August 25, 2011

Taxes set to reduce transactions


THE pending property tax could lead to declining residential property transactions in the Kingdom as residents fear rising house prices.

Although the property sector is currently stable after the country’s recovery from the financial crisis, it is expected to stall once the prakas is implemented, VMC Property Company General Manager Dit Channa said.

“Many residents are not fully aware of the regulations relating to tax collection, which could lead to hesitation among purchasers, temporarily dampening the market.”

The taxation will also put pressure on multiple-property owners, especially residential landlords, who may reconsider purchasing further properties, potentially reducing transactions, she said.

“Many owners have already started selling property, but buyers are questioning them over the implications of the proposed tax.”

She added that the government should suspend the implementation of the edict for a year to allow for further recovery in the sector.

Although the prakas is set to come into play next month, some residents claim to have not received a tax form, or any relevant information.

“I know very little about the property tax, so I’m hesitant about buying property in the future, because of the additional burdens I might face,” said Phnom Penh-based car broker Kim Sarin.

“If the taxes are used to develop the country, citizens should abide, however, many people are unlikely to pay, due to poverty,” he added.

Heng Ponreay, assistant director of Company Properties Limited believes that once residents adapt to the new laws, the additional income will be beneficial for the Kingdom.

“People will face difficulties in the short-term, but it will contribute to the development of Cambodia, attracting more foreign investment in the future,” he said.

The property tax will initially focus on the capital’s properties, comprising an annual payment calculated at 0.1 percent of the value of the property, while houses worth less than $25,000 will be exempt from the law, according to the prakas.

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