Cambodia Taxes for US Expats Simplified

Cambodia Taxes for US Expats Simplified

Whether you’re among the thousands of Americans working in Cambodia or have relocated there full-time, you must understand Cambodian taxes for US expats. 

If you fail to fulfill your tax obligations in Cambodia and the United States, you could face fines, civil penalties, or even more severe repercussions. Remember, you may also have to pay state taxes while living abroad, which can further complicate things.

Luckily, handling your taxes in Cambodia is relatively straightforward, as the country has a streamlined filing process and a simple tax rate for foreigners in Cambodia. Still, it never hurts to brush up. Doing so will help you stay in compliance with tax laws and may even enable you to save money the next time you file. 

With that in mind, here’s what you need to know about Cambodian taxes for US expats. You’ll familiarize yourself with some key points on expat taxes and walk away with a few pro tips you can use to reduce your tax liability.

Cambodia Taxes at a Glance

  • Tax Deadline: Within three months of the end of the tax year
  • Currency: Cambodian Riel
  • Population: 16.95 million
  • Number of Expats in Cambodia: Approximately 100,000
  • Capital City: Phnom Penh
  • Primary Language: Khmer
  • Tax Treaty: No
  • Totalization Agreement: No

Living as an Expat in Cambodia

Cambodia has become a popular destination for US expats. This should come as no surprise, as the country boasts a long and intriguing history, a rich and varied culture, and warm weather year-round. The conversion rate between the US dollar and the Cambodian Riel is also quite favorable. As such, US expats in Cambodia enjoy quite a bit of buying power, even on a modest salary or pension.

Even though so many Americans have made their way to Cambodia, the two countries don’t have an official tax treaty. As you’ll soon learn, the lack of a Cambodia-US tax treaty means you could get double-taxed.

The good news is there are ways to reduce your liability in one or potentially both nations. Like the US, Cambodia’s tax year mirrors the calendar year, meaning you’ll be able to prepare your Cambodia and US taxes simultaneously. 

While you might assume that all nations end their tax year in December, that’s not the case. Some countries, like Australia, end their tax years around June or July. This means that you’d have to file taxes twice in one year. Talk about frustrating.

US Expat Taxes in Cambodia

You’ll often have to file a tax return with the Cambodian and United States governments. There are some rare exceptions, so you should always consult with an experienced tax professional if you have questions. 

Unless you’re confident you’re exempt from filing with either your host nation or the United States, you should plan to pay taxes to both governments. That way, you won’t be caught off guard by any end-of-year surprises. 

Who Has to File Taxes in Cambodia?

According to US tax laws, Americans living in Cambodia (or any other foreign nation) must file a US expat tax return annually.

As part of these regulations, you must claim any pensions or retirement income on your US expat tax return and all income generated from work you do in Cambodia. You must also include worldwide income on this tax return, even if it’s subject to taxation in Cambodia.

Fortunately, you can use a few deductions and credits to reduce your tax liability. These credits might help you lessen your obligations to the US, Cambodia, or potentially both.

Some of the most notable deductions and credits include:

Of these, the FEIE will likely make the most significant impact on your tax liability. To qualify, you must generate foreign income, and your tax home must be in Cambodia. You must also meet one of the following criteria:

  • You’re considered a bona fide resident of Cambodia for a complete tax year (without interruption)
  • You’re a resident alien of the US who’s a citizen of a nation with a US tax treaty, or
  • You’re physically present in a foreign nation(s) for 330 or more days during a 12-month period

If you meet these criteria, you can exclude a large percentage of your foreign earnings when filing your US tax returns. The exact amount you can exclude will vary yearly based on inflation rates.

The amount eligible for exclusion over the last three tax years is as follows:

  • 2020: $107,600
  • 2021: $108,700
  • 2022: $112,000
Pro Tip

Taking advantage of these credits could leave you with zero tax liability to the US government, provided your foreign income is equal to or less than the exclusionary limit.

Remember, these credits and liability reductions only apply to your US tax burden. You’ll still be subject to the standard Cambodian tax rates for US expats unless you qualify for an exemption under Cambodian tax law. On that note, there are few, if any, Cambodian tax law exemptions for individuals. 

Who Is Considered a Cambodian Resident?

Cambodia adheres to the commonly used 180+ day standard for determining residency. Put simply, you’ll be treated as a Cambodian resident if you reside in the nation for 182 days or more during a 12-month tax year. To meet Cambodia’s definition of a resident, you must have your principal place of residence within the country.

The IRS tax code is 7,000 pages. Want the cliff notes version for expats? Let us help.

What Types of Taxation Does Cambodia Have?

Multiple types of income are subject to taxation in Cambodia. These sources are divided into two broad categories: fringe benefits and salaries.

Fringe Benefits

Fringe benefits include things like:

  • Pension fund contributions that exceed one-tenth of your monthly salary
  • Private use of motor vehicles
  • Travel expenses
  • Low-interest loans
  • Health and life insurance premiums
  • Meals and other accommodations

Many of these fringe benefits are taxable only if provided by your employer. For instance, if your employer pays your health and life insurance premiums, these fringe benefits might increase your tax liability. 

Salary

The Cambodian tax scale includes five thresholds, which increase tax liability in 5% increments. These include:

  • 0-1.3 million Riels: 0%
  • 1.3-2 million Riels: 5%
  • 2-8.5 million Riels: 10%
  • 8.5-12.5 million Riels: 15%
  • Over 12.5 million Riels: 20%

If you’re a non-resident, you’ll be taxed at a flat rate of 20%. You will be ineligible for the aforementioned foreign tax credits, meaning your US tax liability will also be higher. 

Does the US Have a Tax Treaty with Cambodia?

Unfortunately, there’s no Cambodia-US tax treaty. This means that you could be double-taxed, especially if you’re not eligible for or fail to take advantage of options like the FEIE.

If you want to protect yourself from the risks of double taxation, you should strongly consider partnering with a qualified tax professional. They’ll be able to help you take advantage of all available deductions, reduce your tax liability, and save money. 

Does Cambodia Have a Totalization Agreement with the US?

Currently, there’s no totalization agreement between Cambodia and the US. As such, expats in Cambodia will need to pay standard Social Security taxes.

In simple terms, a US totalization agreement can allow expats to use their host nation’s program to receive benefits while accessing select benefits from Social Security.

Pro Tip

Under US tax law, workers must pay 6.2% of their taxable wages in Social Security taxes. However, programs that limit your US tax liability can also reduce or eliminate your Social Security tax obligation.

Get Expert Help with Your Expat Tax Return

Hopefully, this guide has given you a better understanding of the income tax rate Cambodia imposes on both native citizens and US expats. You can use the tips outlined here to familiarize yourself with Cambodian taxes for US expats, prepare your filing documents, and avoid incurring penalties on your tax return.

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