The double tax avoidance agreement (DTA) between Cambodia and Malaysia came into effect on January 1, ushering in optimism and hope in the private sector that bilateral investment will garner steam.
Royal Code NS/RKM/1120/023, dated November 14, 2020, promulgated the “Law on the Approval of the Agreement between Government of Cambodia and the Government of Malaysia on the Elimination of Double Tax Avoidance”.
This is according to a January 6 press release issued by the Ministry of Economy and Finance’s General Department of Taxation (GDT).
The GDT noted that under Article 29, the law could not have come into force until domestic procedures in the two countries had been completed and an exchange of diplomatic notes had taken place.
The DTA was signed in September 2019 between minister Aun Pornmoniroth and Malaysian Minister of Foreign Affairs Saifuddin Abdullah.
Cambodia Chamber of Commerce director-general Nguon Meng Tech told The Post on January 7 that the agreement was made to prevent investors on both sides from paying income taxes on the same source of income and obliging them to pay where the profit was made.
He said: “If taxed on the Malaysian side, we won’t have to levy a tax anymore. This will ease the burden of businesspeople on both sides.”
Meng Tech believes the DTA will help boost trade between the two countries. “This agreement is good for both parties to do business and they’ll promote it to attract people to invest in either country,” he said.
According to the Council for the Development of Cambodia (CDC), Malaysia was the fifth largest foreign investor in Cambodia in 2014-2018, bringing in $481 million.
Most of the Kingdom’s exports to Malaysia are agricultural products, while imports from Malaysia include electronic equipment and food products.
Hong Vanak, director of International Economics at the Royal Academy of Cambodia, told The Post that the DTA would further reduce the burden on consumers and suppliers between the two countries to a whole new level.
He lauded the agreement as a new milestone between the two countries, saying that the mechanism will also increase the volume of bilateral trade and the inflow of foreign investment into Cambodia.
“This is an incentive for investors as well as suppliers to prevent the tax burden from falling to consumers. With its entry into force, [the DTA] will help lower the selling price of goods in each country and will also increase the competitiveness of their products,” Vanak said.