​1. Introduction​​

 

Cambodia’s transfer pricing regime applies to transactions between related parties and requires those transactions to be priced consistently with the arm’s-length principle. The rules apply to both cross-border and domestic transactions and cover far more than the purchase and sale of goods. Management and technical services, royalties, leases, loans, guarantees, cost allocations, asset transfers and dealings between a permanent establishment and its overseas enterprise may all fall within scope.

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The General Department of Taxation (GDT) has become increasingly active in reviewing related-party transactions during tax audits. The practical risk is therefore not limited to whether a taxpayer has prepared a transfer pricing report. The GDT will also consider whether the underlying transaction occurred, whether the Cambodian entity received an identifiable benefit, whether the contractual allocation of functions and risks reflects the parties’ actual conduct, and whether the financial outcome is commercially supportable.

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Cambodia’s current framework is principally contained in the 2023 Law on Taxation and Prakas No. 574 MEF.PrK.GDT dated 19 September 2024. Prakas 574 took effect on 1 January 2025 and replaced the original transfer pricing regulation, Prakas No. 986 dated 10 October 2017. It introduced clearer rules on related-party control, arm’s-length ranges, primary and secondary adjustments, permanent establishments, annual documentation and exemptions for smaller taxpayers and certain related-party loans.

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2. Legal and Regulatory Framework

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2.1 Core Legislation and Administrative Guidance

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Cambodia’s transfer pricing framework is based on the following principal instruments:

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• Law on Taxation 2023: Article 18 provides the underlying statutory power for the GDT to allocate income, deductions and other benefits between related parties where this is necessary to prevent tax avoidance or to reflect an appropriate allocation. The Law also contains the general audit, reassessment, record-keeping, penalty, interest and appeal rules relevant to transfer pricing cases.

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• Prakas No. 574 MEF.PrK.GDT dated 19 September 2024: This is Cambodia’s principal current transfer pricing regulation. It sets out the arm’s-length principle, related-party definition, comparability factors, approved methods, rules for services and property, arm’s-length ranges, documentation requirements, documentation exemptions, permanent-establishment profit attribution and the consequences of non-compliance. It applies from 1 January 2025.

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• Prakas No. 986 MEF.PrK dated 10 October 2017: This introduced Cambodia’s first comprehensive transfer pricing regime. It is historically important, but Prakas 574 replaced it for periods from 1 January 2025. References to Prakas 986 in older publications and tax-return forms should therefore be read in light of Prakas 574.

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• Instruction No. 14256 GDT dated 12 May 2025: This is the current guidance on supporting documents and interest rates for loans between related parties. It replaced earlier guidance, including Circular No. 151, Instruction No. 11946 and Instruction No. 10979.

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• Annual GDT market-interest-rate notifications: The GDT publishes annual rates used as the ceiling for interest on qualifying inbound related-party loans under Instruction 14256. For the 2025 tax year, Notification No. 5097 dated 11 February 2026 set the rates at 9.36% for Khmer riel loans and 8.45% for US-dollar loans. These rates are updated annually and should not be treated as permanent benchmarks.

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• Annual Tax on Income return and related-party transaction annex: Taxpayers disclose their related parties, transaction types, transaction values, related-party loans and interest rates as part of the annual Tax on Income compliance process. The annex also asks whether transfer pricing documentation has been prepared and maintained.

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• Tax audit and dispute regulations: Cambodia’s general tax-audit procedures and rules for objecting to a reassessment apply to transfer pricing disputes. A transfer pricing review may arise as part of a desk, limited or comprehensive tax audit rather than through a separate standalone transfer pricing procedure.

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2.2 Relationship with International Standards

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Cambodia is not an OECD member, but the core concepts and five methods in Prakas 574 are broadly consistent with the OECD Transfer Pricing Guidelines. The Cambodian rules use the arm’s-length principle, a functions-assets-risks analysis, recognised comparability factors and the traditional transaction and transactional profit methods commonly applied internationally.

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The OECD Guidelines are therefore an important interpretative reference, particularly where Prakas 574 does not address an issue in detail. They do not, however, automatically override Cambodian law, and each new edition of the OECD Guidelines should not be assumed to have been incorporated into Cambodia’s domestic rules without further action.

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Cambodia’s domestic transfer pricing documentation requirement is currently centred on entity-level transfer pricing documentation commonly described as a Local File. Prakas 574 does not itself impose a separate Cambodian Master File or Country-by-Country Report filing requirement. A multinational group may nevertheless have Master File and Country-by-Country Reporting obligations in other jurisdictions.

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3. Scope and Application of the Transfer Pricing Rules

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3.1 Definition of Related Parties​

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Under Prakas 574, related parties include:

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• A relative of the taxpayer.

• An enterprise that directly or indirectly controls, is controlled by, or is under common control with the taxpayer.

• A permanent establishment and the non-resident enterprise of which it forms part.

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Control generally exists where a person or enterprise owns at least 20% of the value of an equity interest or has at least 20% of the relevant voting power. Direct and indirect interests are relevant. For an individual, the interests of the individual and the direct or indirect interests of the individual’s spouse may be aggregated.

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The 20% threshold is not an absolute limit on the GDT’s authority. Prakas 574 permits the tax administration to examine the facts and determine that direct or indirect control exists even where the formal ownership or voting threshold is not met. Businesses should therefore consider actual decision-making power, contractual influence, financing dependence and common management rather than relying only on the shareholder register.

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3.2 Transactions Covered​

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The rules apply to controlled transactions affecting the allocation of income, expenses or other tax benefits. Common examples include:

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• Purchases and sales of raw materials, components, finished goods and commodities.

• Contract manufacturing, toll manufacturing and procurement arrangements.

• Distribution, commissionaire, agency and marketing arrangements.

• Management, administrative, technical, IT, finance, human-resources, legal and other intra-group services.

• Royalties, licences and transfers involving trademarks, technology, software, know-how and other intangible property.

• Loans, current accounts, cash advances, guarantees and other financing arrangements.

• Leases and transfers of tangible property or other assets.

• Cost allocations, shared-service arrangements and cost contribution arrangements.

• Dealings between a Cambodian permanent establishment and its non-resident enterprise.

• Business restructurings, transfers of functions or risks, and changes to supply-chain arrangements.

 

Cambodia’s transfer pricing rules are not restricted to cross-border dealings. Transactions between two

 

Cambodian related parties are also within scope, including transactions between a tax-incentivised entity and a normally taxed entity.

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3.3 Documentation Exemption for Smaller Taxpayers

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For a tax year from 2025 onwards, a taxpayer is exempt from the obligation to prepare the full annual transfer pricing documentation only where both of the following conditions are satisfied:

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1. Annual turnover is below KHR 8 billion and total assets are below KHR 4 billion; and

2. The total value of controlled transactions, excluding loans, is below KHR 1 billion.

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All elements of the exemption must be met. For example, a business with turnover below KHR 8 billion but assets above KHR 4 billion does not qualify. Similarly, a business meeting the turnover and asset limits does not qualify if its non-loan controlled transactions reach KHR 1 billion.

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This is a documentation exemption, not a general exemption from the transfer pricing rules. A qualifying taxpayer must still apply reasonable arm’s-length pricing, disclose relevant related-party transactions in its annual Tax on Income return, retain ordinary supporting records and respond to GDT enquiries.

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3.4 Simplification for Unchanged Documentation

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Where transfer pricing documentation was prepared for the preceding tax year, Prakas 574 permits the taxpayer to use that documentation again if there have been no material changes to the controlled transactions or the comparability factors that would affect the selected method.

This does not permit a report simply to be rolled forward without review. The taxpayer should confirm annually that the functions, assets, risks, agreements, transaction values and commercial circumstances remain accurate. The financial indicators of the taxpayer and comparable companies must also be updated each year.

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3.5 QIPs and Tax-Incentivised Enterprises

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Qualified Investment Project status, a Tax on Income holiday or another tax incentive does not remove a taxpayer from the transfer pricing regime. A QIP with related-party transactions must still consider the arm’s-length principle, the annual related-party disclosure and the applicable documentation requirements.

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Transfer pricing can remain important during an incentive period because an adjustment may affect exempt-income calculations, loss positions, future taxable years, withholding tax, minimum tax, VAT, customs values or transactions with related Cambodian entities that are taxed differently. The existence of an incentive can also increase the need to demonstrate that profit has not been shifted artificially into or out of the incentivised activity.

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4. The Arm’s-Length Principle

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The arm’s-length principle requires the conditions of a controlled transaction to be consistent with those that would have been agreed between independent parties in comparable circumstances. Applying this principle requires more than selecting a percentage or locating a benchmark range. The transaction must first be understood and accurately characterised based on the parties’ actual conduct.

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4.1 Approved Transfer Pricing Methods

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Prakas 574 recognises the following five methods:

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• Comparable Uncontrolled Price Method: Compares the price in a controlled transaction with the price in a sufficiently comparable transaction between independent parties. It is generally the most direct method where reliable internal or external price comparables exist.

• Resale Price Method: Begins with the price at which a product purchased from a related party is resold to an independent customer and deducts an appropriate gross resale margin. It is most relevant to relatively routine distributors that do not add substantial value or own valuable intangibles.

• Cost Plus Method: Adds an arm’s-length gross mark-up to the relevant direct and indirect costs of the supplier. It may be appropriate for routine manufacturing, semi-finished goods and certain intra-group services, provided the cost base is defined consistently.

• Transactional Net Margin Method: Tests the net profit earned from a controlled transaction relative to an appropriate base such as sales, costs or assets. This is frequently used in practice where reliable gross-margin or price comparables are unavailable.

• Profit Split Method: Divides the combined profit from controlled transactions according to the economically significant contributions of the parties. It is most relevant where operations are highly integrated or more than one party makes unique and valuable contributions.

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The most appropriate method should be selected in light of the transaction, the functional analysis, the availability and reliability of information, and the degree of comparability. A method should not be selected merely because it is convenient or produces a preferred result.

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4.2 Comparability and Functional Analysis

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The comparability analysis should consider:

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• The characteristics of the goods, services, tangible property or intangible property involved.

• The functions performed by each party.

• The assets used, including operational assets and economically significant intangible property.

• The risks assumed and, importantly, which party actually controls and has the financial capacity to bear those risks.

• The contractual terms and whether the parties complied with them in practice.

• Economic circumstances such as geography, market size, competition, regulation, currency and business cycle.

• Business strategies, including market-entry, expansion, restructuring or long-term investment strategies.

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Internal comparable transactions should be examined before relying entirely on external database searches. Where Cambodian comparable information is unavailable, regional comparables may be used in practice, but the geographical scope, screening criteria, accounting consistency and any comparability adjustments should be explained carefully.

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4.3 Arm’s-Length Range and Median Adjustments

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Where the tested financial indicator falls within a properly determined arm’s-length range, Prakas 574 provides that no adjustment should be made. Where it falls outside the range, the rule permits an adjustment to the median of that range where this does not reduce or eliminate Cambodian tax revenue.

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This makes the reliability of the range particularly important. A taxpayer should be able to explain the tested party, profit-level indicator, search period, screening criteria, rejection reasons, working-capital adjustments and treatment of loss-making comparables. Simply attaching a list of companies or using an overseas group benchmark without testing its relevance to Cambodia may provide limited defence.

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5. Transaction-Specific Requirements

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5.1 Intra-Group Services

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An intra-group service charge should be supportable at two levels: the service must actually have been provided and the price must be arm’s length.

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The recipient should be able to demonstrate an economic or commercial benefit of the type for which an independent business would have been willing to pay or perform the activity itself. Charges may be challenged where they relate to shareholder activities, duplicate services already performed locally, incidental group benefits, unsupported management oversight or a broad allocation of regional costs with no clear connection to the Cambodian business.

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Useful supporting evidence includes:

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• A signed intercompany service agreement reflecting the actual services.

• Invoices that identify the relevant service period and nature of the charge.

• Deliverables, reports, emails, meeting records, system logs, timesheets or other evidence of performance.

• A clearly defined cost pool that excludes shareholder, financing and unrelated costs where appropriate.

• Allocation keys connected to expected benefit, such as headcount, users, transaction volume or revenue, rather than a single arbitrary key used for every service.

• Support for the mark-up and consistent treatment of pass-through costs.

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A benchmarked mark-up alone does not prove that a service was received or that the cost allocation is correct.

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5.2 Intangible Property and Royalties

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Royalty and licence payments should be supported by evidence that the Cambodian taxpayer received and used an identifiable legal or commercial right. The amount should reflect the value of that right, the relevant market, exclusivity, legal protection, useful life, expected benefits and the functions and risks connected with the intangible property.

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The GDT may examine whether the Cambodian entity already pays for the same value through the purchase price of goods, whether local marketing or development activity contributes materially to the value, and whether the royalty continues to make commercial sense where the Cambodian entity is persistently loss-making.

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A signed licence agreement and a group policy are necessary starting points, but they should be supported by evidence of use, commercial benefit and an appropriate royalty analysis.

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5.3 Related-Party Loans and Cash Advances

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Instruction 14256 allows the parties to an inbound related-party loan to agree their interest rate without applying a conventional arm’s-length benchmark where the prescribed conditions are met. The borrower should maintain:

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• A loan agreement specifying the borrowing term and repayment obligations.

• A business plan or current and forecast financial statements, together with the purpose of the borrowing and an explanation of the funding requirement.

• A board of directors’ resolution, except where the borrower is a single-member private limited company.

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The agreed rate must not exceed the market-interest-rate ceiling published annually by the GDT for the relevant currency and tax year. The annual rate is a ceiling for the qualifying arrangement, not an automatic price that should be applied to every loan.

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A cash advance from a related party that is repaid within one year from receipt is not treated as a loan for this purpose. The facts should nevertheless support its treatment as a genuine short-term advance rather than a repeatedly rolled long-term financing arrangement.

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Resident taxpayers other than banks and microfinance institutions are relieved from the arm’s-length and specified loan-document requirements where at least one of the following applies:

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• The enterprise has been registered for tax for fewer than three tax years.

• A single-member private limited company borrows from its owner and the loan balance remains below KHR 3 billion at all times.

• A sole proprietorship borrows from its owner, the owner’s spouse or a dependent child.

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These concessions apply narrowly. Guarantees, guarantee fees, cash pooling and other financing transactions are not automatically covered and may require a separate arm’s-length analysis. Interest deductibility limitations, withholding tax and general business-purpose requirements should also be reviewed independently of the transfer pricing position.

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5.4 Tangible Goods, Manufacturing and Distribution

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For related-party goods, the taxpayer should establish whether the Cambodian entity is a manufacturer, contract manufacturer, distributor, commission agent or another type of participant based on what it actually does. Relevant issues include control of inventory, product liability, capacity utilisation, quality risk, market risk, warranty exposure, procurement decisions and ownership or use of local intangibles.

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Customs values and transfer prices serve different legal purposes but are based on the same commercial transaction. A policy that increases import prices to support a low Cambodian operating margin may increase customs duty, while a year-end transfer pricing adjustment may not automatically amend the customs entry or import VAT position. Customs and transfer pricing should therefore be reviewed together before adjustments are posted.

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5.5 Permanent Establishments

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Prakas 574 expressly includes the relationship between a permanent establishment and its non-resident enterprise and requires income and deductions to be attributed as though the permanent establishment were a separate and independent enterprise undertaking the same or similar activities under comparable conditions.

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The analysis should identify the functions performed in Cambodia, the assets economically connected with those functions, the risks controlled locally and the dealings recognised between the permanent establishment and other parts of the enterprise. A simple head-office allocation may not be sufficient.

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6. Documentation and Disclosure Requirements

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6.1 Annual Related-Party Disclosure

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The related-party transaction annex to the annual Tax on Income return generally requires the taxpayer to disclose:

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• The name of each related party.

• The jurisdiction in which the related party is registered.

• The nature and type of revenue, purchase, expense or other controlled transaction.

• Transaction values reported in Khmer riel.

• Related-party loans receivable and payable and the relevant interest rates.

• Whether transfer pricing documentation has been prepared and maintained.

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The annex is filed with the annual return even though the full transfer pricing report is ordinarily retained by the taxpayer and provided only when requested.

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6.2 Transfer Pricing Documentation

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Unless an exemption applies, each Cambodian taxpayer with controlled transactions should maintain annual entity-specific transfer pricing documentation. A group-wide policy or overseas Master File is not a substitute for a Cambodian analysis.

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The documentation should normally include:

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• The legal and ownership structure of the group and identification of the related parties.

• A description of the group’s business and the Cambodian taxpayer’s operations and strategy.

• Details of each material category of controlled transaction and the relevant agreements.

• A functional analysis of the parties, including functions, assets, risks and actual decision-making.

• The accurate characterisation of the Cambodian entity and each transaction.

• Selection of the most appropriate transfer pricing method and reasons for rejecting other plausible methods.

• The comparable search, arm’s-length range and financial analysis where an economic benchmark is required.

• The taxpayer’s financial statements and a reconciliation between the tested results, accounting records and annual tax return.

• Supporting contracts, invoices, calculations and evidence that services, rights or property were actually provided.

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6.3 Timing, Retention and Language

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For a calendar-year taxpayer, the annual Tax on Income return is generally due by 31 March of the following year. A taxpayer with an approved non-calendar tax year generally files within three months after its year-end.

The full transfer pricing documentation is not normally filed with the return, but it should be treated as contemporaneous and completed by the annual filing date because the taxpayer must state whether it has been prepared. Waiting until an audit begins can make it difficult to reconstruct the facts, evidence and financial segmentation credibly.

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Accounting records, invoices, agreements and other supporting documents should generally be retained for ten years after the relevant tax year. Transfer pricing documentation is commonly prepared in English and has been accepted in practice, although the GDT may request Khmer translations of all or part of the report.

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The time allowed to respond to an audit request can be short. Cambodia’s general tax-audit rules can require requested records within seven days, while a specific request or audit notice may prescribe another period. Taxpayers should not assume that they will automatically receive 30 days to create a transfer pricing file after a request arrives.

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6.4 Consequences of Inadequate Documentation

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Under Prakas 574, failure to comply may result in the taxpayer’s tax-compliance status or certificate being reassessed or withdrawn, together with penalties under the Law on Taxation. Where the taxpayer does not cooperate or provide adequate information, the GDT may make a unilateral assessment using the information available to it.

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Inadequate documentation also affects the quality of the taxpayer’s audit defence. A report prepared after the fact, based on unverified agreements or group-level assumptions, may not prevent the GDT from rejecting deductions or applying its own characterisation and comparables.

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7. Transfer Pricing Adjustments, Penalties and Dispute Resolution

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7.1 Primary and Secondary Adjustments

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Prakas 574 expressly recognises:

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• A primary adjustment, being the initial adjustment to taxable income resulting from applying the arm’s-length principle; and

• A secondary adjustment, being the further tax treatment of the value created by the primary adjustment, potentially as a constructive dividend, equity contribution or loan.

 

This means a dispute may extend beyond increasing taxable profit. The GDT may also consider how the adjusted amount should be treated between the related parties, which can create additional tax and accounting consequences.

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7.2 Common Forms of Adjustment

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The GDT may, depending on the facts:

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• Increase revenue from related-party sales.

• Reduce the deductible cost of goods acquired from a related party.

• Deny or reduce management fees, technical-service fees or royalties where the benefit, evidence, allocation or price is insufficient.

• Adjust the margin earned by a Cambodian manufacturer, distributor or service provider.

• Recharacterise a transaction where the contract does not reflect actual conduct.

• Adjust the pricing or deductibility of financing arrangements not protected by the specific loan rules.

• Attribute additional profit to a Cambodian permanent establishment.

• Adjust an out-of-range result to the median of the arm’s-length range, provided the adjustment does not reduce Cambodian tax revenue.

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7.3 Penalties and Interest

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A transfer pricing reassessment can result in additional Tax on Income and associated taxes, together with additional tax penalties and late-payment interest under the Law on Taxation. Depending on the conduct and circumstances, the general additional-tax rates may be:

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• 10% for ordinary negligence.

• 25% for serious negligence.

• 40% where the GDT makes a unilateral assessment, commonly associated with non-cooperation or failure to provide the required information.

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Late-payment interest is generally imposed at 1.5% per month on the unpaid tax. Serious or deliberate non-compliance may also expose the taxpayer and responsible persons to larger statutory fines or criminal proceedings under the 2023 Law on Taxation.

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7.4 Domestic Objection and Appeal

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A taxpayer that disagrees with a reassessment should act promptly. The general dispute process permits the taxpayer to object to the GDT, escalate an unresolved matter through the further administrative process and, where appropriate, proceed to the Tax Arbitration Committee and the courts. Applicable deadlines are short and are commonly 30 days or 30 working days depending on the relevant notice and stage.

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An objection should address the transaction’s facts, the legal basis of the adjustment, the functional and economic analysis, and the calculation of tax and penalties. Providing only a benchmark without responding to a benefit-test, deductibility or substance challenge is rarely sufficient.

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7.5 Advance Pricing Agreements and Mutual Agreement Procedure

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As at August 2026, Cambodia does not have an established domestic Advance Pricing Agreement programme under Prakas 574. A taxpayer may seek clarification from the GDT on a technical issue, but this should not be treated as equivalent to a formal unilateral or bilateral APA.

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Where a Cambodian tax adjustment creates taxation not in accordance with an applicable double taxation agreement, the taxpayer may seek relief through the treaty’s Mutual Agreement Procedure. Cambodia has issued administrative guidance confirming the availability of MAP under its treaties. The applicable treaty commonly requires a MAP request within three years of the first notification of the disputed action, but the exact wording of the relevant treaty must be checked.

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MAP and domestic appeal are different procedures. A taxpayer considering MAP should protect all domestic objection deadlines and should not assume that a MAP request automatically suspends tax collection, penalties or the local dispute process.

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8. Industries and Transactions with Higher Transfer Pricing Risk

 

Cambodia does not publish a closed list of high-risk industries. In practice, risk is driven by the value and nature of controlled transactions, tax-rate differences, recurring losses, weak supporting evidence and inconsistency between the taxpayer’s contracts, operations and reported results.

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8.1 Industries Commonly Exposed

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• Garment, footwear and travel-goods manufacturing: Related raw-material purchases, contract-manufacturing returns, production inefficiencies, capacity utilisation, QIP incentives and sales to overseas group companies are central issues.

• Other export manufacturing and assembly: The GDT may examine whether the Cambodian operation is genuinely routine or performs wider procurement, quality, engineering, workforce or supply-chain functions that justify a higher return.

• Distribution and consumer products: Import prices, persistent local losses, marketing expenditure, rebates, year-end adjustments and the interaction between transfer pricing and customs valuation create risk.

• Banking, microfinance and financial services: Funding, guarantees, regional service charges, treasury support and regulatory capital are material. The specific small-company loan exemptions do not apply to banks and microfinance institutions.

• Real estate, construction and hospitality: Related-party development services, project management, asset transfers, leases, financing and brand or hotel-management charges can be difficult to value and document.

• Telecommunications, technology and digital businesses: Software, platform, technical-service, data and royalty charges often combine services and intangible property and require careful delineation.

• Agriculture and commodity businesses: Commodity pricing, procurement functions, quality differentials, logistics, seasonal funding and transactions through regional trading entities may be scrutinised.

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8.2 Higher-Risk Transactions and Outcomes

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• Management or technical-service fees with generic invoices and limited evidence of benefit.

• Royalties charged in addition to high related-party purchase prices or while the Cambodian entity is loss-making.

• Related-party loans that lack the documents required by Instruction 14256 or exceed the annual GDT interest-rate ceiling.

• Guarantees, cash pooling or financing fees treated as though they fall automatically within the loan concession.

• Long-term losses or results consistently below the benchmark range for an entity described as routine or limited risk.

• Large year-end true-ups that are not provided for in the agreement, are calculated after the annual close or cannot be reconciled to invoices and customs entries.

• Domestic transactions between entities benefiting from different tax rates, QIP incentives, losses or compliance positions.

• Business restructurings that move customers, functions, employees, risks or profit without analysing whether compensation is required.

• Whole-entity benchmarking where the tested entity undertakes several economically different activities or controlled transactions.

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9. Current Challenges and Emerging Trends

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9.1 First Audit Cycle Under Prakas 574

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The 2025 tax year was the first period governed by Prakas 574 for calendar-year taxpayers, with the related annual return due in March 2026. Those returns and their related-party disclosures now provide the GDT with a clearer population for risk review. Taxpayers should expect the new definitions, documentation thresholds, median-adjustment rule and permanent-establishment provisions to be tested increasingly in audits.

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9.2 Substance and Evidence over Formal Documentation

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The quality of the evidence supporting services, royalties and the allocation of risk is becoming as important as the economic benchmark. Agreements that were signed late, copied from another country or never followed operationally can undermine an otherwise technically sound report.

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9.3 Greater Focus on Domestic Transactions and Tax Incentives

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Because Cambodia’s rules cover domestic transactions, the GDT can examine profit allocation within a Cambodian group where entities have different tax rates, incentives, losses or tax-compliance profiles. QIP and non-QIP activities should be separated accurately, and common costs should be allocated using supportable drivers.

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9.4 Financing Governance

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Instruction 14256 provides useful flexibility, including the possibility of a mutually agreed low or zero rate where the prescribed conditions are satisfied. It also creates a clear annual compliance task: taxpayers must monitor the GDT’s published ceiling, maintain the prescribed evidence and distinguish genuine short-term advances from longer-term financing.

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9.5 International Developments

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Cambodia continues to develop its international tax treaty network and administrative cooperation. Groups should monitor whether Cambodia introduces further rules concerning Master Files, Country-by-Country Reporting, simplified pricing approaches or formal tax-certainty mechanisms. None of those potential developments should be assumed to apply domestically until implemented through Cambodian law or official guidance.

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10. Practical Recommendations

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10.1 Establish the Compliance Position Each Year

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• Map all direct and indirect related parties, including domestic parties and permanent establishments.

• Recalculate the turnover, asset and controlled-transaction thresholds annually rather than relying on the prior year’s exemption.

• Complete and reconcile the annual related-party transaction annex to the general ledger and intercompany confirmations.

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10.2 Align Policy, Agreements and Conduct

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• Accurately delineate each material transaction before selecting a method.

• Ensure intercompany agreements describe what the parties actually do and are signed before or when the transaction begins.

• Confirm that invoices, settlement terms and year-end adjustments follow the agreement.

• Review whether the Cambodian entity’s actual profit is consistent with its functions and risk control.

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10.3 Build Transaction-Level Evidence

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• Retain deliverables and benefit evidence for intra-group services throughout the year.

• Document the use and economic value of licensed intangible property.

• Maintain the loan agreement, business plan or forecasts and board approval required by Instruction 14256.

• Keep calculations of cost pools, allocation keys, mark-ups, royalty rates and financial true-ups in a form that can be reproduced during an audit.

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10.4 Monitor and Adjust Before Filing

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• Test margins and prices during the year rather than waiting until the annual return is prepared.

• Update comparable-company financial data annually, even where the previous report is reused.

• Calculate any true-up early enough to issue appropriate invoices and consider the Tax on Income, withholding tax, VAT and customs consequences.

• Prepare clear explanations for start-up losses, capacity underutilisation, exceptional costs or market disruption rather than removing those items automatically from the tested result.

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10.5 Prepare for Audit

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• Maintain the transfer pricing report and key evidence in an accessible audit file.

• Identify documents that may require Khmer translation.

• Reconcile every number in the report to the audited financial statements, tax return and related-party annex.

• Respond to GDT requests consistently and within the stated deadline, preserving domestic objection and treaty MAP rights where a reassessment arises.

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Conclusion

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Cambodia’s transfer pricing regime is no longer a new or purely documentary requirement. Prakas 574 gives the GDT clearer tools to identify related parties, adjust out-of-range results to the median, attribute profit to permanent establishments and impose both primary and secondary adjustments. At the same time, it offers useful compliance relief for genuinely smaller taxpayers and certain related-party loans.

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The strongest position is created before an audit: transactions are accurately understood, agreements reflect conduct, prices are monitored, evidence is retained as the activity occurs and the annual disclosure reconciles to the Local File and financial records. A report prepared only after the GDT asks questions cannot easily repair gaps in the underlying facts.

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This summary is for general information only and does not constitute tax or legal advice. The application of Cambodia’s rules depends on the facts, the relevant tax year and any later legislation or GDT guidance.