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Cambodia: Independent contractor or employee


Clint O’Connell

When hiring labour in Cambodia, it is essential to know what kind of relationship exists from a tax perspective. Importantly, the General Department of Taxation (GDT) will not base its view simply on the contract or agreement in place, but on the actual facts of the matter. The method and rate of taxation varies for employees and independent contractors – employees will be subject to Tax on Salary (TOS), whereas contractor's fees will be subject to withholding tax.

Tax on Salary

A resident will be subject to monthly deductions of tax withheld from salaries received from both Cambodian and foreign sources (in practice only Cambodian sourced salary can be declared). TOS rates are progressive, ending with a top marginal rate of 20% of the taxable base (see Table 1).

Table 1: Tax on Salary rates

Taxable salary (per month)

Progressive tax rate

Khmer Riel

Approx. USD (Translated at KHR4,000:US$1)

From 0





From 500,001





From 1,250,001





From 8,500,001





Over 12,500,001



Withholding tax

A Cambodian registered entity will need to withhold either 15% or 14% withholding tax on payments made to resident or non-resident contractors respectively. There is an exemption for withholding tax payable to a resident contractor in the event that they provide a valid VAT invoice for their services rendered.

Employee or contractor?

Under Cambodia's Law on Taxation (LOT), there is no clear guidance on this matter. Thus, for tax purposes, as per Prakas No. 1173, an employer-employee relationship may be decided on the same basis of authority and subordination that is stated in the Cambodian Labour Law. Therefore, both by law and in practice, if a person is deemed to be an employee per the Labour Law, then it shall follow that the person shall also be an employee for tax purposes. The criteria listed in Section 1.2 of Prakas No. 1173 is mostly in line with the Labour Law criteria as follows:

"Compared with professional and other activities, employment activity is characterised by the state of subordination to the employer of the employee in fulfilling their activities. Shall be considered an employee and subject to the TOS a physical person who meets two of the following conditions:

  • The physical person is not a risk for non-payment of employment services rendered as long as he appears for work at a designated place and performs the tasks which are part of a general employment agreement whether written or not;

  • The physical person is not able to fix the time and place for rendering employment services;

  • The physical person is not required to have a significant investment in the equipment necessary to render employment services;

  • The physical person does not supply services to several recipients simultaneously."

When at least two of the four criteria are met by a physical person, they are then deemed to be an employee and their remuneration is subject to TOS.

Per the LOT, it is the duty of the employer to withhold the TOS. The definition of the term employer states that it is "including any government institution, any resident legal person, any resident pass-through, any permanent establishment in the Kingdom of Cambodia, any non-profit organisation, or any resident physical person carrying on a business". The term employee is defined as "any physical person receiving salary from their employment activity including any responsible officer or director of an enterprise, any governmental officer, any elected official except for members of parliament and senate".

Therefore, though an independent contractor is similar to an employee in that they are contracted to perform work for a person or entity, the independent contractor remains autonomous from the employer. However, the distinction between these two types of labour relationships can be difficult to determine under Cambodian law as no specific provisions exist regarding independent contractors.

Where a physical person is engaged to perform an employment activity on an as-needed basis, including temporary work such as for a particular campaign or a one-off event, there is no specific guidance for these instances in the LOT. In our opinion, there is little basis to treat part-time and temporary employees as independent contractors. Using the definition of employee above, the relationship between the employer and part-time employee is more likely to be considered an employer-employee relationship, as the part-time employee performs the work under "the direction and control" of the employer. It should be noted that the law does not specify what constitutes "direction and control".

In addition, assuming the worker does not make any substantial investment in buying any equipment required to perform the work, and that they are not at risk of non-payment if they go to work at the time and place determined by the employer, then based on Prakas No. 1173, an employer-employee relationship would be considered to exist.

The treatment of an employee as opposed to a contractor is not only important from a tax perspective. An employee has significant minimum rights as expressed in the Cambodian Labour Law with respect to leave requirements, severance pay and damages, whereas a contractor's rights are mainly expressed in the underlying contract agreement.

Consequently it is important that before entering into any document with an employee or contractor that their status is clearly spelt out taking into account the criteria outlined above.

Clint O'Connell (


Tel: +855 23 964 430


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