Cambodia: New Regulations in Transfer Pricing


published on 7 February 2018

The Cambodian Ministry of Economy and Finance has issued new transfer pricing guidelines regarding rules and procedures on income and expense allocation among related parties, (Prakas No. 986 MEF.P - ”Prakas”). The guidelines took effect on 10 October 2017. Enterprises operating businesses in Cambodia will have to create processes and responsibilities to ensure compliance with the Prakas.

The new regulations are based on the arm’s length principle and modeled after the OECD's guidelines. Taxpayers will have to submit a transfer pricing declaration (together with the income tax declaration) and – upon request – submit the relevant transfer pricing documentation.


Related Enterprises

Enterprises are related if
  • they are members of the same family of enterprises, or
  • if an enterprise controls another enterprise, or
  • if an enterprise is controlled by another enterprise, or
  • if two enterprises are under common control of third party.


Control means holding 20 percent of dividend rights (equity) or having an equivalent amount of voting rights in the Board of Directors. The definition does not require related parties to be in different jurisdictions. Thus, the Prakas apply to domestic transactions, too.


Applicable methods

The following methods can be used to ensure compliance with the arm’s length principle:
  • Comparable Uncontrolled Price
  • Resale Price Method
  • Cost Plus Method
  • Transactional Net Margin Method
  • Profit Split Method


Transfer Pricing Documentation

The Prakas require taxpayers to maintain a comprehensive documentation with regard to the pricing of controlled transactions. Ideally, the documentation should comply with the standards set by Action No. 13 (Country-by-Country reporting) of the OECD’s recommendation regarding Base Erosion and Profit Shifting (BEPS).


Violation of the Transfer Pricing Guidelines

Taxpayers not complying with the guidelines face a range of possible consequences:
  • The authorities might revoke the taxpayer’s certificate of tax compliance;
  • The authorities might adjust the tax due, including interest of 2 percent as well as an additional tax for the obstruction of the implementation of the tax law; and
  • The taxpayers might face criminal charges, e.g. tax evasion or obstruction of the implementation of tax.



Cambodia appears willing to comply with international standards of transfer pricing. The introduction of the Prakas is a significant first step and further regulatory development seems likely. Taxpayers in Cambodia have to adjust to the new regulations and given that the Prakas do not specify certain details (e.g. deadlines for submissions) and their application is still widely untested in practice, local counsel seems inevitable. As a first step, enterprises should review the pricing of controlled transactions and ensure compliance with the arm’s length principle. Further, enterprises have to start maintaining a comprehensive transfer pricing documentation.

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