Cambodia Taxation and Tax Planning

Cambodia Taxation and Tax Planning

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When Can a Thai Distributor Be Deemed the Agent of the Foreign Seller?

In cases where a foreign company wishes to bring goods on the Thai market, there are several possibilities for him to consider to achieve this, involving different degrees of integration in the Thai legal and economic order. In increasing measure of integration, the following could be considered:

1.     Sell goods directly to Thailand without any representation in Thailand. In this case, the foreign company may find Thai customers by phone or Internet, mailings or trade fairs abroad.

2.     Send a sales-agent of the company to Thailand for one or more short visits in the hope of later generating orders or arrange for representation at trade fairs held in Thailand.

3.     Find an independent company that is willing to buy the goods from the foreign company and resell them to customers in Thailand (= distributor).

4.     Find an independent agent or broker in Thailand that will try to sell the goods locally on commission.

5.     Appoint a sales-agent in Thailand that will be there for considerable periods of time, with or without disposal over office/shop and other business facilities.

6.     Formally open a branch in Thailand;

7.     Establish a subsidiary company in Thailand.

To layman’s eyes, step 3 (distributor) and step 4 (agent) may be hard to distinguish from each other. In both cases, the sale is concluded with the help of the Thai company. In both cases, it is likely that the Thai company will make an income based on the sales price of the goods. Often, in both cases, the goods are shipped directly to the final customer. Sometimes the price is in both cases paid to the foreign company by the final customer.

Nevertheless, the tax and legal treatment of these two comparable situations is quite different. Much of this discussion relates to the operation of sec. 76 bis RC. This provision reads as follows:

"If a juristic company or partnership organized under a foreign law has an employee*, a representative or a go-between to carrying on business in Thailand and thereby derives income of gains in Thailand, such a juristic company and partnerships shall be deemed carrying on business in Thailand, and such employees, representatives or go-betweens, whether a natural or juristic persons, shall, in so far as the said income or gains are concerned, be deemed to be the agent of the said juristic company or partnership and shall have the duty and liability to file a return and pay tax under the provisions of this Division.  

In all cases under the provisions of the foregoing paragraph, if the person having the duty and liability to file a return and pay tax is unable to ascertain the profits chargeable with tax under the provisions of this Division, the provisions of Section 71 (1) on the method of assessment shall apply mutatis mutandis.

An appeal is allowed against the assessment made under this Section."

In essence, sec.76 bis RC establishes two main legal rules for tax liability determination, calculation and collection. In our view, these are the following:

1.     Deriving income in Thailand through an employee, representative or intermediary may be considered carrying on business in Thailand in the sense of sec.66 par 2 RC and thus establishes Thai tax liability on that income;

2.     Such agent is liable for filing an income tax return and pay the tax due.  

 

In other words, when a foreign company disposes in Thailand over an agent or a broker, as in step 4 depicted above, that foreign company is liable to tax in Thailand on the sales made to Thai customers. Moreover, the agent is jointly liable with the taxpayer himself (the foreign company) to file a return and pay the tax. This is the effect of sec.76 bis RC. However, when a foreign company sells goods to a distributor in Thailand, who will then sell them on to his customers, there is only a direct sale between the foreign company and the Thai company. There does not appear to be an “employee, representative or intermediary” as the text of sec.76 bis RC requires. The provision does thus not apply and the foreign company is not subject to tax in Thailand on the income from the sales to the distributor. Of course, the distributor itself is as a normal Thai company subject to 30% tax on its net-profit, namely the difference between its buying prices and its sales prices.

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* See B.T.R. no. 2/2526, D.I. No. Paw. 13/2527, D.N. 30 June 2529

Example:

 

As far as the income of the Thai company is concerned, actually the result from the perspective of tax revenue for the government should be the same. Either the income of 20 is taxable as difference between buying price and selling price (distribution) or the same amount is taxable as commission received from the foreign principal (agency).

That is where the similarity ends, however. The profit the foreign company has generated in or from Thailand (30 in the example above) is normally NOT subject to Thai tax in the distribution scenario, but TAXABLE in case of the agency-scenario. This is the effect of sec. 76 bis RC. In case the Thai profit was derived through an employee, representative or intermediary (in Thailand-is at least the implication), the foreign company may be deemed to “carry on business in Thailand” rather than with Thailand. The profit on the sale of the goods is subject to Thai tax, and the agent is jointly liable for the payment of this tax. Note however that abstraction has been made of the implications of double taxation agreements.

Avoidance

Clearly, many foreign sellers of goods will seek to avoid having to pay tax in Thailand. Tax avoidance will be even higher on the agenda when the Thai company in the scenario above is actually a related party to the foreign company. In that case, the taxpayer may be tempted to try and reduce all tax in Thailand, including the tax that would otherwise be due on the (related) Thai distributor’s profit or the Thai agent’s commission. 

Example:

 

From the above it is clear that selling to Thailand by means of a distribution-agreement may be more advantageous for foreign companies than through agents. Especially between related parties, taxpayers are thus more likely to characterize their agreements as “distribution agreements” and not as agency-agreements. But just because parties (especially related parties) give this name to a contract does not mean that it corresponds to the legal reality. How can the RD be sure that the arrangement chosen is not in reality that of an agency, thus triggering the application of sec. 76 bis RC?

General Principles

Under Thai revenue law, the characterization by the parties of their actual legal agreement is not determinative of the tax consequences. It does not necessarily matter that parties call their contract a “sale agreement” or “service contract”. What matters more is the actual legal rights and obligations of the parties under the written or oral agreement, which may be proven by all forms of evidence or concluded from the facts and circumstances.

This is well illustrated by the Bell-Telephone case before the Supreme Court of Thailand[1]. This decision is noteworthy because it clearly confirms that taxation in Thailand must be based on the correct legal qualification of the legal acts and agreements of the taxpayer. The denomination of a contract by the taxpayer is not in itself determinative. The agreements must be assessed on their actual legal rights and obligations, and taxation must be based on that qualification. This principle can obviously work both to the benefit and to the disadvantage of the taxpayer. If a taxpayer denominates his agreement a “service”, for example, but an examination of the language of the contract, the intention of the parties and the circumstances surrounding the conclusion of the contract shows that actually the agreement should legally be characterized as a license, tax should be levied on the latter qualification[2]. This approach could be called the principle of juristic interpretation, and is familiar to many civil law jurisdictions. 

Another important principle is that of restrictive interpretation. It was recalled in another landmark decision of the Supreme Court, the Walai case (No.1908/2538). The dispute concerned the collection of a tax debt upon the property of the wife of a taxpayer. The tax arrear concerned exclusively the income of the husband. The couple had, as sec. 57 quinque RC allows, submitted separate income tax returns. Sec. 57 quinque RC provides that “the wife and the husband shall file tax returns and pay tax separately” and regulates the treatment of personal allowances in that case. It is not expressly mentioned that husband and wife are in that case not liable for each others tax debts, as would be the case when they file a joint tax return (sec. 57 ter RC). The RD based itself on the general rule of sec. 57 ter RC to collect tax from the wife, arguing that sec. 57 quinque RC only “addressed the method of tax assessment, and does not affect the collection of tax as provided by sec. 57 ter RC”. The Court did not follow the RD’s view: “The Court does not agree with the view of the Revenue Department because revenue law is public law, providing in the duties of taxpayers towards the state. It affects the rights and the property of the people. Consequently, revenue law must be interpreted strictly, namely in a manner that results in the least amount of duty upon the taxpayer”.

The Court’s dictum is a clear endorsement of a generally restrictive approach to the interpretation of tax statutes. According to this decision, tax statutes should as a principle be interpreted strictly, which incidentally does not equate to “literally”. If the statute does not clearly establish an obligation upon the taxpayer, no such obligation may be deemed to exist. This fundamental principle, which can be associated with the postulate of legality formulated in the constitution of Thailand[3], has far-reaching consequences. One of its implications is that in case of doubt, the statute should be interpreted to the benefit of the taxpayer (“in dubio contra fiscum”). It also has implications for cases of tax avoidance. When an event or a transaction does not fall under the scope of the tax statute, it is not taxable, the reasoning goes. A strict interpretation of tax statutes increases the opposability to the RD of tax avoidance-schemes. But, this does not mean that a literal interpretation of tax statutes will always be supported by the Court. Some provisions, particularly those seeking to curb abuses, may be drafted so that would have a wide scope of operation, and the Court has shown no hesitation to give such measures their full effect[4].            

Bangkok Motorworks case[5]

Turning our attention to distribution-agreements, the Bangkok Motorworks case is certainly a decision that merits further attention. Bangkok Motorworks Ltd. is a company established under Thai law which sells goods in Thailand that it bought from a foreign company. The RD took the position that sec. 76 bis RC nevertheless applied in this situation mainly because the Thai final customers paid directly to the foreign company, and not to the Thai distributor. The foreign company would then remit a “price difference” to the distributor. Furthermore, the RD argues that the distributor does not incur any business risk in the transaction, as would normally be the case when buying/selling. The goods are ordered only when they are already sold, and there is thus no possibility of a loss for Bangkok Motorworks Ltd. The RD therefore considers that the role of Bangkok Motorworks is limited to that of a representative in the sense of sec. 76 bis RC. As a consequence, the profit on the sale of the goods by the foreign seller is taxable in Thailand and Bangkok Motorworks is held liable to pay this tax.

The taxpayer obviously sees the matter entirely different. Bangkok Motorworks argues simply that there is only a sale and resale of goods. It also points out that the agreement explicitly states that the Thai company shall not be regarded as a representative of the foreign seller in any way.

The Court notes that it is clear from the facts that Bangkok Motorworks had the freedom to conclude sales with customers in Thailand, with who to do so, or not to do so. When a sale was concluded, Bangkok Motorworks was free to set the price as well. In addition, from the contract it appears that in case of defected goods, it is the distributor which is responsible towards the final customer, not the foreign company. The income of the distributor is a profit, not a commission, the Court also holds. The mere fact that the payment was made to the foreign company is not sufficient to warrant the conclusion that there is no real distribution agreement, as such was the result of a special arrangement between the customer and a financial institution.

The Court therefore decides that the foreign company may not be deemed to carry on business in Thailand by means of a representative. In a case with essentially the same set of facts, the Court came to a similar conclusion (Bornaew Tech Ltd 1971/2537).

Diethelm Case[6]

An earlier case before the Supreme Court illustrates however that not all contracts which are called distribution agreements by the parties, will be treated as such for tax purposes. 

Diethelm is a Thai company that distributes products in Thailand bought from a foreign company. The companies treat their arrangement as buying/selling but the RD argues that the reality is different.

The Court therefore decides that it is not credible that the taxpayer is a person who purchases goods and resells them. From taxpayer's behavior, it can be concluded that the taxpayer is a representative of the foreign seller in the sense of sec.76 bis RC. 

Clearly, in this case the fact that the final customers paid directly to the foreign company and not to the “distributor” weighed heavily for the Court to decide in favor of the RD.

Conclusions

Based on the above it can be said that in order to distinguish between a distribution-arrangement (seller normally not subject to Thai income tax) and an agency agreement (seller and agent liable to Thai income tax) a legal analysis of the contract and situation must be made. Obviously, the name the parties gave to their contract is an important point, but it is not determinative. Even the text of the contract itself is not determinative if the actual behavior[7] of the parties indicates clearly that the real rights and duties are different. The following questions can be asked:

1.     Is the Thai party free to sell, not to sell or to choose its customers?  If so, likely to be distribution, not agency.

2.     May the Thai party set its own price? If so, almost certainly distribution, not agency.

3.     Does the Thai party has the ownership right of the goods once they leave the property of the foreign seller? If so, almost certainly distribution, not agency.

4.     In case there is something wrong with the goods or the shipment (defects, late delivery, etc.) must the final customer present his claim to the Thai party (and not the foreign seller)? If so, almost certainly distribution, not agency.

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[1] Supreme Court Decision No.124/2540

[2] See also Siam Tin Case (Supreme Court Decision No.4483/2533)

[3] The Thai Constitution provides in sec 69 that Thai people have the duty to pay tax. Sec 48 notes, however, that the right to property may only be infringed upon if a legal act so provides. Put another way, the government is not entitled to take the property of the people unless there is an act of parliament which explicitly enables it to do so. This principle, which is most often associated with expropriation, applies to taxation as well, as is illustrated by Art. 1 Prot 1 European Convention on Human Rights. Essentially the same observation can be made with respect to the right to establish and carry on a business, which is guaranteed by sec 50 in the Thai constitution.

[4] See for example the Siam Tin Case 4483-4484/2533  

[5] Supreme Court Decision No.1009/2539

[6] Supreme Court Decision No.6056/2534

[7] Note in this respect that under the Thai Civil and Commercial Code in sec.797 provides the definition of an agency as follows:

"Agency is a contract whereby a person, called the agent, has authority to act for another person, called the principal, and agrees so to act."

VAT on the Export of Services in Cambodia, Laos and Vietnam

When a VAT-registered enterprise performs services for a non-resident, must it charge VAT on this supply? Can the VAT be applied at 0%? Whether or not VAT applies to services that are provided to foreign recipients is a significant tax issue for cross border supplies. The foreign recipient is often not able to offset any VAT that is charged by the service supplier, and the VAT thus becomes an actual cost. Whether with respect to providing technical services, telecommunication, hire of work or consulting, the VAT issue is crucial for parties to consider.   

In any VAT system, the supply of services by a VAT registrant to a recipient that is based abroad demands special attention. On the one hand, export of services is usually zero-rated for VAT, just as the export of goods. But unlike with the export of goods, it may be difficult in practice to determine when a service has actually been exported. For the export of goods, most VAT systems will simply refer to the customs document that proves that goods have in fact been exported. That will suffice to entitle the exporter to 0% VAT. With services, this cannot be organized in exactly the same manner. To some degree, what is an “export of a service” will have to be determined by means of legal provisions or regulations. As there is no one obvious way to define export with regard to services, as is the case with goods, countries may adopt different definitions.

As a case in point, the rules with respect to the export of services in the VAT systems of Cambodia, Laos and Vietnam are remarkably different in terms of their practical application.

Cambodia: “use abroad”   

Cambodia introduced VAT in 1999, in following of its major tax reform of 1997. At the time, the decision was made not to fully implement the VAT in cross-border transactions. Service supplies made overseas by a non-resident to a recipient in Cambodia are not subject to VAT. There is no system of reverse charge.  However, a non-resident who performs services in Cambodia will become a VAT-taxable person when the thresholds stated in the Sub-Decree on VAT are exceeded (VAT Guide Leaflet 13, 18 May 1998, “Services”, p. 2). These thresholds are the same as for business activity performed by unregistered sole enterprises in Cambodia. For example, for services the threshold is 30,000 US$ per 3 months or 62,500 US$ per year.

Services exported from Cambodia will liable to 0%VAT.  To qualify for zero rating, an exporter of services has to be able to demonstrate that the service provided was used or consumed outside the Cambodia. Based on the current practice, the TD will apply the 0%VAT on a case by case basis.

Only the “supply of services in Cambodia” is subject to Cambodian VAT under Art. 60 LOT. Import of services is not subject to VAT.

The place where a service is supplied is defined in Art. 63 LOT (2)

“2. The supply of a service takes place in the Kingdom of Cambodia if the service is performed in the Kingdom of Cambodia, except that:

a. the supply of a service in connection with immovable property is deemed to take place where the property is located;

b. the supply of a service in connection with transport is deemed to take place where the transport occurs”.

Cambodia’s main implementing regulations on VAT (Sub-Decree No. 114 and Prakas on VAT No 1031) do not add much to the concept that the place of performance of a service is the place of supply.

Under Art.64 of LoT, the export of goods or services is subject to VAT at 0% under Cambodian tax law. The VAT leaflets issued by the TD offer some additional guidance on the interpretation of this provision. 

“All services exported from the Kingdom of Cambodia are liable to VAT but at the zero rate. This means that no VAT has to be charged, but that you are entitled to reclaim the VAT on all the goods and services used in your business to provide services which are exported.

To qualify for zero rating as an export, an exporter of services has to be able to demonstrate that the service he has provided was used or consumed outside the Kingdom of Cambodia (see VAT leaflet 07 “VAT Imports and Exports”).  For example a Cambodian architect may produce plans in the Kingdom of Cambodia for a building to be built by the customer outside the Kingdom.  This would involve an export of services.  You must therefore be able to prove that the service was used in a foreign country.  The evidence which will be considered to substantiate this claim will be a contract which clearly specifies the place of use or consumption of the service as outside the Kingdom of Cambodia or evidence that the service was provided at or for a building or premises located outside the Kingdom of Cambodia.  The evidence must be clear; otherwise, you will have to charge VAT”.

Based on the current practice, the GDT will apply the VAT at 0% on a case by case basis.  There is no further official guidance as to how “use outside Cambodia” is to be interpreted and it is thus possible that in any particular case, the application of 0% by a VAT registrant would be refused. There may be a particular exposure when the recipient of the service has some dealings in Cambodia to which the service relates, as such might be seen as a “use in Cambodia” by tax authorities.

Vietnam: “place of business of the recipient”

Vietnam amended its VAT law in 2008 (which came into force in 2009) to provide further clarification on the problem of exported services. Art. 6 of VAT Decree 123-2008 provided the following new rules:

                        (b) Export services shall include services directly provided to non-resident organizations and individuals or to organizations and individuals in non-tariff zones.

A non-resident organization means an organization without a resident establishment in Vietnam and which is not a value added taxpayer in Vietnam. A non-resident individual means a person who is a non-resident of Vietnam, a Vietnamese who resides overseas, or a Vietnamese during the period while he or she is providing services. An organization or individual in a non-tariff zone means any such entity which has registered business or other cases as stipulated in regulations of the Prime Minister of the Government.

                        (c) Export goods and services as stipulated in sub-clauses (a) and (b) above must satisfy the following conditions in order for the tax rate of 0% to apply:

                        – There must be a contract of sale or a contract for processing goods for export or a contract authorizing processing of goods for export, or a service provision contract signed with an non-resident organization or non-resident individual or with an organization or individual in a non-tariff zone;

                        – There must be vouchers for payment of the export goods or services via a bank and other source vouchers required by law; and there must be a customs declaration for exported goods.

Thus, under Vietnam’s VAT rules the fact that the recipient of the service is not a resident suffices for the services to be deemed “exported”, provided that the recipient does not have a PE in Vietnam. There are a number of formalities to be respected, such as a written contract and payment by means of a bank transfer from overseas. On the whole, however, the place of business of the recipient of the service (including branches or other types of a PE) will be the most important criterion to decide whether services are exported. There is no difference in terms of the nature of the services.

Despite the improvements of 2009, there remain some questions related to the export of services. For example, the requirement of the customer not having a permanent establishment (PE) in Vietnam may lead to uncertainty. A PE is (in corporate tax law) defined as means a production [and/or] business establishment via which a foreign enterprise conducts part or all of its production, and includes a branch and an agent (Art. 2 (3) Law CIT). 

The service performer might not always be aware of the customer’s PE, and one is not certain what kind of evidence will be accepted by the tax authorities that there is indeed no PE in Vietnam.

Laos: “place of business of the recipient” with exceptions  

Laos has issued its first VAT law in 2006, and started with the implementation on 1 January 2010. “All supplies of goods and services and all transactions assimilated to supplies of goods and services that are made for a consideration within the Lao PDR by a Registered VAT Taxpayer” are within the scope of the VAT system. The supply of services which is not “within” the Lao PDR is not subject to Lao VAT. Thus, rather than offering rules on the “export” of a service, a service may not be deemed to “take place” within Laos and is therefore outside of the scope of Lao VAT.

As the Instruction on VAT explains:

In order to determine where a particular service takes place:

first, it is necessary to establish the exact nature of the transaction within the service sector, for instance, construction services, repairs, designs, transportation ...;

then, it must be determined whether that particular service is a service that is found in Article 10, paragraph 2 (items 1 to 6) of the Decree on the Implementation of the VAT Law.  If that is the case, the specific provision of that paragraph 2 designates where the service takes place;

if the particular service is not found in Article 10, paragraph 2, items 1 to 6 of the Decree on the Implementation of the VAT Law, then the general rule established by the first paragraph of Article 10 of the Decree on the Implementation of the VAT Law applies, which means that the service takes place where the receiver of the service is established or has his usual residence.

If it is determined, following the steps outlined above, that a service does not take place in the Lao PDR, no Lao PDR VAT can be payable on that service and it is therefore not necessary in such case to establish whether or not that service is exempt or zero-rated in accordance with the VAT Law”.

Lao VAT uses the place of business of the recipient of a service as the default rule to determine the place of supply. In other words, unless one of the exceptions applies, Lao VAT will not apply when a Lao VAT registrant supplies a service to a non-resident recipient because the place of business of the recipient is not in Laos. Lao VAT regulations further provide that for the interpretation of the place of supply in any situation, the receiver of the services is deemed to be established or to reside in the Lao PDR if he is registered as a Value-Added Taxpayer in the Lao PDR. If the receiver of the services has business establishments in both the Lao PDR and another country, the place of supply of the services is in the other country if the receiver can prove that these services have been supplied to his business establishment in that other country.

It is not entirely clear whether other conditions and principles will still apply. Art. 19 (3) Decree VAT refers to the export of goods and services and provides in some additional conditions including a “certification” of the exported service by authorities:   

The amount of input VAT of goods and services for export including VAT exempted goods and services for export, allowed to be deductible shall proceed as follows:

a. Goods and services exported shall be certified' by the Industry Commerce, Customs and other concerned sectors;

b. Availability of export contracts consistent with regulations;

c. Payment through bank.

The following table gives an overview of the rules on place of supply of services in Lao VAT:

Service	Place
General services	Place of business or residence of recipient
Design, construction, maintenance, repair, supervision, real estate agents, experts for property, hotel	Place where the property is situated
Rental of movable goods	Place of main use by recipient
Transport	Place where the transport is carried out
Cultural, artistic, sports, scientific, education, entertainment, organization, restaurant, catering, tourism services, loading and unloading, valuation and work on movable property, logging, extraction of natural resources	Place where the service is carried out
Telecommunication	Place of establishment of the telecommunication company
Tourism, tours	In Laos unless all elements are outside of Lao

Consultancy services

When a local VAT registrant provides consultancy services to a non-resident customer, the VAT implications may differ considerably depending on the country where the consultant is established. A service provider in Cambodia will be allowed to charge VAT at 0% only if it is clear that the recipient used the service outside Cambodia. Since this notion is not further defined, there may be an exposure for the service provider if he does not charge the VAT. In Vietnam, the rules on the subject are clearer. If the customer does not have a PE in Vietnam, a contract was drafted and the payment made by bank, the VAT can be charged at 0%. For a service provider that is established in Laos, the place of supply of a general consulting service is the place of the recipient (offshore) so that no Lao VAT must be charged. It is not clear in Laos whether additional conditions apply as well, such as bank transfer.

Inspection services

Let us assume that parent company PARCO has assigned subsidiary SUBCO to inspect goods in SUBCO’s country before these goods are shipped to PARCO. SUBCO provides a service to PARCO and invoices accordingly. The essential difference with consultancy services is that in the case of inspecting tangible goods, the service is used in the country of the service provider.

If SUBCO is resident in Cambodia, it will be allowed to charge VAT at 0% only if it is clear that the recipient used the service outside Cambodia. Since this notion is not further defined, there may be an exposure for the service provider if he does not charge the VAT. In this case it seems difficult to argue that the service is used outside Cambodia. In Vietnam, the rules on the subject do not refer to place of use. If the customer does not have a PE in Vietnam, a contract was drafted and the payment made by bank, the VAT can be charged at 0%. When SUBCO is established in Laos, it is not entirely clear whether inspection services should be seen as general services (place of the recipient) or as “work on movable goods” (place where service is carried out). In the second case, Lao VAT would have to be applied. 

Construction work

In this final example, we assume that foreign contractor CONCO has a project onshore for the construction of infrastructure. CONCO hires local subcontractor CONSUBCO to complete a part of the work.

If CONSUBCO is resident in Cambodia, it will be allowed to charge VAT at 0% only if it is clear that the recipient used the service outside Cambodia. In this case it seems difficult to argue that the service is used outside Cambodia. In Vietnam, the rules on the subject do not refer to place of use. If the customer does not have a PE in Vietnam, a contract was drafted and the payment made by bank, the VAT can be charged at 0%. However, CONCO will almost certainly have a PE in Vietnam for this project under Vietnam law. Again it thus seems that local VAT will have to apply. When CONSUBCO is established in Laos, construction services should not be seen as general services (place of the recipient) but fall within the category of services that are deemed to be supplied on the place where the immovable property is situated. Lao VAT would have to be applied. 

Some notes on comparing Cambodia, Laos and Vietnam

Each country has chosen its own rules on the issue of export of services. In many situations, the result of the different rules is similar. For example, if the recipient has a local PE (Vietnam) it is also likely that the same service would not be deemed “exported” in Cambodia (the PE may likely have “used” the service) or Laos (because of the Lao provision on having a place of business within Lao and abroad). Or, if work is performed on constructing a building overseas or repairing a machine abroad, this would likely not only be seen as export of service in Laos, but also in Cambodia. So, even though the rules are different, the outcome may often be the same in practice.   

One could say that the VAT laws of Cambodia and Laos are less likely to result in a 0% VAT rate than in Vietnam. Laos favors export of services because it has adopted a default rule in favor of the place of business of the recipient of the service. Of course, this will work in favor of the Lao treasury with respect to incoming services.

The situation is more challenging in Cambodia, where the largely undefined criterion “use abroad” creates some uncertainty in practice.