Donaco Delays Scheme as Cambodian 10% VAT Gaming Tax Looms
Donaco International Limited has postponed its Scheme of Arrangement timetable amid extended legal and valuation reviews, while revealing a new 10% VAT gaming tax liability in Cambodia effective from January 2025.
- Scheme timetable delayed due to extended expert valuation and legal analysis
- Cambodian 10% VAT on gross gaming revenue now legally applicable from 2025
- Estimated additional tax for Q3 FY2025 around A$666,000
- No formal Cambodian tax assessment issued yet; ongoing government engagement
- Potential double taxation concerns with existing 7% gaming tax remain unresolved
Scheme Delay Reflects Complex Cross-Border Review
Donaco International Limited has announced a delay in the dispatch of its Scheme booklet and the scheduling of its Scheme meeting, originally planned for early May and June respectively. The postponement stems from slower-than-expected input returns from third-party valuers and a more detailed legal review of change of control provisions under Cambodian and Vietnamese law. Compounding these delays were recent holiday periods across Australia, Vietnam, and Cambodia, which have collectively pushed back the Independent Expert’s report completion and subsequent regulatory filings.
New Cambodian Gaming Tax Liability Emerges
In a significant update, Donaco has clarified its tax position in Cambodia following legal advice on Prakas No. 1080, a ministerial proclamation that subjects gross gaming revenue (GGR) to a 10% Value Added Tax (VAT), alongside other tax obligations. Although the Cambodian government had deferred enforcement of these taxes until the end of 2024, recent communications indicate that the VAT and related taxes have been effective from 1 January 2025. Donaco estimates that this new tax could add approximately A$666,000 in liabilities for the third quarter of fiscal 2025.
Navigating Double Taxation and Regulatory Uncertainty
Donaco currently pays a mandatory 7% contribution on GGR to the Cambodian Commercial Gambling Management Commission (CGMC). The newly imposed 10% VAT is not creditable against this existing tax, raising concerns about double taxation within the industry. Despite ongoing engagement with Cambodian tax authorities and government bodies, Donaco has yet to receive a formal tax assessment under Prakas No. 1080. The company continues to advocate for clarity and potential relief from overlapping tax burdens.
Implications for Donaco and Investors
This dual update on the Scheme timetable and tax position introduces fresh uncertainty for Donaco’s shareholders and potential acquirers. The delay in the Scheme process could affect deal timing and investor sentiment, while the crystallisation of a new tax liability may impact Donaco’s financial outlook. Market participants will be watching closely for further developments, including the finalisation of the Independent Expert’s report, court hearing dates, and any formal Cambodian tax rulings.
Bottom Line?
Donaco’s path forward hinges on resolving tax uncertainties and resetting its Scheme timetable, with material implications for valuation and investor confidence.
Questions in the middle?
- Will Cambodian authorities issue formal tax assessments under Prakas No. 1080 soon?
- How might the new 10% VAT affect Donaco’s profitability and cash flow going forward?
- What revised timeline can investors expect for the Scheme of Arrangement completion?
