On 6 October 2016, the Ministry of Economy and Finance issued Circular No.011 MEF entitled "The Implementation of Withholding Tax on Fringe Benefits". It supersedes Circular 002 MEF dated 20 January 2015, and now applies all Businesses not just manufacturing businesses. The 2016 Circular describes certain cash or in-kind employee benefits that are not subject to Fringe Benefit Tax (FBT). These are as follows:
1. Transportation allowance or transportation from the workers' or employees' accommodation to the factory or workplace, and vice versa, and housing allowance or accommodation to the factory complex, subject to any limitation under the labor law.
2. Provision of meals or meal allowances if these are provided to all employees and workers regardless of their positions or functions
3. National Social Security Fund or Social Welfare Fund contributions up to the level determined by the Labor Law
4. Health insurance or life and health insurance permiums fi these are provided to all employees and workers regardless of their positions or functions
5. Child allowance or child-care center expenses meeting the requirements of the Labor Law
6. Compensation for redundancy or termination not exceeding the amounts provided foro in the Labor Law
These exemptions are identical to those contained within the superseded Circular 002 of 2015; however under Circular 002, it was generally understood that they applied only the garment and footwear factories. The new 2016 Circular contains a significant difference in its introductory paragraph, which staes that it applies to "workers and employees of all factories or enterprise." Thus, it now appears that the exemptions will apply to all enterprises, which will be of great interest to other manufqacturers, as well as banks, insurance companies, hotels, and all other non-manufacturing enterprises.
Although neither Circular 002 of 2015 nor the new 2016 Circular restricts the applicability of the exemptions to only cambodian personnel, a ruling letter issued in 2015 to the Garment Manufacturers Association of Cambodia stated that the FBT exemptions applied only to Cambodian nationals. It is probably safe to assume for the moment that this restriction still applies.
If you have any questions about this issue, or would like to discuss how it may be of benefit to your business, please contact Mr. Lee Sang Yeop (firstname.lastname@example.org), or your regular SM Gobal consultant.