VLP Legal Press #23
Implementation of Capital Gain Tax
Selling property, shares, or other assets in Cambodia? Big changes are here!
As we shared in Legal Press #9, Capital Gains Tax (CGT) is reshaping the investment landscape in Cambodia. The full implementation was originally planned for 2026, but here’s the good news: based on the latest update, CGT on property will only commence in 2027.
However, it’s important to note that CGT on other asset classes, such as shares, has already started.
The implementation can impact the profits you gain from investment, so understanding them now is key.
What is CGT?
CGT is a tax on profits when you sell or transfer certain assets. This includes property, shares, leases, intellectual property, and more.
What is new about the implementation of CGT?
The General Department of Taxation (GDT) has issued a Notification no. 041 on 2 January 2026 confirming that:
from 1 January 2026, CGT applies to gains from:
Leases
Investment assets (shares, bonds)
Intellectual property
Business goodwill
Foreign currency gains
CGT on real estate gains starts 1 January 2027.
What Should You Do?
Plan for tax considerations early in deals especially when deciding on the sale price.
Prepare for CGT by having the sale transaction documented, gather all evidence that can proof your expense related to the asset.
Agree on who pays the CGT (e.g., in case of share sale, the buyer and seller should ensure that the company withhold the CGT, report and remit the tax).
Learn the basics about the CGT (e.g., who must pay the CG, when is CGT considered due, how is the CGT calculated, are there any exemptions, etc.). Revisit in our Legal Press #9 to get familiar with these basics by just clicking on this link https://www.vlplaw.co/vlplegalpress/capitalgainstax.
🔎Let’s brainstorm on a real-life example of CGT!
Paul, a foreign businessman has set up a local start-up company called SCo. with Vandy, his Cambodian friend in 2022. Paul injected $70,000 for his 70% shares and Vandy injected $30,000 for his 30% shares into SCo as its registered capital.
In early 2024, Paul bought all Vandy’s shares at $40,000, becoming the sole shareholder of SCo. He paid an agent $1,500 to help him with the processing of the share transfer with the authority but didn’t receive any invoice for the payment.
To expand the business of SCo, Paul has loaned a $15,000 to SCo in late 2024. There was a written shareholder loan agreement between Paul and SCo.
Now that he wants to invest in another business, Paul offers to sale all his shares in SCo to another friend, Mike, at a price of $200,000 (Selling Price). Paul and Mike agree to sign a share sale and purchase agreement on 1 February 2026 and that Paul will receive the payment of Selling Price in 2 phases: 50% by 10 February 2026 and remaining 50% by 20 February 2026. It is agreed that the share transfer process will be completed by first week of March 2026 and Mike can operate SCo from then. This time, Paul engages a law firm to help him with the preparation of a share sale and purchase agreement and also assist with the transfer of shares with the authority. The legal service fee is $2,500.
When Paul knows about the implementation of the CGT, he has the following questions:
💰Is there any gain from the share sale in 2026?
Yes. If the selling price is higher than the cost of the asset, it is highly likely that there is a gain.
To be clear, the gain is the Selling Price (i.e., $200,000) less deductible expenses related to the shares. The higher the gain is, the higher CGT Paul needs to pay. So, Paul has to make sure that he deducts all allowable expenses related to the shares from the Selling Price.
💸What are the expenses that he can deduct from the Selling Price?
The expenses that can be deducted need to (i) be identified and supported by verifiable evidence, (ii) ties to economic activities and (iii) there are invoice or supporting documents verifying the amount and date of the expense.
For the shares, the expenses that can be deducted are:
paid-capital
acquisition cost of the shares
expenses related to the sale and transfer
🧮Can he deduct the agent fee he paid in 2024 from the Selling Price?
No – because there is no invoice as a supporting document for this expense.
🏷️How much is the CGT?
His taxable gain = $200,000 - $70,000 (cost of 70% shares) - $40,000 (cost of 30% share) - $2,500 (cost of legal service) = $87,500
He has to pay 20% of $87,500 = $17,500 to the GDT.
(This is a simplified calculation based on a straightforward example and is intended for general illustration only. Capital Gains Tax (CGT) outcomes can vary depending on your specific circumstances. You should seek independent tax advice to determine the correct CGT calculation for your situation.)
⏰When should he pay CGT?
The law requires that CGT is paid within 3 months from the gain realization. For the share sale, the gain is considered realized at the earlier of (i) recognition of share transfer by the Ministry of Commerce; (ii) the loss of right to control the shares by the seller; or (iii) receipt of full payment of the selling price.
So, Paul should procure for the payment of CGT within 3 months from 20 February 2026.
🏦How about the $15,000 loan that SCO owes him, can he just mark-up this loan to the Selling Price and let SCo repay the loan to Mike directly?
Legally, Paul can assign the right to collect repayment of the loan to Mike and, in return, increase the Selling Price into match loan amount that Mike can get from the Company.
However, the law has not clarified as to whether the loan amount that the shareholder granted to the company for its expansion – which may cause the value of the shares increased - can be considered as a deductible expense from the selling price (i.e. expense resulting from economic activity?).
Paul may want to consider proceeding with the sale of shares separately from the loan. He may sell the shares and deal with the loan separately by arranging for the Company to repay the $15,000 loan to him.
💳How should he pay the CGT?
The law clarifies that, in case of sale of shares, the company where the shares are being transferred, has to withhold, declare and pay the CGT as it is realized by the shareholder. However, there is no clarification on the steps the company can take to withhold the CGT amount when the company is not a party to the share sale and purchase and selling price is normally paid by buyer directly to the seller.
‼️What if the CGT is not paid?
If the CGT is not paid for, the transfer of the asset is not legally valid. However, there is no clarification as to how the transfer is invalidated if the transfer has already been registered with the Ministry of Commerce – would there be any cancellation of the transfer of shares?
As the implementation just took place, we have not seen any cases of invalidation of the transfer of asset due to non-payment of CGT yet, it is strongly recommended that the seller comply with the CGT related laws carefully.
This case study is provided for illustration purposes only and does not constitute legal advice. The legal framework discussed is still new, and practical implementation of the regulations has yet to be fully tested or clarified. You should not rely on this material as a substitute for obtaining legal advice tailored to your circumstances. We will continue to monitor developments and provide updates as more information becomes available.
This is for general reference only and does not constitute legal advice. For further guidance, contact us at: