Instruction on The Procedure for Business Dissolution Permanently under Tax Laws

On 17 September 2024, the General Department of Taxation, under the Ministry of Economy and Finance, issued an instruction on the procedure for business dissolution permanently.According to Paragraph 2 of Article 203 of the Law on Taxation 2023, “businesses must inform the tax administration within 15 days if there are changes to their address, format, name, business objective, transfer, dissolution, management structure, or the person in charge of tax affairs of the enterprise.”

1. The Procedure of Application for Business Dissolution Permanently.

• Application

Taxpayers can apply for business dissolution permanently with one of the following options:

Option 1: file the application at www.registrationservices.gov.kh. (Taxpayers can find more about the guidelines in booklet of “How to apply for changes in registration of the company or enterprise’s information.)

Option 2: Apply to the tax administration by completing the application business dissolution permanently (Form of 103) and must be signed by the governor, manager, owner, or a representative with a legal authorization letter and the required documents listed in the instructions must be attached. To choose this option, taxpayers can apply:

• By the Electronic Tax Administration (GDT e-Administration) program with the following steps as below:

Step 1: Download the e-tax administration software by accessing to the website www.tax.gov.kh., select the e-tax services and set-up this software on the taxpayer’s computer.

Step 2: Use your existing account to access other General Department of Taxation systems or programs. If you don’t have an account, click “Create a new account” to register.

Step 3: Select the type of applicant as a taxpayer or tax service agent

Step 4: Click on the menu “Create a new administrative letter”, then enter the

information of the applicant and enter the subject “business dissolution permanently” and select “General Department of Taxation”.

Step 5: Attach the administrative letter as a PDF format, check and verify the information, re-enter any details if needed, and click ‘Send’ to submit it to the General Department of Taxation. Taxpayers can print a receipt to track their documents. The officer will review the application and email approval or rejection through GDT e-Administration.

• Or apply directly at the General Department of Taxation or a provincial tax branch.

After submitting the application, the taxpayer will receive an acceptance letter from the tax administration. For enterprises not yet registered for tax or lacking updated information of enterprises, taxpayer must apply for tax registration or apply for update information of enterprises before they can apply for business dissolution permanently.

• • Required Documents:
  • A letter of notification on business dissolution permanently.
  • An application of business dissolution permanently. (An application form of 103 can be downloaded from the official website of the General Department of Taxation, tax.gov.kh)
  • A receipt of stamp duty on legal documents on the closure of the company for 1,000,000(one million) Riels.[1] (For companies registered with the competent ministry)

1. Obligation of Taxpayers to apply for Business Dissolution Permanently.

• • To apply for permanent business closure, the taxpayer must first complete the accounting records, submit the monthly tax returns, and file the annual income tax return by the business’s final closure date.
  • Once the tax administration receives the application of business dissolution permanently, the taxpayer no longer needs to file monthly or annual tax returns. The business’s electronic tax management systems or services on the enterprise will be shut down, except for tax payment and tax debt payment services. Tax certificates, such as tax patent, tax registration certificates or VAT (Value-Added Tax) certificates, incentives and/or other enterprise permits issued by the General Department of Taxation, will be suspended indefinitely. The business will also be unable to issue tax or regular invoices for any transactions, including imports and exports.
• Penalties for Non-Compliance under Tax Laws.

Failure to register with the tax administration or to update registration information after receiving more than 2(two) warning letters from tax administration results in a penalty of 5,000,000 (five million) Riels.[2] In cases of double jeopardy under this act, shall be punished by imprisonment from 1 (one) month to 1 (one) year and a fine from 50,000,000 (fifty million) Riels to 100,000,000 (one hundred million) Riels.[3]

Conclusion:

In conclusion, the General Department of Taxation has established clear steps and strict requirements for permanent business closure. Businesses must apply within 15 days, either online or directly, with necessary documentation. Once approved, tax responsibilities and certifications are indefinitely suspended, ending all business transactions. The tax administration may inspect and audit the business per the tax audit guidelines, requiring full cooperation from taxpayers. Non-compliance can lead to heavy penalties and imprisonment, stressing the importance of following these rules.​

Authors: Vicheka Lay, Partner;

Footnotes

[1]Article 4, point 5 of PraKas No.577 សហវ.ប្រក.អពជ on Stamp Duty issued on 19/09/2024 by Ministry of Economy and Finance.

[2]Article 235 point 1 of the Law on Taxation 2023.

[3]Article 235 point 3 and 243 of the Law on Taxation 2023.