Govt lowers withholding tax on interest on MFI loans

According the a new prakas signed by Finance Minister on October 27, the government has decided to lower withholding tax on interest on loans that microfinance institutions (MFIs) acquired from abroad from 14% to 10%, the move it claims will keep the sector sustainable. The reduction was implemented from the signing date and will last until the end of 2018. According to the decree, in order to receive the tax reduction MFIs need to have supporting documents, such as loan agreements properly legally verified by both parties, documents on the actual transfer of capital and proper accounting records showing that the loan has been received. Yun Sovanna, general secretary of Cambodia Microfinance Association (CMA), said the government intervention will help MFIs to lower expenses by reducing the costs associated with obtaining funds, a main factor that has forced operators to issue high interest rates. Total debt among top seven MFIs amounts to $1.33bn as of last year, of which $1.09bn is owed to overseas lenders. (Source: Phnom Penh Post)