Tax Update: Tax Relief Related to the Obligations of Private Water Operators

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On 1 July 2025, the Ministry of Economy and Finance issued Letter No. 6816 MEF.LS, granting tax relief to private water operators classified as small and medium taxpayers. This initiative is designed to encourage private sector investment in Cambodia’s water infrastructure, particularly in rural and underserved areas, where infrastructure gaps persist. The tax relief applies prospectively, meaning it does not cover taxes or penalties previously paid.

The tax relief includes the following key provisions:

• Exemption from income tax, prepayment of income tax, and the 1% minimum tax, effective from the date the operator first realizes income.
• 0% VAT on the domestic supply of goods and services used during the construction phase of clean water infrastructure. This includes chemicals and transportation services required for the production and distribution of clean water.

To qualify for these incentives, private water operators must implement new or expansion projects between 2025 and 2030, which must be recognized by the Ministry of Industry, Science, Technology & Innovation (MISTI) and registered for tax purposes with the General Department of Taxation (GDT). Additionally, operators must meet the following requirements:

• Submit a list of domestic suppliers of goods and services to GDT;
• Ensure their staff receive professional training in clean water operations, as recognized by MISTI;
• Develop and implement a water quality management plan that adheres to MISTI’s technical standards.

Failure to comply with these requirements may lead to tax reassessments, penalties, and other legal consequences under Cambodian tax law.

Background

Access to clean and affordable water remains a key national priority for Cambodia, particularly in rural and underserved regions. The private sector, especially small and medium-sized water operators, plays a crucial role in extending clean water infrastructure across the country. However, high startup and operational costs, coupled with technical compliance demands, have created barriers to entry for many prospective operators.

To address this challenge, the government has introduced tax relief to encourage greater private investment in clean water supply services. This initiative supports Cambodia’s efforts to achieve Sustainable Development Goal (“SDG”) 6, particularly:

• Target 6.1: Universal and equitable access to safe and affordable drinking water;
• Target 6.3: Improved water quality and pollution reduction;
• Target 6.b: Enhanced community participation in water management.

These incentives are in line with Cambodia’s Pentagonal Strategy Phase I, which prioritizes the water sector as one of its key areas for growth and sustainability. The strategy aims to ensure 100% access to clean water by 2030, reflecting the government’s long-term commitment to enhancing water infrastructure and providing reliable services to all Cambodians. In this context, the tax incentives introduced in Letter No. 6816 MEF.LS is a direct implementation of the Pentagonal Strategy, encouraging private investment and expanding access to clean water nationwide.

Conclusion

The tax relief provided through Letter No. 6816 MEF.LS is a crucial step toward realizing 100% clean water access by 2030. This policy promotes private sector investment in water infrastructure, supports public-private partnerships, and accelerates the delivery of clean water, ultimately improving the lives of Cambodians and contributing to the nation’s sustainable development.