Initially postponed to January 1, 2022, implementation of capital gains tax (CGT) in Cambodia may be pushed back another two years, which would spell increased activity for the real estate market.
In accordance with this possible development, experts have remarked that the delay would deprive the government of additional revenue before January 2024.
Clint O’Connell of the Cambodia Tax Practice Group at DFDL, shared, “The impact on economic recovery is likely to be nominal, whilst government tax revenues, and hence government spending, will be negatively impacted.”
On the other hand, delaying CGT is certain to alleviate pressure on property owners who need to sell their assets due to financial difficulties as an immediate result of the pandemic. This is from a short-term perspective.
The strongest impact would be on property speculation, with the bright side peaking if further postponement leads to sustained circulation of cash within the economy through the real estate sector.
O’Connell advises investors to look into tax-friendly arrangements that would shield them from long-term effects of the capital gains tax, particularly those investing in production or agriculture which are typically long-term positions.
Based on the law drafted by the General Department of Taxation (GDT), the CGT would apply to both resident and non-resident taxpayers for immovable properties, leases, investment assets, intellectual property, and foreign currency. For sales made without any profit, sellers will not be obligated to pay the tax.
The CGT was anticipated to benefit the Cambodian government by offsetting lost tax revenues from pandemic-related economic decline across sectors.
While anticipated as a positive trigger for real estate market activity, O’Connell nevertheless advises investors to investigate tax-friendly arrangements that would shield them from long-term effects of the capital gains tax.
This is especially critical for those investing in production or agriculture, which are typically long-term positions. Meanwhile, foreigners who are not investing in local real estate are likely to receive little impact from the delay in CGT.