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Tax on Salary-Example 1

Example 1-Tax on Salary ( ToS)

Mr. B is Khmer and he has the basic salary of $2,000 per month. For June 2018, he worked extra hours (OT) and got $200. He has two children under 14 year old and wife is housewife.

Residents are taxed at progressive rates as follows:

Salary Tax Calculation Base Range Tax Rate Tax on Salary
0-1,200 ,000 0% 0
1,200 ,001 -2,000 ,000 5% Salary Tax Calculation Base  x 5% – 60,000
2,000 ,001 -8,500,000 10% Salary Tax Calculation Base  x 10% – 160,000
8,500,001 -12 ,500,000 15% Salary Tax Calculation Base  x 15% – 585,000
12 ,500,001 and over 20% Salary Tax Calculation Base  x 20% – 1,210,000

Assume monthly exchange rates from General Department of Taxation (GDT) as follows:

  • Salary rate @ 1 USD = 4,000 KHR
  • Average rate @ 1 USD = 4,100 KHR

Required:

  1. Calculate tax on salary ( KHR amount) for Mr. B
  2. Make journal entry (accounting record) as USD amount if tax on salary is withheld from Mr.B

Solution

1.Tax on Salary

Salary Tax Base = ($2,000+$200) x 4,000 KHR – 2 x 150,000 KHR – 1 x 150,000 KHR = 8,350,000 KHR

Because 8,350,000 KHR is between 2,000 ,001 -8,500,000, so it is rate @ 10% , so tax on salary = Salary Tax Calculation Base  x 10% – 160,000.

Tax on Salary = 8,350,000 KHR x 10% – 160,000 KHR= 675,000 KHR 

2.Journal Entry

675,000 KHR/4,000 = 168,75 $

His salary = $2,000 => amount he received 2,031.25 $

Dr. Salary expense……………..2,000$

Cr. Cash………………………………………2,031.25 $

Cr. Salary Tax Payable……………………168.75 $


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