The tourism industry is hoping that tax benefits would be extended once more.

[ASEAN NOW]

 

The government's tax-exemption status for restaurants and hotels is slated to expire on September 30, and the authorities have yet to decide if it will be renewed after nine prior rounds of amnesty.

 

In 2019, the restaurant business accounted for almost 19 percent of total GDP growth.

 

In 2020, revenue plummeted by 50%, and Cambodia Restaurant Association (CRA) President Arnaud Darc warned at a seminar yesterday that 2021 isn't looking much better, with the business already down 60% from last year.

 

During an online webinar on Cambodia Restaurant Tax, Darc noted, “We estimate that the share of consumers dining in sit-down restaurants has decreased 85 percent since the pandemic began.”

 

The Almond Group's CEO, Chef Luu Meng, told the Khmer Times that extending the tax exemption is "the most critical problem" for the sector.

 

“We'd like to see the government extend it until the end of 2021, ideally early in 2022. When business travel starts at the end of 2021, we will be able to pay taxes to the government,” said Meng, who is also the head of the Cambodia Tourism Federation.

 

Many enterprises would not have been able to continue functioning if tax exemptions had not been granted, he said, and employment figures may have suffered as a result.

 

“Right now, the most essential problem is the government's tax exemption for tourism-related firms. Businesses require funds to cover costs such as facility maintenance, rent, and employee compensation. Maintaining it will enable businesses to remain open and employees to remain employed,” Meng added.

 

During the webinar, Eng Ratana, director of the General Department of Taxation's (GDT) Department of Large Taxpayers, stated that he had no idea whether the tax amnesty will be extended.

 

Ratana stated that the government will decide whether or not to extend the grace period based on the current situation of the pandemic, adding that he has ceased dining out.

 

“We don't know what will happen [with the tax exemption] or how the pandemic will play out. We hope it will go away, and we understand that the tourism industry is the hardest hit,” he said.

 

After inbound flights to Siem Reap town were canceled, the government implemented its first set of actions, according to Anthony Galliano, group CEO of Cambodian Investment Management Holdings. Prior to expanding to the capital and the provinces of Kep, Preah Sihanouk, Kampot, Bavet, and Poipet, businesses in that province were granted tax amnesty.

 

“Over the last 16 months or so, the government has sought through a series of rounds to support the restaurant and hotel industry during this very tough time,” Galliano said.

He also said it's difficult to say how long tax exemptions for the tourism business will endure, but that they usually last two to three months.

 

He also said it's difficult to say how long tax exemptions for the tourism business will endure, but that they usually last two to three months.

 

Galliano noted that because there is no precise timetable for when the pandemic will stop, periods of uncertainty will continue, making it difficult to forecast when exemptions would end.

 

“Despite government support, the hospitality sector is fast declining, and a recovery strategy that incorporates tax incentives to incentivize investment that fosters longevity and sustainability is needed. He stated, "The silver bullet might very well be refining the small taxpayer category, which provides significant tax perks and advantages."

 

Foreign nationals registering as small taxpayers, according to Galliano, is "nearly impossible."

 

“Given that small taxpayers charge VAT [value-added tax] at 10% yet pay over 2% with no withholding tax except on rent and salaries, have simplified tax forms, lower profit tax levels, lower patent tax, and are not subject to audits,” Galliano stated.

 

According to the president of the American Chamber of Commerce, the government should raise the threshold for foreign-owned small businesses, allowing firms with sales of $500,000 or less to obtain the same benefits as small taxpayer Cambodian-owned businesses.

 

Allowing limited liability firms to register as small businesses would “resurrect the industry, boost investment, and improve durability in the restaurant industry, which has a failure rate of 60% in the best of times,” he added.

 

Last year, the GDT implemented 83 tax reform initiatives, including eight avoidance of double taxation agreements.

 

The government is presently negotiating DTAs with seven other nations, including Macao, Myanmar, the Philippines, Lao, Japan, Turkey, and Slovakia, according to Ratana.

 

Negotiations with Macao are reported to have already completed, and both parties are preparing to sign the deal. Early February is thought to be the start of talks with Laos.