RHTLaw: Law on Business and Investment in Cambodia (Part 3)

Here in Part 3, we will cover Cambodian law on business and investment with a focus on incentives, advantages and promoted business sectors in Cambodia. It will also touch on how these can be beneficial for investors and businesses operating in the Kingdom.

In the previous article from legal experts RHTLaw, we covered information regarding investment law in Cambodia, which you can view here. This included information on different types of investment, applications for investment, requirements, regulations, the latest laws and much more.

For more information on the latest laws and regulations for businesses, you can contact RHTLaw directly here. Alternatively, for further advisory information regarding anything involving business within Cambodia, you can contact the in-market experts Aquarii here.

What are the promoted sectors of investment in Cambodia?

There are multiple promoted sectors regarding Investment in Cambodia, which are sometimes known as areas of interest for investment in the Kingdom.

These include the various sectors that have been designated by the Royal Government of Cambodia as the priorities sector through the grant of investment incentives.

These incentives are an attempt to attract foreign direct investment to the Kingdom. However, even though Cambodia has committed to a liberal investment regime, some sectors are prohibited from investing in Cambodia due to its impact to society and environmental well-being. Read below to find out more about the promoted investment sectors in Cambodia.

What are the priority sectors for FDI?

The sectors that receive investment incentives under the Investment Law can be considered as the prioritized sector. However, in general terms, Cambodia Industrial Development Policy 2015-2025 pointed out some main sectors as the following:

• New industries with the capability of breaking into new markets, with high value-added products, creative and highly competitive such as machinery assembly, mechanic/electronic equipment assembly, means of transport assembly, and natural resource processing.
• SMEs in all sectors especially those involved in drugs and medical equipment production, construction materials, packaging equipment for export, furniture manufacturing, industrial equipment, etc.
• Agro-industrial production for export and domestic markets.
• Various types of supporting industries for the agriculture, tourism, and textile sectors as well as for industries serving regional production chains with either global markets or global value chains.
• Industrials serving regional production lines and that future strategic importance such as ICT, energy, heavy industries, cultural/historical/traditional handicraft, and green technology.

 Are there any limitations on Foreign Investment in Cambodia?

Foreign investors are not discriminated against in any way, except in the case of investment activities on the Negative List and in respect of ownership of land. However, Foreign Investors are permitted to hold land through a long-term lease including land concessions. Under the Cambodian law on business and investment, pursuant to relevant Laws and Sub-Decrees, prohibitions on investment activities include:

• Production/processing of psychotropic substances and narcotic substances
• Production of poisonous chemicals, agriculture pesticides and other goods by using chemical substances
• Processing and production of electric power by using any waste imported from a foreign country
• Forestry exploitation business

 Which investment sectors enjoy incentives in Cambodia?

The following sectors are currently subject to incentive under Cambodian law on business and investment:

• High-tech industries involving innovation or research anddevelopment;
• Innovative or highly competitive new industries or manufacturing with high added value;
• Industries supplying regional and global production chains;
• Industries supporting agriculture, tourism, manufacturing, regional and global production chains and supply chains
• Electrical and electronic industries;
• Spare parts, assembly, and installation industries;
• Mechanical and machinery industries;
• Agriculture, agro-industry, agro-processing industry, and food processing industries serving the domestic market or export;
• Small and medium-sized enterprises in priority sectors and small and medium-sized enterprise cluster development, industrial parks, and science, technology, and innovation parks;
• Tourism and tourism-related activities;
• Special economic zones;
• Digital industries;
• Education, vocational training, and productivity promotion;
• Health;
• Physical infrastructure;
• Logistics;
• Environmental management and protection, and biodiversity conservation and the circular economy;
• Green energy, technology contributing to climate change adaptation and mitigation;
• Other sectors and investment activities not listed by this Law deemed by the Royal Government of Cambodia to have the potential for socio-economic development.

Which investment sectors do not enjoy incentives under Cambodia law on business and investment?

The following sectors do not have incentives under the Cambodian law on business and investment

• All types of Trading Activities,
• All Forms of Transportation Service,
• Duty-Free shops,
• Restaurant, Karaoke, Bar and
• Massage Parlors outside the premises of international standard hotels,
• Shopping Mall,
• News and Media-related Activities,
• Retail and Wholesale, and
• Service and business in currency and finance,
• Professional Services

What are the other types of investment incentives in Cambodia?

In addition to the basic incentives under the Cambodian law on business and investment, such as tax exemption and/or special depreciation, new Laws on Investment also offers additional incentives to QIPs. Those additional incentives include the following:

(1)- Value-added tax exemption for the purchase of locally made Production Inputs for the implementation of the QIP, and

(2)- The deduction of 150 % from the tax base for the activities such as research, development, and innovation, human resource development, construction of accommodation, food courts or canteens that gives more benefits to the employees/workers, and the upgrade of machinery for the production line, and other provision of welfare for Cambodian workers/employees. Moreover, the potential sectors which are determined by the Law on Financial Management may be entitled to some other specific incentives.

What are the rights that investor pursuant to investment law receive?

An investor pursuant to the investment law is entitled to the rights as the following:

• The right to hire foreign employees to manage or operate an Investment Project based on the scope provided by the investment law and other law and regulations.
• The right to obtain a temporary long-term stay permit for oneself, spouse and children who are minors.
• The right to request temporary long-term stay permits for foreign employees and their spouses and children who are minors.
• The right to obtain a work permit and employment book for oneself and foreign employees.

This is the complete entitlement under Cambodia law on business and investment.

Is there any control enacted over Foreign Companies in Cambodia?

Foreign and local companies are subjected to the same provisions under Cambodian law in general, and investment law in particular except in the area of land ownership. Accordingly, the foreign company is not subjected to any specific law which has the intention to govern their activities. Cambodian law on investment has stated clearly the principle of non-discrimination between Cambodian and foreign investors.

 Are they any control on Foreign Exchange in Cambodia?

Cambodian law on investment provides a friendly provision concerning foreign exchange. Foreign currency purchasing and repatriation to settle their financial obligation in connection to their investment through the authorized intermediary banks are freely allowed in accordance with Cambodian law on business and investment.

When can an investment project be nullified?

Yes. Investment projects must be careful to follow guidelines and regulations in order to not be nullified. For more information on how best to meet all regulations, contact a member of the Aquarii team today. The basic information for reasons why an investment project could be nullified in Cambodia are as follows:

• Inability to continue to implement the QIP,
• Dissolution of the legal entity implementing the QIP,
• Failure to implement the obligations set out in the law and regulation in force,
• At the request of the relevant ministries/institutions for the Investment Project which adversely affects the environment or national security or public interests or people’s welfare or at the request of the Investor.

How do I find out more information on Cambodian law on business and investment?

You can find out more information. onCambodian law on business and investment in the previous two in-depth posts brought to you by AquariiBD in partnership with RHTLaw in our library of laws section. Alternatively, you can get in contact with us today for specific queries, we look forward to hearing from you!