What kind of immovable properties are taxable?

• 4 June 2020
• Local News
• 13425 Views

With the real estate sector booming, especially in the land and housing markets in Cambodian cities and provinces, understanding the types of taxable immovable property is important for property developers, land broker agencies and the general public to process their tax payment as required by law.

What kind of immovable properties are taxable?

The definition of “Immovable Property” is clearly spelled out in article 13 of the 2010 Law on Finance. The term refers to lands, houses, and other constructions directly built on land. In Cambodia, real estate is taxed only if the property is worth more than 100 million riels, or approximately US$25,000 and must fall under any of the following categories:

1. Land: Refers to land without buildings and/or land with buildings
2. House: Refers to a place to live
3. Buildings or constructions: Refers to buildings and constructions that are connected to land.

Whereas the untaxable immovable property is a kind of property that is worth of 100 million riels or less, according to article 14 of the 2010 Law on Finance, untaxable immovable properties include:

1. Agricultural land: Such as farmland, ranch land or salt fields. If any part of the agricultural land on which the buildings or constructions are built and not permanently used for agricultural activities, all those parts are taxable.
2. State properties: Immovable property that is owned by the Royal Government or a governmental institution that is listed as state property.
3. Religious and charity property: Immovable property belonging to any community or individual that operates only for purely religious and charitable purposes. They are still taxable if the properties are only temporarily rented or given away to someone not for charitable purpose.
4. Diplomatic property: Immovable property belonging to foreign diplomatic missions or consulates, international organisations and technical cooperation agencies of any state acknowledged by the Royal Government.
5. Majeure Force: Immovable property that is seriously damaged by force majeure events.
6. Incomplete buildings: Any home or building under construction less than 80% complete and not yet used. But even if the immovable property is not in use, the land is still subject to tax; and
7. SEZs Property: Immovable property in special economic zones that directly serves only production activities.

Who is liable for property taxes?

According to the above law, a taxpayer is referred to as a natural person or a legal entity that is determined by law to pay the property tax in various categories. Such persons or entities include:

1. Proprietor: Refers to a natural person or legal entity which holds a title of possessory right over immovable property or a certificate of ownership over immovable property issued by the cadastral administration.
2. Occupier: Refers to a natural person or legal entity which doesn’t holds a title of possessory right over immovable property or a certificate of ownership over immovable property issued by the cadastral administration.
3. Final beneficiary: Refers to a natural person or legal entity which is entitled to the right of use, the right to enjoy, the right of management and the right of final residence on that real estate. A successor is one example of the final beneficiaries.

This means that even if we do not own the property, if we are the one who occupies or gets the direct benefits from the property, then we are liable for property taxes.

In short, the type of taxable property in Cambodia depends on the amount of the property value, type of ownership and the purpose of using that property. Not all of the immovable property owners are subject to be taxed, and it does not mean that all of more than 100 million riels property owners are taxable. It also depends on for what purpose the property is used.

For instance, Ms. “A” owns a hectare of land in Siem Reap. She built a three-storey house on a half-hectare of the land. For the remaining land, she runs a livestock farm. All three-storey houses, in cases worth over 100 million riels, and a half hectare of land on which the houses are built are subject to property tax. The other half hectare of her livestock farm is not taxable as long as the business is approved by the department of the Ministry of Agriculture, Forestry and Fisheries.

Notably, unused properties are also subject to tax, especially land without construction and land with construction but abandoned in cities and areas as defined by the ” Unused Land Appraisal Committee (ULAC).”