Cambodian Government’s Prakas 209: Tax Incentives for Educational Institutions
On March 2, 2020, the Cambodian government made a significant stride in supporting its educational sector by issuing Prakas 209. This policy extends crucial tax incentives to educational establishments, which had initially been introduced in 2016 under Prakas 904. These provisions are designed to enhance the operational viability of various educational institutions and, by extension, improve the educational landscape in Cambodia.
Scope of Educational Establishments
Prakas 209 encompasses a broad spectrum of educational entities. This includes:
- Kindergartens
- Vocational and Technical Schools
- Primary Schools
- Higher Education Institutions
By recognizing these categories, the Cambodian government aims to ensure that a diverse range of educational services benefits from tax relief, nurturing an inclusive approach to educational growth.
Tax Incentives Detailed
One of the key aspects of Prakas 209 is its comprehensive tax relief program. The incentives provide exemptions and reductions in several areas:
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Withholding Tax: A 15% exemption applies to interest payments made to resident lenders, as well as payments for services that contribute directly to the education of students. Non-resident lenders benefit from a 14% withholding tax exemption on interest payments and management and technical services related to education.
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Value-Added Tax (VAT): Supplies of goods and services that support educational services—such as catering and accommodation for students—are categorized as non-taxable supplies, thus exempt from the standard 10% VAT.
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Minimum Tax: The annual minimum tax, calculated as 1% of total turnover, has been suspended until the end of 2023. This tax is applicable only if the minimum tax liability surpasses the corporate income tax (CIT) liability of 20% on taxable profits.
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Prepayment of Tax on Income (PTOI): Similar to the minimum tax, the PTOI, assessed at 1% on monthly turnover (excluding VAT), has also been suspended until the end of 2023. This provides further relief for educational institutions in managing their cash flow.
Impact on Scholarships and Grants
Another advantageous feature of Prakas 209 is the treatment of scholarship grants. These financial aids are explicitly exempt from being counted as taxable revenue for income tax calculations. This creates a more favorable environment for institutions to offer scholarships without the burden of taxation, promoting education accessibility for students.
Looking Ahead
The extensions specified in Prakas 209 demonstrate the Cambodian government’s commitment to bolstering its educational infrastructure. By easing the tax burdens on educational establishments, the government aims to foster an environment conducive to learning and growth, thereby paving the way for future innovations in education.
Support Services Available
If you operate within the educational sector or are considering entering it, access to business support services is crucial. A range of resources is available for those seeking assistance with tax compliance and strategic planning in light of these incentives.
For instance, you can find tailored business support through organizations that specialize in navigating the complexities of tax regulations. This can significantly enhance operational capacity and ensure that educational institutions maximize their benefits from policies like Prakas 209.
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