Simplified Guide to Cambodia Taxes for US Expats
- Living as an Expat in Cambodia
- Cambodia at a Glance
- US Expat Taxes in Cambodia
- Who Has to File Taxes in Cambodia?
- Who Is Considered a Cambodian Resident?
- What Types of Taxation Does Cambodia Have?
- Essential Tax Forms for US Expats in Cambodia
- Does the US Have a Tax Treaty with Cambodia?
- Does Cambodia Have a Totalization Agreement with the US?
- Navigating Tax Compliance for US Expats in Cambodia
Living as an Expat in Cambodia
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 critical points on expat taxes and walk away with a few pro tips you can use to reduce your tax liability.
Cambodia at a Glance
- Primary Tax Form for Residents: Annual Tax on Salary Declaration
- Tax Year: January 1st to December 31st
- Tax Deadline: March 31st of the subsequent tax year.
- Currency: Cambodian Riel (KHR) and US Dollar (USD)
- Population: 16.5 million
- Number of US Expats: around 1,700 US expats living in Cambodia.
- Capital City: Phnom Penh
- Primary Language: Khmer
- Tax Treaty: No
- Totalization Agreement: No
US Expat Taxes in Cambodia
US expats living in Cambodia are subject to Cambodian and US tax laws, making tax compliance a complex process. Cambodia does not have a tax treaty with the US, which means that expats may be unable to take advantage of certain tax benefits, such as the foreign tax credit.
US expats in Cambodia must file taxes in both countries and report their worldwide income to the US. They may also be eligible for specific exclusions and deductions, such as the Foreign Earned Income Exclusion and the Foreign Housing Exclusion.
Cambodia has a progressive income tax system, with tax rates ranging from 0% to 20%, depending on the income level. Expats may also be subject to other taxes, such as social security contributions, property taxes, and value-added tax.
US expats in Cambodia need to stay up-to-date on tax filing requirements and deadlines, as failure to do so can result in penalties and fines.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
Who Has to File Taxes in Cambodia?
If you’re an American living in Cambodia, you must file a US expat tax return every year. This includes reporting all income from work in Cambodia and any pensions or retirement income you receive. You must also report your worldwide income, even if you’re taxed on it in Cambodia. Fortunately, you can take advantage of various deductions and credits to lower your tax liability. These credits can help reduce your obligations to both the US and Cambodia.
Some of the most notable deductions and credits include:
- Foreign Housing Exclusions
- Foreign Tax Credits
- Foreign Earned Income Exclusion (FEIE)
Of these, the FEIE will likely make the most significant impact on your tax liability. You must generate foreign income to qualify, 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 for the 2023 tax year is $120,000 (filed in 2024) and will increase to $126,500 for the 2024 tax year (filed in 2025)
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.
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 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.
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.
Essential Tax Forms for US Expats in Cambodia
As a US expat living in Cambodia, staying up-to-date on tax filing requirements and deadlines is important to avoid penalties and fines. The following are necessary tax forms that US expats in Cambodia need to file to remain compliant with US tax laws:
- Form 1040 is the primary tax return form US citizens and residents use to report their worldwide income, including income earned in Cambodia.
- Form 2555: This form is used to claim the Foreign Earned Income Exclusion, which allows expats to exclude up to a certain amount of their foreign-earned income from US taxation.
- Form 1116 is used to claim a credit for foreign taxes paid to Cambodia or any other foreign country.
- FBAR: US expats with foreign financial accounts with an aggregate value of $10,000 or more must file the Report of Foreign Bank and Financial Accounts (FBAR) at any point during the year.
- FATCA Form 8938: Expats with certain foreign financial assets that meet certain thresholds must also file the Foreign Account Tax Compliance Act (FATCA) Form 8938.
It’s important for US expats in Cambodia to consult with a qualified tax professional to ensure that they are filing all the required forms and taking advantage of all available tax benefits.
When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.
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.
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.
Navigating Tax Compliance for US Expats in Cambodia
We hope our guide has given you a thorough understanding of income tax rates for both Cambodian citizens and US expats. Use the tips provided to familiarize yourself with Cambodian taxes, prepare your filing documents easily, and avoid penalties on your tax returns.
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