Transfer Pricing

We assist companies to prepare transfer pricing documentation, provide defence on transfer pricing issues in a tax audit, set acceptable transfer prices and provide technical advice on all transfer pricing matters.

For more detailed information on the transfer pricing regime in Cambodia, please refer to our transfer pricing article [Link].

Transfer Pricing Requirements in Cambodia 

1. The Minister of Economy and Finance issued Prakas No. 986 MEF.PrK. on “Rules and Procedures on Income and Expense Allocation among Related Parties” on 10 October 2017 to introduce a Transfer Pricing regime in Cambodia to regulate related party transactions where at least one party to the transactions is a Cambodian entity. 
   
   To a multinational group of companies (“MNC”), Transfer Pricing (“TP”) is a day-to-day matter as related parties within the MNC enter into business transactions with each other for sales and purchase of goods, services, properties, intangibles, and provision of financing. All these intra-group transactions involve transaction values, or transfer prices. The Prakas requires the MNC to observe the arm’s length principle in setting their transfer prices, otherwise penalties will be imposed on offences relating to non-compliance of the Prakas. 
   
   The arm’s length principle requires that the prices set for transactions between related parties (“controlled transactions”) should approximate the prices transacted between independent parties under comparable terms and conditions. The taxpayer is responsible to perform a comparability analysis to justify that the transfer prices are at arm’s length, applying the 5 transfer pricing methods. 
   
   The Prakas defines “Related Party” as: 
   1. Any family member / relative of the taxpayer; or 
   2. An enterprise that controls, controlled by, or under common control of the same taxpayer. The term “Control” means having ownership of 20% or more of the share capital or voting power of the board of directors in the company.
2. Recent Notifications 11946 and 10979 from the GDT have emphasised the use of arms-length interest rates for related party loans. However, related parties can set other interest rates provided that they can justify with the following documentation:
   • A loan agreement which set out the terms of the loan
   • A business plan to explain the need for the loan and the intended use of the loan proceeds
   • A statement to justify the interest rate used
   • A directors’ resolution approving the loan