"I invoiced 1,000 and received 850"
This is one of the most common surprises for a service business in Cambodia. You issue an invoice for USD 1,000, the client pays USD 850, and when you ask, you are told "we withheld the tax". Nobody is stealing from you — but the arithmetic needs explaining, and it matters which figure goes on the document.
What withholding tax is
Withholding tax (WHT) is a tax the payer deducts from a payment and remits to the General Department of Taxation on the recipient's behalf. The payer becomes the collection point. The recipient receives less cash, and the amount withheld is credited against the recipient's own tax liability.
Two consequences follow, and both are counter-intuitive:
- The withheld amount does not reduce the total due on your invoice. Your invoice says 1,000. The client owes 1,000. The client pays 850 and remits 150 to the GDT. Your document does not become an 850 document.
- Whether withholding applies depends on who the recipient is — resident individual, resident company, or non-resident — and on what the payment is for. It is not a property of the invoice.
The rates
The rates below are the standard Cambodian withholding rates for payments to residents and non-residents:
| Payment | Rate |
|---|---|
| Services to resident individuals | 15% |
| Royalties and non-bank interest | 15% |
| Rent to residents | 10% |
| Bank interest — fixed-term deposits | 6% |
| Bank interest — savings accounts | 4% |
| Payments to non-residents | 14% (or 10% where an in-force double tax agreement applies) |
The rate that catches service businesses most often is the 15% on services to resident individuals. If your client is a company and the work is a service you performed personally, the 15% withholding on that payment is the normal treatment — which is why a USD 1,000 invoice arriving as USD 850 is usually correct behaviour, not a mistake.
Non-resident payments are a different track: 14% as the standard rate, reduced to 10% where an in-force double taxation agreement applies. That is why the recipient's tax residence matters, not just the type of service.
What this means for your invoice
- Put the full amount on the invoice. The invoice total is the amount the client owes, before withholding.
- Do not silently reduce the invoice total to what you expect to receive. If you do, your books and the client's books disagree, and your revenue is understated.
- If you want the client to see the effect, show it as information — a separate, clearly labelled line that says "withheld by the payer" and "you receive after withholding". It is not part of the tax computation on the document and it does not change the total due.
- Keep the withholding certificate or evidence the payer gives you. That is what substantiates the credit against your own tax.
The Cambodia Invoice Generator handles this exactly as described: it shows a withholding block that is explicitly labelled informational, computes the net you will receive, and states on the document that the payer withholds the amount and that it does not reduce the total due. It never quietly reduces the invoice.
Why a client might withhold when you think they should not
- The recipient's status. Services to a resident individual attract 15%; a payment to a resident company for the same service may not be subject to the same withholding. The client is applying their own reading of your status.
- Residence. If you are invoicing from outside Cambodia, or from a company registered abroad, the client may be applying the 14% non-resident rate — or 10% under a treaty.
- The nature of the payment. Rent, royalties and interest have their own rates. A payment that mixes a service fee with a royalty element can be split, with different rates on each part.
- Timing. The withholding obligation arises when the payment is made, not when the invoice is issued. A client paying late withholds at the time of payment.
Practical checklist for a service business
- Ask before you invoice. "Will you withhold tax on this payment, and at what rate?" It is a normal question in Cambodia and it avoids the 850 surprise.
- Invoice the full amount, with any withholding shown as information only.
- Collect the withholding evidence — a certificate or a clear statement of the amount withheld and the period.
- Reconcile the withheld amounts against your own tax position at filing time.
- For cross-border work, confirm residency and any applicable treaty before quoting. The difference between 14% and 10% is material on a large contract.
Common questions
Does withholding apply to VAT? No. Withholding tax and VAT are separate. VAT is charged on the invoice; withholding is deducted from the payment.
Does the withholding rate depend on the invoice amount? No. The rates above are flat, applied to the payment.
Can the client decide not to withhold? The withholding obligation sits with the payer. If it applies, it applies — and a payer who fails to withhold can be assessed for it themselves. Do not assume a client's decision to pay gross means the tax is not due.
Is withholding the same as the tax on my profit? No. It is a prepayment mechanism. The amount withheld is credited against your final liability, not an additional tax.
What if I never receive the withholding evidence? Ask for it in writing. Without evidence of the amount withheld, you may be assessed on the full amount, which means paying the difference twice before recovering it.
Where to check the current position
Rates and treatment are set by the General Department of Taxation and can change. Confirm your specific case with the GDT or a qualified adviser — particularly for non-resident payments, where treaty status changes the answer.
The Cambodia Invoice Generator prints the informational withholding block described above and leaves the invoice total untouched. If you invoice continuously and need withholding tracked across customers and periods, that is a different job from producing one correct document — khmerinvoice.com is the product for it.
This article explains the mechanism; it is not tax advice.