Cambodian Government Imposes $16.6-Million Additional Non-Gaming Revenue Tax to NagaCorp

Casino operator NagaCorp Ltd may be forced to pay additional non-gaming taxes estimated to $16.6 million in 2017. The amount corresponds to the added tax obligation the company applied in 2016 after its inaugural Phnom Penh hotel and casino complex’s audit was carried out.

The additional tax bill measure that is to be imposed on the non-gaming operations of NagaWorld by the Government was announced by an official representative of the Ministry of Economy and Finance. The Deputy Director-General of the Ministry’s Finance Industry Department Ros Phirun explained that the massive tax payment will be charged on the company and further revealed that the final amount of the payment is to be negotiated. Last year, the non-gaming revenue of NagaCorp amounted to $30.7 million, while the reported non-gaming revenue value was $14.8 million over the first half of 2017.

According to Mr. Phirun, there is no more excuse for such a profitable company to pay non-gaming taxes, so NagaWorld will be made to pay such a tax amount on an annual basis from now on.

A few days ago, the parent company of the gambling operator – NagaCorp – revealed a massive net profit estimated to $150.6 million. The company explained that the amount was generated by its operations in Cambodia over the first half of the year and represented a 20.3% increase from the amount generated over the same period a year earlier.

The NagaWorld brand suffered a Government audit in 2016, after local authorities found that there were illogical lack of compatibility in its financial reports from 2014 and 2015. According to auditors’ findings, the company had previously claimed non-gaming revenue taxes exemption. At that time, the company cited an agreement inked back in 2006, under which it got a 7-year grace period for completion of its Phnom Penh-located flagship hotel and casino complex’s construction. The term of the agreement, however, ended in 2013.

So, after the audit of NagaWorld’s financial reports of 2014 and 2015, the Government made a decision to impose a tax payment of $16.6 million on the company’s non-gaming revenue, or said otherwise, revenue generated by the hotel and restaurants at the brand’s Phnom Penh complex.

Over the past two decades, NagaCorp has taken advantage of a special tax agreement with the Government of Cambodia. Apart from the agreement, the company’s 41-year gambling monopoly over a 200-kilometre area of Phnom Penh also played a crucial role in the increase in NagaCorp’s profits. Also, under its Government agreement, the company has been obliged to pay a single gaming and non-gaming activities tax on a monthly basis, instead being imposed the 20% corporate profit tax of the country.

The parent company of NagaWorld, however, does not pay any taxes either in Hong Kong or in Cayman Islands. Instead, it has paid an effective tax rate amounting to less than 2% to the Government of Cambodia since 2003.

The company’s executives have still not commented on the tax payment. At the beginning of the week, NagaCorp revealed that it was not aware of any additional non-gaming revenue tax obligations for 2017. Previously, it has described the tax settlement of $16.6 million a one-off fee.

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