed or excess products and
- Other revenues other than export price
B- Deductible expenses
The expenses shall be in accordance with the law and regulations on income tax.
C- Advance income tax and minimum tax
The basis for calculating advance income tax and minimum tax includes:
- CMT service fee
- Revenue from the sale of failed or excess product in the production or CMT raw
materials.
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The price of exported products shall not be considered the revenue of the enterprise that supplies
CMT service for calculating advance income tax or minimum tax.

2- Value added tax (VAT)

A- Output VAT:
- The supply of CMT service for supporting the exports of processed products shall be
subject to VAT at a rate of 0%
- The supply of CMT raw materials, finished products or failed/excess products to local
markets shall be subject to VAT at a rate of 10%
- In case of raw material waste or failed products, the enterprise shall give notice in
advance to the General Department of Taxation in order to be free from the obligation of
10% VAT.
B- Input VAT:
Credit of input VAT for VAT that has been paid on local goods or service for the CMT
activity shall follow Article 29 to Article 41 of Sub-decree 114 OrNKr.BK dated 24
December 1999 on Value Added Tax.
C- The enterprise that supplies CMT service shall simply implement the regulations on VAT
and shall possess and keep accounting records on VAT as stipulated in Article 50 of Sub-
decree on VAT.

Article 8 Inventory management

The enterprise that supplies CMT service shall possess, record and maintain the records of
inventory management which is able to monitor and track the change of inventory of the goods
owner. The records of inventory management shall have the following information:
1- Inventory of CMT raw materials
A- Records of inventory management to track the movement of CMT raw materials of the
goods owner include:
- The quantity of the raw materials received
- The quantity of raw materials in work-in-progress (WIP)
- The quantity of failed raw materials
- The quantity of raw materials returned (if any).
B- The records of inventory management as stated in Paragraph A above shall have the
following supporting documents:
- Goods Received Notes (GRN) – record the quantity or detailed description of CMT raw
materials received.
- Acknowledged Delivery Orders – support the Goods Received Notes (GRN)
- Material Quality Rejects (MQR) – record the quantity of substandard or failed raw
materials that will be returned, in case of return
- Documents for recording the movement of inventory or quantity of raw materials into
the warehouse.
C- The enterprise that supplies CMT service shall present all the above records as required
by the Tax Administration.
2- Inventory of finished products shall have the following records:
- Beginning inventory of finished products
- Quantity of finished products in the period
- Ending inventory of finished products
3- For inventory of failed or excess products (including CMT raw materials, if any) that will be
destroyed or disposed, a notice of at least 07 (seven) days in advance shall be given to the
Unofficial Translation/GMAC

General Department of Taxation so that they participate and inspect the destruction or
disposal.

The enterprise that supplies CMT service shall provide the report of inventory inspection every
year together with income tax return.

Article 9 Possession, keeping and correction of accounting records

1- The enterprise that supplies CMT service shall possess, keep and maintain accounting
records in accordance with the Cambodian International Financial Reporting Standard
(CIFRS) and tax provisions.
2- For any enterprise carrying out the business of supplying both CMT service and non-CMT
service shall keep records in a joint financial report and prepare only one income tax return
but shall have accounting records and documents separately between CMT and non-CMT
transactions.
3- In case of any enterprise supplying CMT service whose tax declaration so far does not
reflect the actual operations, the enterprise shall make a correction of the income tax return
within 03 (three) years backwards. The result of the correction resulting in tax arrears to
be paid shall be free from penalty in which it includes additional taxes and interest for
being late. The period of the correction shall be set by an instruction of the General
Department of Taxation.
4- The enterprise that supplies CMT service shall have supporting documents as follows:
A. For sale transactions:
- CMT agreement
- Sale invoice (supply of service …)
- Bank statements
- Payment documents via local bank
- Customs declaration and export documents
- Letter certifying the goods origin
- Bills of lading
B. For import of CMT raw materials
- Shipping orders
- Invoice for import
- Acknowledged Delivery Orders
- Customs declaration and import documents
- Bills of lading

Article 10 Implementation
Cabinet chief, Secretary General, Royal Government Delegate in charge as Director General of
General Department of Taxation, Royal Government Delegate in charge as Director General or
Director General of all General Departments, General Inspector of General Inspectorate, Directors
of units under the supervision of the Ministry of Economy and Finance and all relevant enterprises
shall implement this Prakas in an effective manner from the date of signature.

Phnom Penh, 03 August 2018

Senior Minister
Minister of Economy and Finance
(Signed and stamped)
Akka Bandit Saphea Cha Aun Pornmoniroth
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Recipient:
- Office of the Council of Ministers
- Secretary General of the Royal Government
- Cabinet of Samdech Akka Moha Sena Padei Techo Prime Minister
- Cabinet of Samdech, Excellency, Lok Chumteav Deputy Prime Minister
- Municipal and provincial halls
- As in Article 10 “for implementation”
- Royal gazette
- Archives
Unofficial Translation/GMAC

Enterprise name ……………… VATTIN: ………………… (Annex Table)

Detailed Cut Make and Trim Fee Table for the Month of …………. Year………

I. Invoice
Invoice Amount
Date Invoice No Customer Description Quantity
F1 F2 F3 F4 F5 F6

Total

II. Cash Receipt

Date Voucher No Buyer Description Amount
T1 T2 T3 T4 T5

Total