The South Korean Assembly has passed a bill to ratify a double tax agreement (DTA) with Cambodia.

It was first signed in November 2019 by Cambodian Minister of Foreign Affairs and International Cooperation Prak Sokhonn and Korean Minister of Foreign Affairs Kang Kyung-wha during the Korea-Asean Summit in Busan, South Korea.

Double Taxation Agreements (DTAs) are treaties between two or more countries to avoid international double taxation of income and property. Tax benefits under DTA for payments can take place in two ways. There can be an exemption from tax payments or a reduced tax rate on respective payments, or there can be a refund of deducted withholding payments.

The DTA has similar provisions to those signed earlier between Cambodia and other countries, which include Singapore, Thailand, Brunei, China, Vietnam, Indonesia and Malaysia, as well as the China-dependent territory of Hong Kong. Those provisions include the ability for tax residents in Cambodia and South Korea to be provided with a corporate tax credit for income that was already subject to tax in the counterparty’s jurisdiction.

The treaty also provides for a reduction in the standard withholding tax rates for cross-border transactions and an information exchange mechanism between the tax authorities of both countries to enhance tax enforcement against tax evasion, base erosion and profit shifting by taxpayers.

The relationship between Cambodia and South Korea has been and remains strong. Bilateral trade between the two countries was valued at $884 million as of December 2020, a year-on-year decrease of 14 percent, mainly down to the COVID-19 pandemic.

Figures from the Korean International Trade Association showed that from January to December 2020, Cambodia exported $317 million of products to South Korea, a year-on-year decrease of 18 percent. Cambodia imported $567 million of goods from South Korea, a slide downwards of 5 percent.

Long Dimanche, Cambodia ambassador to the Republic of Korea, explained that bilateral trade between Cambodia and South Korea in 2020 suffered a slight drop, but with a free trade agreement (FTA) in the pipeline, there is a bright future between the two nations.

“In general, South Korean exports represent around 70 percent of that volume with imports from Cambodia making up the balance. Cambodia has been negotiating the establishment of a free trade agreement with South Korea since 2019 and has nearly concluded those negotiations. We expect that we will sign an agreement in early 2021. A Cambodia-Korea FTA will grow the value of our bilateral trade even larger,” Dimanche said.

• Tags: Cambodia South Korea Relations, DTA, South Korea