Supporting Documents for Loans to Related Parties

The General Department of Taxation (GDT) has recently issued Instruction No. 14256 dated 02 May 2025 on documents confirming interest among related parties.  This instruction supersedes Circular 151 dated 22 January 2014, Instruction 11946 dated 21 August 2018, and Instruction 10979 dated 25 May 2022 which are all abrogated. GDT would like to provide the following guidance:

A. Enterprises which enter into a loan agreement with a related party may determine the interest rate based on mutual agreement. Compliance with the arm’s length principle is not required, provided the enterprise maintains the following supporting documentation for the loan:

1. A loan agreement that clearly defines the loan terms and repayment obligations.
2. A business plan or current/forecasted financial statements prepared at the time of borrowing that demonstrate the purpose of the loan and provide relevant explanations.
3. Approval of the Board of Directors (for those enterprises that are not single-member private limited companies).

B. When obtaining loans from related parties, the interest rate applied by the enterprise must not exceed the prevailing annual market interest rate at the time of borrowing. This market rate is the average of the lending rate of five major Cambodian banks and is published annually by GDT.

C. Enterprises that receive a cash advance from a related party and repay it within one year of receipt will not be treated as having entered into a loan transaction and will be exempt from applying the Arm’s Length Principle.

D. For loan transactions among independent parties, the interest rate is applied based on the actual loan transaction stated in the loan agreement and other supporting documents.

E. Loan transactions between related parties and those between independent parties are not required to be notified to the General Department of Taxation (GDT).

If you have any queries on this tax or on any Cambodian tax matter, please contact us at 023 216 717 or info@crowe.com.kh.