Cambodia applies fresh revenue-based tax model for casinos

From December 30, 2022, Cambodia’s Ministry of Economy and Finance (MEF) began applying the latest revenue-based rules for taxes and procedures for commercial gambling business, aka casinos, to the self-proclaimed regime, after decades of applying a “lump sum” method of taxation, according to a senior official of the ministry.

Decision on the application of the new tax model:

The decision to apply the new tax model came after the CGMC officially announced new guidelines regarding commercial casinos in October 2022. With these guidelines, the CGMC officially warned owners that they must “pay all required taxes on time and in full or face legal and regulatory action.”

The guidelines, which came in response to an earlier order by Cambodian Prime Minister Hun Sen to clampdown on illegal gambling facilities due to a huge increase in high-profile kidnapping cases connected to non-legal casino operations, also cleared up the government’s policy that only licensed casinos can continue to operate in the country.

A new revenue-based tax model:

The new tax model comes after two long years and follows Cambodia’s highly anticipated casino law, the Law on the Management of Integrated Resorts and Commercial Gambling (LMCG), after it was was officially approved as law, according to a Khmer Times report.

The LMCG implements a tax rate to mass gaming at 7% and to VIP at 4% and points to a number of other new regulatory controls, even though the MEF has officially announced that these controls will be phased in over the next five years.

In an interview for The Khmer Times, Mey Vann, Secretary of State and member of the General Secretariat of the Commercial Gambling Management Commission of Cambodia (CGMC), said: “The new rules would allow for greater oversight of the industry.

“This means that there would no longer be cases of hiding cash to be paid to the authority even by the casino owners and tax officials, as the rules and procedures determine check-and-balance practices for the balanced power among operators, regulators, inspectors and other relevant stakeholders involved in the implementation of the new proclamation.

“Check-and-balance practices mean all relevant parties are required to check or examine one another. None of them can exploit anything in the gambling business operations, while the casino party would not be able to cheat the gamblers and the gamblers would not be able to cheat the casino. Gamblers at casinos can file complaints if they have sufficient evidence.”

Khun Darith, Managing Partner for audit, accounting and tax solutions at accounting and auditing firm K Professional Accountants (KPA), added: “The new guidelines and procedures to implement tax obligations to commercial gambling industry are divided into two folds that would enable GDT to properly regulate the gambling industry which strengthen the tax regime and to collect tax timely — monthly and annually — from the industry.

“The commercial gambling entities will have profit tax obligations of 20 percent and other withholding tax obligations and this is yet another indicator that GDT will be expecting to collect more taxes from the commercial gambling industry. The tax income that is collected from commercial gambling will significantly increase as the tax procedures has outlined additional tax on Value Added Tax (VAT) and 1 percent prepayment of income tax.

“To me this is a very good step for Cambodia to have such guidelines and procedures to properly regulate the industry. It is a very excellent step to have clear procedures and mechanism for this gambling industry to implement their tax obligations, as there was no clear procedures before, with more than 100 licensed casinos.

“The new guidelines instructed all gambling businesses to register with GDT, declare all gambling income and other incomes from non-gambling activities which will contribute to additional tax incomes, maintain proper accounting records and retain the supporting documents and records for 10 years. “This is very good from good governance perspective to ensure transparency and accountability.”

New rules for casinos following the implementation of the new revenue-based tax model:

However, following the implementation of the new tax model, casinos are also obligated to comply with International Reporting Standards (IFRS), aka a set of accounting standards that decide how certain types of transactions and events need to be presented in financial statements, created and maintained by the International Accounting Standards Board (IASB), according to the official.

In this regard, Mr. Vann also said: “Plans to force casino owners to change the word “casino” to “commercial gambling” on all signage once the five-year grace period expires represents the part of efforts to market the country’s casinos as entertainment centers rather than gambling hubs.

“We cannot ask them to change immediately and so we have to give them some time as they are related to many factors such as their internal agreements and other legal aspects.”