Payment of Property Rental/Leasing

Withholding Tax on Rental/Leasing Payment of  Property from Non-Resident Lessors

Resident Companies in Cambodia may rent/lease from property from non-resident companies or individual (foreign companies/foreign countries) outside Cambodia.

Rental payments of  property from non-residents are subject to withholding tax (WHT) at 14% (standard rate).

When resident companies face financial problem, they can lease/rent properties from non-residents. Expensive properties cost to invest/buy, so resident companies may choose this method.

Resident companies (Lessees) have responsibilities to withhold tax from rental expenses before payment to non-resident lessors (individual or companies) otherwise resident lessees will pay withholding tax on rental payment on behalf of non-resident lessors.

 Example 1

ABC Company in Cambodia rent expensive machinery from foreign XYZ Company outside of Cambodia. Rental Payment per month is $4,000.

Required:

Calculate withholding tax (WHT) on rental that ABC Company will withhold tax from non-resident XYZ Company.

Answer 

Withholding tax (WHT) Base = $4,000

WHT = $4,000 x 10% = $400

Note:

• -XYZ company received cash of $3,600 ( $4,000-$400) from ABC Company if XYZ allowed ABC withhold tax of $400.
• -XYZ company received cash of $4,000 from ABC Company if XYZ did not allow ABC withhold tax of $400, so ABC will pay $400 ( WHT) to tax authority on behalf of XYZ company. Total payment by ABC company is $4,400.