Here in part 2, we focus on the current law on business and investment in Cambodia, including applications, processes, legal requirements and more, courtesy of legal experts RHTLaw.
In the previous article, we covered information regarding business setup in Cambodia, which you can view here. This included information on types of companies which can be established, representatives offices, VAT & Patents, foreign ownerships, disputes and 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 is the current law on business and investment in Cambodia?
Cambodia has made a significant improvement in its regulatory environment in the area of investment. In late 2022, the new Law on Investment was promulgated bringing a more investor-friendly regulation into place. This new law reduces the complexity of investment project applications by reducing the period of issuance of a Certificate of Registration to 20 days, creating the online application, and so on.
Upon receiving the Certificate of Registration from CDC as a Qualified Investment Project (QIP), the investor may receive up to 9 years of tax holiday along with 6 more years gradual period, or the special depreciation. In addition to these incentives, the investor will also receive full import duties, export tax exceptions, and some other incentives such as the use of foreign labor, and so on. Moreover, investment projects in Special Economic Zones (SEZ) are also entitled to the same incentives as QIPs on customs duty and tax and other special benefits. The following are the questions that are commonly asked when it comes to investment in Cambodia.
What is a Qualified Investment Project in Cambodia?
Under new law on business and investment in Cambodia, a QIP is defined as an investment project which has received a registration certificate from the Council for the Development of Cambodia (CDC) or a Municipal-Provincial Investment Sub-Committee. QIP is issued to a project, not to an investor or investing enterprise. QIP is entitled to certain investment incentives, one of which is tax exemption or special depreciation.
What are the dispute settlement mechanisms for foreign investments?
The law on business and investment in Cambodia, which is handled by the royal government, has dispute settlement procedures for disputes between investors or investors related to the investment project except for land-related disputes. 30 (thirty) days upon the written request from the investors to CDC or Municipal-Provincial Investment Sub-committees, either authority shall arrange the reconciliation for the investors and the relevant stakeholders in order to find a suitable solution in accordance with the existing procedure. In the event that the reconciliation is not successful, the dispute shall be settled by national or international arbitration with the consents of the dispute parties, or the relevant courts of the Kingdom of Cambodia.
Are there any taxes in Cambodia levied on profits?
Yes, there are tax incentives in Cambodia for qualifying businesses. A QIP (or Qualified Investment Project) is entitled to exemption from tax on profit imposed under the Law on Taxation by obtaining a profit tax exemption for a period of time. Tax holiday period may be varied depending on the size of the investment capital and is available for up to a maximum of 9 years.
After the expiration of the exception period, the QIPs are entitled to a gradual phase of the percentage of Tax on Income for the next 6 (six) years from 20%, 50%, and 75% increase every two years respectively in accordance with the new investment law. This tax exemption or tax holiday consists of a Trigger Period (commencing from when the company first gains its income or profit, which is sooner) plus a Priority Period (varies on the size of investment capital which is determined by the Law on Financial Management) and 3 years automatic exemption. These are the current law on business and investment in Cambodia.
Is profit tax exemption the only incentive option in law on business and investment in Cambodia?
Special depreciation is enshrined in law in Cambodia. Under Cambodian investment law, it provides a second option to investment incentive, which is the deduction of capital expenditure via special depreciation. It consists of the eligibility of deducting up to 200% of specific expenses incurred for up to 9 years. However, the detailed sector, specific expense, and the deduction period shall be determined by the Law on Financial Management and/or sub-degree.
Which agencies are involved in administering investment applications in Cambodia?
Council for the Development of Cambodia (CDC) Cambodian Law on Investment established the Council for the Development of Cambodia as an executive body acting as the “Etat-Major” and One Stop Service of the Royal Government of Cambodia to oversee and manage the private investment and special economic zone. Moreover, in order to enhance the effectiveness of public service rendered to the investor, the Law on investment also creates Municipal-Provincial Investment Sub-Committees which the power of the CDC is delegated to administer investment applications via the sub-degree.
Who has the authority to grant investment incentives in Cambodia?
Below is all of the regulatory authorities in Cambodia that grant or are involved with investment incentives under the law on business and investment in Cambodia.
- The Cambodian Investment Board and Cambodian Special Economic Zone Board
The Cambodian Investment Board (CIB) and the Cambodian Special Economic Zone Board (CSEZB) is the CDC’s operational arms for private sector investment. CIB deals with investment projects out of special economic zones (SEZs) and CSEZB takes charge of the investment projects in SEZs. They review investment applications and grant incentives to investment projects meeting the requirements set forth in the Investment Law and regulations, which streamlined the foreign investment regime and provided generous and competitive incentives for direct private sector investment.
What is the timetable for processing applications for Investment in Cambodia?
This depends on the timelines of Investment Application. Upon the receipt of the investment project applications either by hand or online, CDC shall review and make the decision on the application through the One Stop Service mechanism. The new Law on investment eliminated the a complicated procedure such as the issuance of Conditional Registration Certificate for example.
The new law requires CDC to decide on the application within 20 working days upon receipt of such an application. If the application satisfied the conditions, CDC shall issue the Registration Certificate (RC) within that period. However, even the investment project that receives RC can be implemented automatically, which does not exempt that project from receiving permits or approval from the relevant ministries or institutions as required by the law and regulations.
Are there any special services for expediting applications?
The CDC offers a “One-Stop-Service” for investment in Cambodia. Through its executive arm, the Cambodia Investment Board (CIB), CDC is responsible for the processing of applications for investment projects. As such, the government is fully committed to expediting applications for new investment projects.
What are the procedures for investment applications?
The procedure of investment applications under the new law is simplified as the following:
- The Investor must submit the investment project application directly to CDC or Provincial/Municipal Investment Sub-committee (PMIS) or via an online portal.
- The investment application shall be reviewed and decided via a One-Stop-Service mechanism which is conducted by the representatives of the ministries or institutions seconded to the CDC according to the appointment and assignment of authority from the head of relevant ministries and institutions under the coordination of the CDC.
- CDC shall issue the Certificate of Registration within 20 working days of the receipt of the application. The date of issuance of the CR shall be the commencement date of the QIP. However, CR does not exempt that project from receiving permits or approval from the relevant ministries or institutions as required by the law and regulations.
Who deals with the establishment of business in Cambodia?
The establishment of a business in Cambodia is governed by the Law on Commercial Enterprise, Law on Commercial Rules, and Register and regulated by the Ministry of Commerce. For more information on law on business and investment in Cambodia contact us today! Or find out more about RHTLaw here.