In Cambodia, employment income is subject to a withholding system called Tax on Salary (ToS). This tax applies to cash salaries and most forms of employment compensation such as wages, bonuses, overtime and certain allowances. Employers are responsible for calculating, withholding and paying the tax each month on behalf of employees, so most individuals do not file a separate personal income tax return.
The Cambodian rules distinguish between tax residents and non‑residents:
- A tax resident (Cambodian or foreigner) is generally someone who stays in Cambodia for at least 182 days in any 12‑month period.
- Tax residents are subject to tax on salary on their worldwide employment income.
- Non‑residents are subject to tax only on Cambodian‑sourced salary, and they are taxed at a flat rate of 20%, regardless of the amount.
Foreigners who are Cambodian tax residents follow the same progressive tax brackets as Cambodian nationals.
Progressive tax brackets for residents
Tax on Salary for residents is calculated on a progressive monthly scale in Khmer riel (KHR). Recent tables provide the following monthly brackets:
- From 0 to 1,500,000 KHR: 0%
- From 1,500,001 to 2,000,000 KHR: 5%
- From 2,000,001 to 8,500,000 KHR: 10%
- From 8,500,001 to 12,500,000 KHR: 15%
- Above 12,500,000 KHR: 20%
Only the portion of salary falling within each bracket is taxed at that bracket’s rate. The first 1,500,000 KHR per month is tax‑free, which reduces the burden on lower and middle incomes.
Net‑negotiated salaries and currency issues
In practice, especially in Phnom Penh and in sectors working with international companies, salaries are commonly negotiated and expressed in net terms and in US dollars. The agreed figure is what the employee will receive “in hand” after tax. For payroll and tax purposes, however, the employer must work backward: they must gross up the net USD amount to determine the corresponding gross salary on which the Tax on Salary is calculated.
Although salaries may be paid in USD, the Khmer riel is the only legal currency for tax purposes in Cambodia. This means that the gross salary must be converted into KHR using the official exchange rate published by the National Bank of Cambodia. For Tax on Salary, the authorities require the official rate as at the 15th of each month (or the previous working day if the 15th is a holiday). As a result, the KHR value of the gross salary – and therefore the amount of tax due – can change from month to month in line with exchange‑rate movements.
Dependent‑related reliefs
Resident employees can benefit from specific dependent‑related deductions that reduce their taxable salary base. These reliefs are clearly defined in the current rules:
- A fixed deduction of 150,000 KHR per month is allowed for a non‑working spouse.
- A fixed deduction of 150,000 KHR per month is allowed for each qualifying dependent child.
A dependent child is usually defined as under 14 years old, or under 25 if they are a full‑time student. The spouse must have no taxable income to qualify as a dependent. These deductions are applied after converting the gross salary into KHR and before applying the progressive tax bands, effectively lowering the taxable amount on which the Tax on Salary is computed.
Employers are responsible for:
- Determining the gross salary (including any gross‑up from a net USD salary).
- Converting the gross salary into KHR using the mandated exchange rate.
- Applying dependent allowances and the tax‑free threshold.
- Calculating the tax based on the monthly progressive brackets (or the 20% flat rate for non‑residents).
- Withholding the tax and remitting it to the General Department of Taxation (GDT) within the prescribed deadlines.
Some fringe benefits are taxed separately at a flat rate (often 20%) on their fair market value, and these amounts are also withheld and reported by the employer.
With the help of IA, we have prepared two simple Excel files with which you can calculate the amount of the ToS based on net or gross salary, based on information found on the GDT website, here. You will need to enter the amount of the salary in USD, and the official exchange rate (that is found on National Bank of Cambodia’s website, here.)
As usual, DFDL’s website has a very informative page, here.
And last, but not least, GDT has created its own Salary Tax Calculation app to calculate the amount of the ToS, see here.
But in any case, you should rely on your accountant to make sure that ToS declarations are made in a proper manner.
Download our Excel calculators:
