Import duties for vehicles in Cambodia vary widely depending on the type of vehicle, from 39.15% to 130.17% according to the General Department of Customs and Excise (GDCE) in late 2021. These duties are an important source of revenue for the Royal Government of Cambodia (RGC), which can use them to fund essential public services. Import duties are calculated by multiplying the Customs value of an imported good by its applicable rate, plus VAT. The rate of vehicle import duties varies depending on whether the vehicle in question is meant for personal or commercial use, in the latter case meaning it is intended to be re-sold for a profit.
Currently, the GDCE allows the import of vehicles for personal use via registered companies. Any company in Cambodia is allowed to import cars provided they have a general import permit issued by the Ministry of Commerce (MoC). As thus, car imports are not restricted to authorised distributors through, for instance, the issuing of automotive import licences. This situation creates potential legal loopholes, wherein companies intending to sell cars in Cambodia import them by declaring them as for personal use and claim exemption from the Exclusive Right regulation issued by the MoC. This results in these companies paying lower duties than required, as rates for goods meant for personal use are overall lower than those for commercial-use goods.
To discourage this practice and close the loophole, EuroCham has supported the raising of the Customs value for personal-use vehicles, to bring the overall tax liability amount closer to that of commercial goods. We welcomed the Ministry of Economy and Finance’s Notification No.10220 SHV dated 10 December 2020, which increased the Customs value by 5% for personal-use imported vehicles. This was a positive measure that enabled authorised distributors to compete more fairly in the Kingdom of Cambodia.
However, given the reports that registered Cambodian companies continue to import vehicles meant for commercial use by declaring them as for personal use continues in Cambodia, we believe further action is needed to discourage such practice.
Impact on business
The import of commercial vehicles by declaring them as personal-use vehicles can have damaging impacts on Cambodia’s tax revenue and overall business environment.
Personal-use vehicles are subject to lower taxes and fees than commercial vehicles, which means that businesses can save money by importing commercial vehicles and declaring them as personal-use vehicles. This can result in a significant loss of revenue for the RGC, which can ultimately limit its ability to fund important public services and infrastructure projects.
Secondly, the import of commercial vehicles as personal-use vehicles can create an uneven playing field for businesses. Authorised distributors that comply with the law and pay the appropriate taxes and fees can find themselves at a disadvantage compared to those that import commercial vehicles and declare them as personal-use vehicles. This can discourage the growth of local businesses and limit economic development in Cambodia.
- Increase Customs value by 15% for personal-use vehicles.
We therefore respectfully call for the Customs value to be increased by an additional 15% for the vehicle importation for personal use, on top of the 5% from Notification No.10220.
We believe such an increase would help address these irregularities and ensure that authorised distributors are able to compete more fairly in the market. Moreover, such an initiative would align with the Ministry of Economy and Finance’s Circular No.009 SHV dated 1 December 2005 on the Management of Imported Non-Commercial Goods. This law states that if goods are commercially imported by non-registered companies, the Customs value shall be increased by 20%.
Raising the Customs value would have two beneficial effects. It would help generate additional revenue for Customs due to the higher tax bases of imported vehicles.
It would also level the playing field for authorised distributors and discourage unfair practices, leading to an overall more sustainable and competitive business environment.
Royal government of Cambodia
Initiative from Eurocham: The issue has been raised by Automotive Committee within The White Book edition 2024 in the Recommendation No. 15.
Mr. Chhoeurn Makara