The Ministry of Economy and Finance issued Prakas No. 584 on Tax Liability for Business Transfers, Share Transfers and Enterprise Mergers on 29 July 2026 (the “Prakas”). The Prakas provides guidance on the allocation of tax liabilities arising from business transfers, share transfers and enterprise mergers, together with related notification, tax registration and VAT requirements. It further clarifies the implementation of Article 215[1] of the Law on Taxation and has important implications for businesses and investors undertaking business transfers, share transfers and enterprise mergers in Cambodia..
Notification and Tax Registration Requirements
In the event of a business transfer, share transfer or enterprise merger, the directors, representatives, owners or shareholders referred to in the Prakas must notify the GDT and update the relevant tax registration information. However, the Prakas does not clearly specify whether the transferor or the transferee bears this obligation.
In our view, before completion of the transfer, the transferor would ordinarily be best placed to fulfil this obligation because it remains the registered taxpayer. Further clarification from the GDT would help confirm the responsible party for each type of transaction.
- Business transfer: Within 15 working days from the date of the business transfer agreement.
- Share transfer: Within 15 working days from the relevant MOC approval date. In practice, the MOC approval email and the stamped corporate documents may be used to identify this date, subject to confirmation in the particular case.
- Enterprise merger: Within 15 working days from the applicable approval date under the Prakas. The relevant merger approval document and date should be confirmed with the MOC.
In the case of a merger, the new enterprise established through the merger or the surviving enterprise, as the case may be, must comply with the provisions of the Prakas.
As a preliminary matter, it should be noted that the Prakas does not define what constitutes a “business transfer” or a “share transfer”. While a “business transfer” would be constituted by the sale of assets and a “share transfer” would be constituted by a transfer of shares, it is not clear whether all of the assets or shares need to be sold/transferred, as the case may be, for it to fall within the ambit of the Prakas. If all the assets/shares need to be sold/transferred, it could, for example, be argued that a transfer of all an enterprise’s assets other than a stapler does not constitute an asset transfer. Such an approach would enable parties to a relevant transaction circumventing the application of the Prakas. On the other hand, if not all of the assts/shares need to be sold/transferred, there would be no de minimis threshold such that, for example, the sale of a single asset, could trigger the application of the Prakas. It is hoped that the GDT provides clarification on this fundamental point at its earliest convenience.
- Tax Liability in Business Transfers
Legal Form | Condition | Tax Liability |
Sole Proprietorships or Partnerships | The transferor has submitted an application for tax clearance of business operations and is accountable for all tax liabilities before the transfer. | The transferee is liable only for tax liabilities arising after the transfer date. |
The transferor has not submitted the application for tax clearance with the GDT before the transfer. | The transferee becomes liable for all tax liabilities*.
| |
Legal Entities Ceasing Operations | The transferor has submitted the application for tax clearance with the GDT before the transfer. | The transferee is liable only for tax liabilities arising after the transfer date. |
The transferor has not submitted the application for tax clearance with the GDT before the transfer. | The transferee becomes liable for all tax liabilities. | |
Legal Entities Continuing Operations | Regardless of whether a tax clearance application has been submitted to the GDT. | – The transferor is liable for tax liabilities incurred up to the effective transfer date. – The transferee is liable for tax liabilities arising after the effective transfer date. |
* Our comment: The rule may have significant consequences for a transferee where the transferor’s failure to submit the required tax-clearance application results in the transferee becoming liable for historical tax liabilities. In circumstances where the transferee may have limited knowledge or control over the transferor’s prior tax compliance, this allocation of liability may be disproportionate to the transferee’s conduct. Clarification from the GDT on the scope and application of this rule would be helpful.
VAT Treatment of Business Transfers
A qualifying business transfer is not subject to VAT where the applicable notification and tax registration update requirements are fulfilled, and the business continues under the transferee. Where the relevant conditions are not satisfied, VAT applies at the standard rate of 10% under VAT rules and regulations.
- Tax Liability in Share Transfers
Where shares in a legal entity are transferred, increased or decreased, the incoming or successor shareholders are responsible for tax liabilities in proportion to their respective shareholdings, subject to the applicable limited-liability rules under the Prakas.
For a partnership, the transferee is liable for tax liabilities in proportion to the interest received. General partners in general or limited partnerships are liable for obligations beyond their agreed capital contributions. Limited partners in a limited partnership, by contrast, are liable only up to the amount or value of their agreed contributions.
Tax Fraud or Evasion: Article 8 of the Prakas also addresses the allocation of tax liabilities arising from tax fraud or tax evasion. Where tax fraud or evasion occurs, shareholders may be liable for the resulting tax debts in proportion to their respective shareholdings in the legal entity.
- Tax Liability in Enterprise Mergers
As the surviving or newly formed enterprise assumes the outstanding tax liabilities of the merged enterprises under the Prakas, it is important for the parties to assess the tax position of each enterprise before completing the merger and to address any identified tax risks appropriately in the transaction documentation.
Practical Implications for Businesses and Investors
Businesses and investors considering a business transfer, share transfer, or enterprise merger should consider the following measures:
- Assess Successor Tax Liability: Before completing a business transfer, share transfer or enterprise merger, assess how the Prakas allocates existing tax liabilities among the transferor, transferee, incoming shareholders or partners, and any surviving or newly formed enterprise, as applicable.
- Confirm Tax-Clearance Transactions: Determine which tax-clearance transactions apply to the proposed business transfer and whether the relevant conditions have been satisfied. This is particularly important where the transferor will cease operations, as the applicable requirements may affect the allocation of historical tax liabilities.
- Plan for GDT Notification: Identify the applicable triggering event and incorporate the prescribed 15-working-day notification and tax registration or information-update requirements into the transaction timetable.
- Confirm VAT Treatment: Before completing a business transfer, assess whether the transaction qualifies for the applicable VAT treatment under Article 35 of Sub-Decree No. 49 and Prakas No. 584, including compliance with the relevant notification and information-update requirements and continuation of the business under the transferee.
- Address identified tax risks: Consider appropriate contractual protections, including tax representations, warranties and indemnities, to allocate financial risk between the parties. Such contractual arrangements do not, by themselves, override statutory tax liabilities owed to the GDT.
Given the potential financial consequences of transferee tax liability, businesses and investors should review the relevant provisions of Prakas No. 584 and obtain appropriate tax advice from HBS LAW before implementing a transfer, share transaction, or enterprise merger.
Disclaimer: The information provided herein is for information purposes only and may not be relied upon as constituting legal advice.
[1] Under Article 215 of Law on Taxation stated that in case of business or share transfer, the new owner shall assume responsibility for all tax liabilities of the business or enterprise; and in the events of enterprise mergers, the enterprise resulting from the merger or the one that continues shall assume liability for all tax obligations.
