Economists are optimistic that foreign direct investment (FDI) from Laos and the Philippines, as well as trade, will increase as Double Taxation Agreements (DTAs) between these two countries and Cambodia are set to enter into force in the near future.

A May 22 notice from the General Department of Taxation (GDT) stated that the two new DTAs have been signed, and that steps are being taken to implement them.

At present, Cambodia has DTAs with 11 countries and jurisdictions, including Thailand and Singapore (since January 1, 2018), China and Brunei (January 1, 2019), Vietnam and Hong Kong SAR (January 1, 2020), Indonesia and Malaysia (January 1, 2021), South Korea (January 1, 2022) and Macau SAR and Turkey (January 1, 2024).

​“The DTA is not just designed to avoid double taxation; it also builds investor confidence and certainty by offering several benefits. These include clear tax rules between the contracting states, reduction or elimination of certain taxes, the prevention of tax discrimination between domestic and foreign companies, mechanisms for resolving tax disputes and systems for information exchange to combat tax evasion,” explained the GDT.

The department also shared that in addition to the latest two DTAs, the Cambodian government has completed technical negotiations on a DTA with Myanmar and is currently negotiating DTAs with six additional tax administrations: the United Arab Emirates, Japan, Morocco, France, Qatar and Azerbaijan.

Aun Pornmoniroth, Minister of Economy and Finance, shared the benefits of such agreements during the December 2024 signing of the agreement with Laos.

He noted, however, that one party may limit the enforcement of certain domestic tax laws, which can initially affect tax revenues due to reduced withholding tax rates for non-residents and the transfer of taxing rights on certain types of income to the investor’s home country.

Despite this, he listed the positive aspects.

“These agreements bring numerous benefits to the signatory jurisdictions, such as attracting and promoting international investment and trade through clarity, transparency and non-discrimination in tax matters, as well as expanding the tax base and increasing capital flows due to lower withholding tax rates on interest and dividends,” he said.

“They also facilitate the transfer of technology and expertise through technical service provisions, protect foreign investors and enhancing international tax cooperation, especially by curbing and combating tax evasion through taxpayer information exchange mechanisms,” he added.

Hong Vanak, an economist at the Royal Academy of Cambodia, told The Post on May 22 that DTAs, bilateral agreements between governments or tax authorities of different countries or territories, bring significant advantages to investors from those jurisdictions. While DTAs may result in some loss of tax revenue for the government, they help boost mutual investments between the countries involved.

“A DTA may cause the government to lose some tax revenue from investors of the partner country, but this is compensated by the increased potential for attracting more investment from DTA-partner countries. Moreover, DTAs can reduce production costs, which in turn can increase exports to international markets,” he said.