Market Info

A curated assessment and must-know facts of the business and investment climate in Cambodia
FIND:

FAQs: Geography and Demography

Q: How many provinces are in Cambodia?

A: There are 25 provinces.

Q: What is the capital city of Cambodia?

A: Phnom Penh is the capital and business central hub of Cambodia.

Q: What is the population size of Cambodia?

A: Nearly 17 million people (16.83 million in January 2021).

Q: What is the official language in Cambodia?

A: Khmer language

Q: How many languages are generally spoken in Cambodia?

A: Khmer is native language; English, French and Chinese are generally and business spoken languages.

Q: How many seasons are there in Cambodia?

A: Rainy season and Dry season.

Q: What is the official religion of Cambodia?

A: Buddhism.

Q: What is the climate condition in Cambodia?

A: Cambodia’s climate is tropical and has a high temperature that is influenced by the monsoon.

Q: Describe Cambodia’s geographical landscape

A: Cambodia is sandwiched between two larger neighbours – Thailand to the north and west along an 817 km border, and Vietnam to the east and south-east along a 1,158 km border. It also shares a 555 km long border with Laos to its north. Cambodia’s geography consists of several mountain ranges and vast swathes of wetlands and agricultural land. Its agricultural land has been assessed to be one of the most fertile in the region. 

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FAQs: Economy and Commerce

Economy Outlook

Q: What is Cambodia’s GDP average annual growth rate?

A: According to the World Bank in Oct 2021, the economy of Cambodia has sustained an average annual growth rate of 7.7% from 1998 to 2019

Q: What is the size of Cambodia’s nominal GDP?

A: The Kingdom’s GDP in 2019 reached an all-time high of USD 27.089 billion.

Q: What is Cambodia’s GDP per capita?

A: In 2019, GDP per capita also reached a high of USD 1,700. According to the National Bank of Cambodia, GDP per capita will be upgraded to USD 1,842 in 2022, a 6.4% increase compared to 2021, $1,771, according to the National Bank of Cambodia.

Q: What are the sectoral contributions to GDP in Cambodia?

A: The sectoral contribution to GDP is agriculture, garment, construction, trade, real estate and finance, hotel and restaurant and garment.

Q: What has been the projection of economic growth of Cambodia by the Asian Development Bank, World Bank and Cambodia’s Ministry of Economy and Finance?

A: The economy was significantly impacted by the COVID-19 pandemic in 2020; economic growth fell to -3.1% but according to the Asian Development Bank (ADB), the World Bank (WB) and the Ministry of Economy and Finance (MEF), Cambodia’s economic growth for 2021 rebounded into positive territory, with projections between 2.2% to 3%. 2022 economic growth is projected to be between 4.5% to 5.5%.

Q: How much are Cambodia’s total Exports? What is the total value of Cambodia’s exports?

A: Cambodia is an active trading country and recorded a total export of USD 17.2 billion in 2020, an increase of 16.72% from 2019. 

Q: Which countries are Cambodia’s main export destinations?

A: Main export partners are China, Germany, Japan, the United Kingdom and the United States

Q: What are the main export products from Cambodia?

A: The country’s exports, composed mainly of garments and agricultural products, have increased steadily since the 1990s and account for more than 60% of the GDP.

Q: How many airports are in Cambodia?

A: There are three international airports in Cambodia.

Q: How many deep seaports are in Cambodia?

A: There is a deep-sea in Sihanoukville.

Q: Which are the tariff exemption program and free trade agreements in Cambodia? Does Cambodia enjoy tariff exemption from other countries? Does Cambodia have FTA with other countries?

A: Businesses and investors have yet to fully optimize the tariff exemption/preference schemes that the developing country enjoys from the European Union [Everything-But-Arms (EBA)] and the US [Generalized Scheme of Preferences Plus (GSP+)], and the Free Trade Agreements (FTA) with China and South Korea.

Q: What are the free trade agreements between Cambodia and other countries?

A: Businesses and investors have yet to fully optimize the tariff exemption/preference schemes that the developing country enjoys from the European Union [Everything-But-Arms (EBA)] and the US [Generalized Scheme of Preferences Plus (GSP+)], and the Free Trade Agreements (FTA) with China and South Korea.

Q: What is the total size of Cambodia’s public debt?

A: Cambodia’s debt-to-GDP ratio reached 33.6 percent of GDP (US$8.8 billion in outstanding debt) in 2020 and is projected to increase to 35.2 percent of GDP (US$9.6 billion) in 2021. 

Q: What is Cambodia’s debt to GDP ratio?

A: Cambodia’s debt-to-GDP ratio reached 33.6 percent of GDP (US$8.8 billion in outstanding debt) in 2020 and is projected to increase to 35.2 percent of GDP (US$9.6 billion) in 2021.

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Q: What constitute trade balance of Cambodia?

A: Trade balance is indicated in this graph

Q: What are Cambodia’s main import and export products?

A: The main import: Textiles, construction materials, steel, and cement while the main export: clothing, footwear and travel accessories.

Q: Which countries are Cambodia biggest trade partners in Asia?

A: Biggest trade partners in Asia are Japan, China, Republic of Korea, India, Thailand and Vietnam.

Q: Which countries are Cambodia biggest trade partners in Europe?

A: The biggest trade partners in Europe is UK, EU and EAEU.

Q: Which country is the biggest export market for Cambodia?

A: Its top export markets in 2019 were the US, EU, Japan, China, UK, Canada, Thailand, Vietnam and Singapore, whereas its top import partners were China, Thailand, Vietnam, Japan, EU, Singapore and the US.

Q: How many bilateral / free trade agreements have Cambodia signed with international counterparts?

A: Not many may be aware that an agreement with the European Patent Organization came into force at the beginning of 2018, providing validation of EU patents in Cambodia and signatory states, or essentially protecting the innovation of manufactured products by EU companies in Cambodia for the Asian market. Moreover, given the tariff exemption/preference schemes under the EBA and GSP that the EU and the US respectively accord to the Kingdom, the Free Trade Agreements (FTA) that Cambodia signed with China (July 2021) and South Korea (Oct 2021), as well as the Regional Comprehensive Economic Partnership (RCEP, Nov 2020), businesses and investors should leverage on the comparative advantage of setting up their manufacturing or assembly facilities in Cambodia for export to these overseas markets.

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Q: What are the main reasons to invest in Cambodia?

A: The attraction of Cambodia to foreign businesses and investors that realized its potential and opportunities were and continue to be attracted by its business-friendly open economy, low labour, and production costs, and its strategic location and close proximity to production facilities in Thailand and Vietnam as well as favourable access to the Chinese, US, EU, Japan, and South Korea markets.

Q: What is the percentage of ownership a foreign investor have for a business in Cambodia?

A: Cambodia’s investment laws allow 100% foreign ownership of companies in most sectors, and provision for the protection of investments from regulated prices and nationalization. 

Q: How many Specialized Economic Zone (SEZ) are in Cambodia?

A: There are 54 SEZs approved, 33 SEZs by Sub Decree, 26 SEZs are operational, 18 SEZs have special admin office, 21 SEZs are seeking funds, 6 SEZs are under construction.

Q: Which countries are Cambodia’s top investment partners?

A: Cambodia’s top investment partners over the past few years have been China, Vietnam, South Korea, Japan, Singapore, Malaysia, Thailand, the UK, Canada, and the US.

Q: Do international businesses need a local partner to start a company / business in Cambodia?

A: Cambodia’s investment laws allow 100% foreign ownership of companies in most sectors, and provision for the protection of investments from regulated prices and nationalization.

Q: What is the total FDI of Cambodia?

A: In 2019 when Cambodia’s GDP hit an all-time high of USD 27.1 b, its total stock of FDI also reached a high of USD 34 b.

Q: Which sectors attract most FDI in Cambodia?

A: Prior to the ban on online gambling which was effective 1 Jan 2020 after it was first announced in Aug 2019, the sectors that attracted the most Foreign Direct Investments (FDI) were real estate and construction, garment manufacturing, tourism, other forms of light manufacturing, services and agriculture.

Q: How has Covid pandemic impacted FDI in Cambodia?

A: The continuing Covid pandemic, disruption to global supply chains, rising costs in raw materials and travel restrictions have severely impacted Cambodia’s open and export-oriented economy. FDIs remained relatively weak at USD 538m or a YOY decline of 83.6% for the first nine months of 2021.

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FAQs: Service Sector

Service Sector Overview

Q: How much of Cambodia’s GDP is accounted for by the service sector? What is the contribution of the Services sector to Cambodia’s GDP?

The services sector in Cambodia accounted for 38.9% of Cambodia’s GDP. Although the contribution of the services sector to the country’s GDP has remained around 40% since 2000, it has seen promising innovation in banking and finance, insurance, and professional services like architecture, real estate, education, healthcare among others as new products are paired with digital technology offering become increasingly commonplace.

Q: What drives promising growth for Service Sector in Cambodia?

Since 2000, it has seen promising innovation in banking and finance, insurance, and professional services like architecture, real estate, education, healthcare among others as new products are paired with digital technology offering become increasingly commonplace.

Q: Which subsector has Cambodia’s service sector diversified into?

There are four subsectors of Cambodia’s service sector such as hotel and restaurant, real estate, wholesale and retail and transportation and communication.

Q: What is the growth of the service sector as a percentage of FDI in Cambodia?

A recent OECD report noted that Cambodia and Singapore are both very open to foreign investment in the Services sector viz-a-viz other ASEAN and OECD member countries. In fact, it highlighted that between 2012 and 2016, the Services sector of Cambodia attracted more than 50% of its total FDI inflows, above that of Myanmar at 43% and even Malaysia (38%).

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Tourism and Hospitality

Q: What is the total gross revenue generated from the Tourism and Hospitality sector in Cambodia?

A: According to the Ministry of Tourism, this translated into a gross revenue of around USD 4.92 b, a 13% YOY increase.

Q: What is the contribution of Tourism and Hospitality to Cambodia’s GDP?

A: In 2020, just USD 1.023 billion in revenue from 1.3m international tourists were recorded, a 79.4% nosedive from USD 4.92 b and an 80.2% fall from 6.6m international visitors in 2019. This translated into just 3% of Cambodia’s GDP in 2020, a far cry from the 21% chalked up in 2019.

Q: How many international tourists travel to Cambodia?

A: In 2019, there are 6,610,592 international tourists visting Cambodia.

Q: Which country is the largest source of international visitors to Cambodia?

A: China was the largest source at 2.36m visitors, followed by Vietnam and Thailand.

Q: What is the current development/status of the eco-tourism sector in Cambodia?

A: The ecotourism sector, hitherto under-developed, has seen a surge in interest in recent years as Cambodia relied more on domestic tourism during the Covid pandemic, raising awareness of the many unspoiled areas of the Kingdom that could be suitable for glamping and small footprint development.

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Q: What is Cambodia’s legal system?

A: Cambodia’s legal system is a hybrid of Civil Law (inherited from the French colonial era) and Common Law (introduced by international development partners as part of their assistance on legal and judicial reform).

Q: What are the taxes that businesses in Cambodia have to pay?

A: In Cambodia, both companies and individuals are subject to certain tax obligations under the host country’s self-assessment system, regardless of the type of business activity or the level of annual revenue.

Q: Who are the taxpayers in Cambodia?

A: There are three type of taxpayers in Cambodia

Q: What is Tax on Income (ToI) in Cambodia?

A: Tax on Income is depending on the industry

Q: What is Tax on Employment / Salary in Cambodia?

A: Tax resident employees must pay tax on salaries from both Cambodian and foreign sources – employer pays to withholding tax on the gross monthly salary of employee according to a progressive scale/rate;

The monthly salary of non-resident employees for salary derived from Cambodian sources are subject to a flat withholding tax rate of 20%;

Employers must withhold the tax due on an employee’s salary (and 20% of the total value of fringe benefits) and pay the withholding tax to GDT on or before the 25th day of the month following the salary payment

Q: What is Patent Tax in Cambodia?

A: Patent Tax is the quantum of which is dependent on the annual revenue viz small, medium or large taxpayers.

Q: What is Stamp Tax in Cambodia?

A: Stamp Tax is exempt for newly established companies) but applicable for mergers, dissolution, transfer of shares and immovable properties and assets.

Q: What is the purpose of the Double Tax Agreement (DTA) in Cambodia?

A: Cambodia has signed Double Taxation Agreements (DTA) with nine countries to avoid the international double taxation of income and properties.

Q: How many countries have signed the Double Tax Agreement (DTA) with Cambodia? Does Cambodia have a Double Tax Agreement (DTA) with other countries?

A: Cambodia has signed the Double Tax Agreements (DTA) with 9 countries.

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Accountancy and Auditing

Q: What are the legal/regulatory requirements for Accountancy and Auditing in Cambodia?

A: Some of the salient legal requirements stipulated for Accountancy and Auditing in Cambodia include but are not limited to the following:

  • Financial statements are the basis upon which tax obligations are premised
  • Full accounting records must be maintained for a period of 10 years, and all financial transactions must be filed with proper supporting documents
  • Accounting records and financial statements are to be in the Khmer language and denominated in Khmer Riel equivalent; a second set of records and statements may be prepared in the English (or foreign language) in which its activities are conducted in
  • The tax and accounting year generally coincides with the calendar year although any deviations are permissible so long as the appropriate approvals are properly documented
  • All business entities must submit their annual financial statements to be audited by an independent auditor who is registered with the Kampuchea Institute of Certified Public Accountants and Auditors (“KICPAA”)

Q: What are the types of Tax Audits in Cambodia?

A: There are 3 types of Tax Audit in Cambodia includes desk audit, limited audit and comprehensive audit.

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Banking and Finance

Q: What is the official monetary authority of Cambodia?

A: The National Bank of Cambodia is Cambodia’s central bank and monetary authority.

Q: What are the financial institutions under the supervision of the National Bank of Cambodia (NBC)?

A: Microfinance Institutions (MFIs), Microfinance Deposit-taking Institutions (MDIs), specialized banks and commercial banks, and operators of e-wallets, remittance services, insurance companies.

Q: What is Cambodia’s banking system?

A: Microfinance Institutions (MFIs), Microfinance Deposit-taking Institutions (MDIs), specialized banks and commercial banks, and operators of e-wallets, remittance services, insurance companies among others. 

Q: What is the minimum capital requirement for a commercial bank in Cambodia?

A: The minimum capital requirement for commercial banks is USD 75m, but this will be raised gradually to USD 200m over the next few years.

Q: Are there microfinance institutions in Cambodia?

A: According to the National bank of Cambodia report in December 2020, there are 73 MFI in the Kingdom

Q: What is the difference in capital requirements for banks and other financial institutions in Cambodia?

A: The minimum capital requirement for commercial banks is USD 75m, but this will be raised gradually to USD 200m over the next few years. Specialized banks must maintain at least USD 15m in registered capital whereas that for MFIs is USD 1.5m.

Q: What are the fixed deposit rates in Cambodia? Are there different fixed deposit rates (FDR) for Cambodian currency Khmer Riel (KHR) and the United States Dollar (USD) in Cambodia?

A: Fixed Deposit Rates in the Kingdom are one of the most attractive in the region at an average of 5.5% to 8% depending on the tenure and currency (in line with NBC’s efforts to encourage the use of the Khmer Riel, Fixed Deposits in Khmer Riel attract a higher FDR than USD). 

Q: What is the average exchange rate of Khmer Riel (KHR) to USD in Cambodia?

A: The exchange rate of Khmer Riel (KHR) to USD stays between 4000riels -4100 riels.

Q: What is the average inflation rate in Cambodia?

A: The average inflation rate in Cambodia is between 1.20% – 3.0%

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Insurance and Actuarial

Q. What are the insurance companies in Cambodia? Are there insurance companies in Cambodia?

A: Cambodia’s insurance market is still at an early stage of development but has become noticeably more active as more international players enter the market in each succeeding year. There are currently 17 general insurance companies, 12 life insurance companies, 6 micro-insurance companies and 1 re-insurance company in the market.

Q: How is the insurance market in Cambodia like?

A: CA estimated the insurance market size to be 1.2 million customers comprising 380,000 policyholders of life insurance, 510,000 in general insurance (health and individual accident insurance) and 280,000 in micro-insurance. Across the board, premium growth was about 7.3% in 2020 at about USD 271.5 m whereas claims paid out to policyholders in 2020 totalled USD 11.3 m.

Q: How many insurance operators are in Cambodia?

A: Currently, there are 17 general insurance companies, 12 life insurance companies, 6 micro-insurance companies and 1 re-insurance company in the market.

Q: What is the premium for General Insurance and Life Insurance in Cambodia?

A: According to local regulations, life insurance companies and general insurance companies are each separately licensed with a minimum registered capital requirement of USD 7 m and are required to maintain a 10% fixed-guarantee deposit with NBC.

Q. What is the percentage of insurance premium from General and Life Insurance products in Cambodia?

A: Total insurance premiums for the same period were $85 million, with general insurance increasing by almost 20% to USD 39.1 m and life insurance premiums increasing by 15.5% to USD 44.6 m, whereas microinsurance premiums contracted by 27% to USD 1.2m. 

Q. What is the insurance claim in General Insurance and Life Insurance in Cambodia?

A: Across the board, premium growth was about 7.3% in 2020 at about USD 271.5 m whereas claims paid out to policyholders in 2020 totalled USD 11.3 m.

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IT and Telecommunication

Q: How is Cambodia’s telecommunications sector?

A: Cambodia’s telecommunications sector is fast developing and its overall outlook is promising and likely to enjoy robust growth in the years to come. 

Q: How many Mobile Service Providers are there in Cambodia?

A: There are 5 mobile service providers – Smart Axiata, Cellcard, Viettel, Cootel and SEAtel

Q: How many Internet Service Providers (ISP) are there in Cambodia?

A: There are 47 ISP licenses that were issued in Cambodia

Q: What percentage of the population in Cambodia is internet service subscribers? How many internet users are there in Cambodia? What is the internet penetration in Cambodia?

A: Increasing internet access and penetration among the Cambodian population, especially among the youths (75% of the population under the age of 35). Compared to neighbouring countries, subscription rates are still very low. There are 17.48 m Mobile internet subscribers or 104% of the total population, a 7% YOY increase.

Q: How many social media users are there in Cambodia? Are there any social media users in Cambodia?

A: There are 12 m social media users or 71.3% of the total population, a 24% YOY increase or 2.3 m over the same period in 2020

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Human Resource, Recruitment and Training

Q: What is Cambodia’s Labor Law?

A: The 1997 Labor Law (“Labor Law”) is the primary legislation governing all employment activities in the Kingdom of Cambodia and is enforced by the Ministry of Labor and Vocational Training (MLVT).

Q: Which government body/ministry oversees employment activities?

A: Ministry of Labor and Vocational Training (MLVT) oversees employment activities.

Q: What is the foreign employee quota in Cambodia? Can companies hire foreigners in Cambodia?

A: Under the latter, the number of foreigners that a business can employ must not be more than 10% of the total number of company employees, of whom 3% can be office employees, 6% skilled labour, and 1% can be unskilled.

Q: What is Seniority Payment in Cambodia?

A:  All employers are reminded that the seniority payment described in the amendment to the Labor Law is applicable to employees that are employed under a UDC.

Q: What is the minimum wage in Cambodia? Is there a minimum wage in Cambodia?

A: No minimum wage has been established by law except for the garments, textiles, and footwear manufacturing industries, where the minimum wage for probationary employees (currently USD 194 per month WEF 1 Jan 2022).

Q: What are the mandatory employee benefits in Cambodia?

A: The mandatory employee benefits in Cambodia:

  • Maximum working hours are normally 8 hrs/day or 48 hrs/week
  • Hourly overtime is compensated at 1.5 to 2 times the normal hourly wage
    • Annual leave entitlement is 1.5 days for each month of employment or 18 days per year, with an additional day every three years of employment
  • Maternity leave of at least 90 days at half salary if she has worked one continuous year or more for the company
  • Special leave (eg: funerals, weddings) at a maximum of 7 days per year and can be deducted from the employee’s annual leave (if such is available) or compensated for through overtime work (calculated at the normal rate for this purpose) by the employee

Q: What is work insurance in Cambodia? Do most companies buy insurance for employees?

A: According to local regulations, life insurance companies and general insurance companies are each separately licensed with a minimum registered capital requirement of USD 7 m and are required to maintain a 10% fixed guarantee deposit with NBC.

Q: What are the areas of insurance coverage of the National Social Security Fund (NSSF) in Cambodia? What is NSSF?

A: The National Social Security Fund (NSSF) covers three pillars: (a) occupational risk (work-related accident and occupational disease) insurance; (b) health insurance; and (c) retirement pension.

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Fintech and E-Commerce

Q: Is there online banking in Cambodia?

A: Cambodia is primarily a cash-based economy but in recent years have seen a greater prevalence in the use of cashless payments through credit cards, digital payments, and transfers through online or mobile banking apps, e-wallets, etc. 

Q: What is the acceptance rate of digital payment in Cambodia? Does Cambodia have digital payments?

A: The digital payment system enables Cambodians to use a free mobile app to make payments and transfer money through any bank on the platform, even if they don’t have a traditional account with the bank.

Q: What is the Fintech market in Cambodia?

A: The fintech ecosystem in Cambodia, particularly in digital payments and transfers, has greatly expanded in recent years. 

Q: What / do commercial banks have digital payment services in Cambodia?

A: Commerical banks in Cambodia provides digital payment services.

Q: What is the number of E-wallet accounts in Cambodia? Are there e-wallet players in Cambodia?

A: The number of registered e-wallet accounts increased more than 20 times to 9.6 m in 2020, accounting for more than 80% of the adult population, higher than deposit accounts with commercial banks or MDIs

Q: When is Bakong? Does Cambodia have/use blockchain? Does Cambodia have an integrated payment system?

A: In October 2020, it formally launched Cambodia’s first and only blockchain-based integrated payment system, called the Bakong, where e-wallets, mobile payments, online banking, and financial applications can all be used through one system interface. 

Q: Which are the top 3 commercial banks with Mobile Payment Gateway in Cambodia? Does Cambodia have a mobile payment gateway?

Q: What is the growth rate of mobile e-transactions in Cambodia?

A: The number and value of mobile e-transactions also expanded rapidly to 266.5 m in 2020, with a total value of 168.6% of Cambodia’s GDP

Q: What is the Cambodian payments system like?

A: National Bank of Cambodia (NBC) has been at the forefront of this transition by encouraging and supporting innovation, improving interoperability between the various banks and financial institutions, as well as the provision of digital financial services to reduce costs and promote financial inclusion.

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Real Estate, Property Management and Maintenance

Q: How is Cambodia’s real estate industry?

A: Cambodia experienced a boom in the construction and real estate industry since 2000, but construction activities and real estate prices defied reality particularly from 2016 to 2019.

Q: How many construction projects are there in Cambodia?

A: Between 2000 to 2018 alone, Cambodia’s Ministry of Land Management, Urban Planning, and Construction (MLMUPC) approved 43,136 construction projects with an estimated investment value of USD 43.3 b. 

Q: What is the total investment value of construction projects in Cambodia?

A: Cambodia’s Ministry of Land Management, Urban Planning, and Construction (MLMUPC) approved 43,136 construction projects with an estimated investment value of USD 43.3 b.

Q: What are the types of construction projects in Cambodia?

A: The residential, commercial, and industrial segments accounted for about 46-50%, 30-35%, and 14-15% share of new projects respectively.

Q: Are there many Condominiums in Cambodia? What is the condominium market in Cambodia like?

A: Real estate companies estimated that the total number of condominiums in Phnom Penh alone jumped by 120% in 2019 and 300% in 2020, with foreigners on average accounting for 60-70% of condominium sales in Cambodia

Q: How has the global economic slowdown and Covid Pandemic impacted/affected the real estate/construction section in Cambodia?

A: Following the global economic slowdown in 2019, Cambodia’s ban on online gambling in Aug 2019 (effective 1 Jan 2020) had a chilling effect on the construction frenzy and frothy real estate prices. The total value of approved projects dropped to just USD 7.8 b in 2020, a YOY fall of 26.9%. 

Q: How does the ‘ban on online gambling’ policy affect/impacted the real estate/construction sector in Cambodia?

A:  following the global economic slowdown in 2019, Cambodia’s ban on online gambling in Aug 2019 (effective 1 Jan 2020) had a chilling effect on the construction frenzy and frothy real estate prices. The total value of approved projects dropped to just USD 7.8 b in 2020, a YOY fall of 26.9%.

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Transportation, Logistics and Supply

Q: How is the Transportation and Storage Market in Cambodia?

A: According to the OECD Competition Assessment Reviews: Logistics Sector in Cambodia in 2021 and updates/figures from the Asian Development Bank (ADB) and World Bank (WB), Cambodia’s transportation and storage market in 2019 was worth USD 2.1 billion, representing 7.8% of the country’s GDP. 

Q: What is the contribution of the transportation/logistics/supply chain industry to GDP?

A: Cambodia’s transportation and storage market in 2019 was worth USD 2.1 billion, representing 7.8% of the country’s GDP

Q: What is the cost of logistics in Cambodia compared to its neighbouring countries?

A: Logistics costs over sales in Cambodia were estimated at 20.5% in 2018, higher than some ASEAN countries such as Thailand and Viet Nam, and the global average of 10-12%, but lower than others such as the Philippines and Indonesia. According to the WB, the informal logistics charges levied by government agencies remain significant at an estimated 48% of logistics administration costs. Improving transport infrastructure in Cambodia is essential to reduce logistics costs.

Q: What is Cambodia’s Logistics performance compared with its ASEAN neighbours?

A: According to the WB, the informal logistics charges levied by government agencies remain significant at an estimated 48% of logistics administration costs. Improving transport infrastructure in Cambodia is essential to reduce logistics costs.

Q: How is Road Freight Transport in Cambodia?

A: Rail network covers 652 kilometres consisting of the Northern line (386km), which links Phnom Penh to the Thai border at Poi Pet, crossing Battambang and the Southern line (264 km), which links Phnom Penh to the port of Sihanoukville. There is also a 6.5 km branch line linking the Phnom Penh railway station with petroleum depot facilities along the Tonle Sap River.

Q: How many international ports are in Cambodia?

A: Two international ports – Phnom Penh Autonomous Port (PPAP) and Sihanoukville Autonomous Port (SAP) – as well as inland waterways for freight and passenger traffic.

Q: What are the differences between Phnom Penh Autonomous Port (PPAP) and Sihanoukville Autonomous Port (SAP)?

A: SAP is the only deep-water seaport in Cambodia and PPAP a river port, but the import-export volume through the latter in 2018 was higher than that of SAP. Both ports recorded solid growth in 2019 in terms of volume handled (SAP: 633 099 TEUs and PPAP: 275 000 TEUs).

Q: How many airports are in Cambodia?

A: Cambodia’s international airports are in Phnom Penh (new international airport being built in Takmao, Kandal Province), Sihanoukville and Siem Reap. Several smaller airports are being constructed or planned in other provinces.

Q: Is there a rail network in Cambodia?

A: Rail network covers 652 kilometres consisting of the Northern line (386km), which links Phnom Penh to the Thai border at Poi Pet, crossing Battambang and the Southern line (264 km), which links Phnom Penh to the port of Sihanoukville. There is also a 6.5 km branch line linking the Phnom Penh railway station with petroleum depot facilities along the Tonle Sap River.

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FAQs: Industry

Industry Overview

Q: How much of Cambodia’s GDP is the industry sector accounted for? What is the industry’s contribution to Cambodia’s GDP?

A: The industry sector accounts for 34.2% of Cambodia’s GDP. Industries in Cambodia is mostly within the garment, light manufacturing, agricultural, construction, and tourism sectors, with a nascent emerging mining and exploration industry.

Q: What drives Cambodia’s industry sector? What is the industry sector in Cambodia?

A: Industries in Cambodia are mostly within the garment, light manufacturing, agricultural, construction, and tourism sectors, with a nascent emerging mining and exploration industry.

Q: What is the growth of the Industry sector in Cambodia?

A: The contribution of the services sector to the country’s GDP has remained around 40% since 2000, while the contribution of the agriculture sector has been declining, in favour of the industry sector.

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Construction, Engineering and Building Safety

Q: How is the construction sector in Cambodia?

A: Cambodia experienced a boom in the construction and real estate industry since 2000, but construction activities and real estate prices defied reality particularly from 2016 to 2019.

Q: How many construction projects have been approved/are there in Cambodia?

A: Between 2000 to 2018 alone, Cambodia’s Ministry of Land Management, Urban Planning, and Construction (MLMUPC) approved 43,136 construction projects with an estimated investment value of USD 43.3 b. 

Q: Is there building safety and construction management in Cambodia?

A: Unfortunately, building and workers’ safety lagged behind the frenetic pace of construction activities as unauthorized projects launched by opportunistic developers rushing to capitalize on rising real estate prices were pushed ahead.

Q: Are there / what are the government measures on building safety?

A: The government amended the Law on Construction in November 2019, including stricter requirements on safety measures at work sites, mandating building safety inspections, and further strengthening permit requirements.

Q: What is the / is there a high demand for commercial buildings, high-end offices and residential projects?

A: The residential, commercial, and industrial segments accounted for about 46-50%, 30-35%, and 14-15% share of new projects respectively.

Q: Is there any impact from covid on Cambodia’s construction sector?

The slowdown in the global economy in 2019 was weighed down further by the Covid pandemic which caused severe disruption in the global supply chain and lockdowns/restrictions on international travel. As foreign investors/buyers accounted for 60-70% of sales in the real estate and property market in Cambodia, external demand for the excess supply of condominiums, apartments, commercial offices, and other mixed development projects was likewise interrupted. This was exacerbated by the lack of supply (and rising prices) of construction materials, labour, and funds. Many projects such as FDI-financed property investment, especially in high-rise development projects in Phnom Penh and Sihanoukville, were suspended.

Q: How has Cambodia’s real estate price evolved? What is the real estate price in Cambodia?

With excess supply and lower foreign investor/buyer appetite to invest in property development projects, the value of approved construction permits has also plummeted, contracting by as much as 63% in 2020. Most observers and experts in the real estate industry expect supply and average property prices to slip further before a slow and gradual recovery.

Click here to read more about Construction, Engineering and Building Safety in Cambodia.

Manufacturing

Q: What are the main manufacturing products in Cambodia?

A: Garment, footwear, and travel goods manufacturing are important components of the manufacturing industry and are considered the main engines of growth for the Cambodian economy. 

Q: What is the size of the Cambodian workforce in the manufacturing sector?

A: Garment manufacturing alone accounts for 80 percent of Cambodia’s exports and employment of more than 600,000 workers, mostly women.

Q: What are the top exports of Cambodia’s manufactured products?

A: Clothing, footwear and travel accessories are the top exports of Cambodia’s manufactured products.

Q: How has tariff exemption programs such as GSP and EBA contributed to the growth of the manufacturing sector in Cambodia? Are there tariff exemption programs for Cambodia?

 A: There is an opportunity for manufacturers to take advantage of the tariff exemption programs that have been accorded to Cambodia by the US (under GSP), the EU (under the EBA), as well as under the provisions of various FTAs that Cambodia has signed with China and South Korea

Q: What is the contribution of the manufacturing sector to Cambodia’s GDP?

A: Garment, footwear, and travel goods manufacturing are important components of the manufacturing industry and are considered the main engines of growth for the Cambodian economy. 

Click here to read more about Manufacturing in Cambodia.

FAQs: Agriculture and Aquaculture

Q: What is the contribution of agriculture to Cambodia’s GDP?

A: Within the sector, crop production has the largest output contribution to total national GDP at 13.0%, followed by fisheries (5.5%), livestock (2.6%), and forestry (1.6%). However, the growth of agriculture value-added has been limited (0.85% annually, on average) since 2013 due to the long-term low labour productivity, lack of rice milling facilities, the downturn in international commodity prices and adverse weather conditions

Q: What is the share of agriculture’s products to Cambodia’s GDP?

A: The share of agriculture value-added to the total GDP averaged around 30% during 2000−2014 but fell to 22.1% in 2019

Q: What are Cambodia’s main exports of agriculture products?

A: The majority of the country’s agriculture exports are still in raw form and heavily dependent on crops. The main export products are rice and rubber, with an increasing share of cassava. From 2010 to 2018, the biggest reduction of export value was seen in maize.

Q: How are Cambodian agriculture products processed?

A: Only about 10% of Cambodia’s total agricultural outputs are processed within the country, whereas processed agricultural exports represent only 8% of total official exports by value. Other than rice milling and basic processing of rubber and pepper, the agro-processing sector is largely underdeveloped.

Q: Which areas in Cambodia produce agricultural crops? Where are Cambodia’s main agricultural areas?

A: Regions surround the Mekong and the Tonle Sap river, with particularly intensive cultivation in BatambangKampong Cham, Takeo, and Prey Veng provinces.

Q: What are Geographical Indication (GI) products of Cambodia?

A: The Geographical Indication in Cambodia are

  • Kampot Pepper
  • Kampong Speu Palm Sugar
  • Kratie Pomelo Fruit

Q: What is the size of Cambodia’s wetland/agriculture compared to its total net area? How much agricultural land does Cambodia have?

A: Cambodia’s wetlands cover about 30% of the country and support one of the world’s biggest, most diverse, and intensive freshwater fisheries. 

Q: Are there fisheries in Cambodia? Is there aquaculture in Cambodia?

A: Definitely there are fisheries in Cambodia. Aquaculture production is estimated at 207,443 tons annually in 2017, which is equivalent to 24% of all fisheries production. 

Q: What are export destinations for Cambodian fisheries products/fish exports?

A: Cambodia exports fresh and processed fish (in smoked and frozen forms) to Hong Kong, China; Malaysia; the Republic of Korea; Singapore; Thailand; and Viet Nam. However, the largest volumes by far are informal or unrecorded flows of fresh or dried fish trucked to Thailand, especially from the Tonle Sap region. There is enormous potential to add value to the national fish catch by processing fish at or near the source. This can range from making sauces, fillets, and packaged or convenience meals.

Q: Is there freezing plant or cold chain facilities in Cambodia?

A: There are few freezing plants or cold chain facilities in the country. There are no industrial-scale commercial exporters transporting frozen fish products in reefer containers from Sihanoukville or shipping fresh fish from Phnom Penh. Cambodia could tap into overseas markets, such as China, EU, US or the food security needs of Southeast Asian countries.

Click here to read more about Agriculture and Aquaculture in Cambodia.

FAQs: Doing Business in Cambodia

Q: What are the business/office hours in Cambodia?

A: In general, Monday to Friday: 8 am to 5 pm and Saturday: 8 am to 12 pm

Q: What are the Public Holidays (PH) in a calendar year in Cambodia? How many public holidays are there in Cambodia?

A: Cambodia has 21 official public holidays (PHs) in a calendar year of which the most important or celebrated is the Khmer New Year in April and the Pchum Ben in September or October. Several PHs are based on the lunar calendar. An official list of PHs indicating their dates is announced by MLVT. Since September 2021, any PH that falls on a Sunday will no longer be carried over to Monday. 

Q: Which government bodies/ministries oversee business setup and registration in Cambodia?

A: On 15 June 2020, the Cambodian Government launched the single portal (https://www.registrationservices.gov.kh/), a new online business registration portal that allows a private limited company to be incorporated at the Ministry of Commerce (MOC), the General Department of Taxation (GDT) and the Ministry of Labor and Vocational Training (MLVT) in one streamlined process. Other relevant ministries/institutions whose involvement is required for a specific license/permit may become involved at a later stage (if any).

Q: What are the required documents and certificates from the Ministry of Commerce (MOC) for a business entity set up in Cambodia?

A: Certificate of incorporation, business Extract; and articles of incorporation, with the ministerial seal.

Q: What are the required documents and certificates from the General Department of Taxation (GDT) for a business entity set up in Cambodia?

A: Value Added Tax (VAT) certificate, patent tax certificate, tax registration identification card; and tax instruction letter.

Q: What are the required documents and certificates from the Ministry of Labor, Vocational Training for a business entity set up in Cambodia?

A: Declaration of Opening of Enterprise.

Q: What are the requirements to register a company in Cambodia?

A: To register a company in Cambodia, a business entity must acquire registration at the Ministry of Commerce (MOC), the General Department of Taxation (GDT), and the Ministry of Labor and Vocational Training (MLVT). Some businesses may involves specific or permit license from other government or regulatory institutions such the Ministry of Economy and Finance (MEF) or the Ministry of Post and Telecommunication (MPTC), etc.

Q: What are the types of company registration in Cambodia?

A: Types of company registration are: Sole proprietorship, General Partnership (partners are personally liable for the partnership’s liability), Limited Partnership (partners are liable only to the extent of their agreed contribution) and Limited Liability Company.

Q: What are the requirements and characteristics of a Private Limited Company in Cambodia?

A: One of the most common types of business entity registered by foreign investors/businesses is the Private Limited Company. Some of its requirements and characteristics include the following:

  • Can be 100% foreign owned
  • A minimum capital requirement of KHR 4 million (equivalent to USD 1,000) – i.e. minimum of 1,000 shares at KHR 4,[email protected]
  • Shareholder(s) liability limited to their value of capital contribution
  • Can have one or more directors (Note: Public Limited Company must have at least 5 but not more than 15 directors)
  • Corporate governance is simple and requires only one director
  • The dissolution process is relatively simple

Q: What are applicable taxes for a business entity in Cambodia? What taxes must companies pay in Cambodia?

A: Foreign businesses are subject to local taxation such as the minimum tax and tax on profit, VAT and other applicable Withholding Tax. See section under Legal and Taxation for more information.

Q: Is there employment contracts in Cambodia?

A: Yes, there are employment contracts in Cambodia that are either Fixed Duration Contracts (FDC) or Undetermined Duration Contracts (UDC).

Click here to read more about Doing Business in Cambodia.

Undetermined Duration Contract (UDC)

According to the Cambodian Labour Law, Undetermined Duration Contract is an employment contract made between workers and an employer with the following criteria:

  1. Both parties agree upon without setting a specific ending date (Article 67, Paragraph 1) or
  2. Both parties agree upon, setting a specific ending date but this duration is more than two years (Article 67, Paragraph 2) or
  3. This contract is made orally, not in writing (Article 67, Paragraph 7) or
  4. In case a Fixed Duration Contract continues quietly (without notice) and the total duration of the previous contract and the new contract exceeds two years. (Article 67, Paragraph 8)

Source: https://www.gmac-cambodia.org/public/pdf_file/1505126368.pdf

Working Time and Overtime Pay

Working Hours

Restrictions on Working Hours

Under the Labour Law, normal working hours cannot exceed eight hours per day or 48 hours per week. An employee must consent to work overtime. Proposed amendments to the Labour Law will likely affect the payment regime for employees who regularly work night shifts (between 10:00 pm and 5:00 am).

Special Restrictions Applicable to Shift Workers

“Nightwork” under the Labour Law is a period of at least 11 consecutive hours that includes the interval between 10:00 pm and 5:00 am. In addition to continuous work that is performed by rotating teams who sometimes work during the day and sometimes at night, work at the business may always include a portion of night work. Workers who perform permanent or shift work between 10:00 pm and 5:00 am are entitled to 130% of the normal working payment rate.

Overtime Pay

The employer must provide overtime pay to employees who work beyond the normal working hours. Overtime must be undertaken on a voluntary basis and is subject to prior approval of the MLVT. Approval for overtime can now be requested through an application on the new Ministry of Labor and Vocational Training (MLVT) online system. Overtime is limited to two hours per working day in excess of the normal eight hours. Employees are entitled to overtime pay as follows:

– Overtime work on a normal working day: 150% of the normal working payment rate.

– Overtime work between 10:00 pm to 5:00 am and work performed on a normal weekly day off 200% of the normal working payment rate. Further, workers who work on public holidays are entitled to the normal working payment rate in addition to the normal wage due on paid public holidays.

Source: https://www.dfdl.com/resources/publications/other-publications/cambodia-employment-rights-explained/

Occupational Risk Scheme under NSSF for Persons Defined by the Provisions of the Labour Law

Medical Care Services

Medical care services of Occupational Risk for Persons Defined by the Provisions of the Labour Law including personnel serving in air and maritime transportation as well as domestic workers shall be as follows:

  • Treatment and care of wound or disease resulting from occupational risk in line with the medical profession technics until recovery despite hospitalization or non-hospitalization;
  • Emergency service;
  • Supply of medicines and other medical materials for treatment;
  • Victim referral service or corpse transportation in the case of emergency;
  • Daily allowance provision for caretaker during the treatment in case the victim concerned cannot serve himself.

Daily Allowance for Temporary Disability

In the period of treating any injuries or diseases resulting from occupational risk in the health facilities and the convalescent care prescribed by the medical doctor or physician recognized by NSSF, the victim concerned shall be entitled to enjoy the daily allowance for temporary disability. Daily allowance for temporary disability shall be provided from the second day when the person concerned sustained a work injury or sickness until recovery or passed away plus the period of convalescent care prescribed by the medical doctor.

The first-day wage of a person concerned for abstention from work shall be borne by the employer. Daily allowance for temporary disability shall be equivalent to 70% of the daily average wage within the last 6 (six) months. In case the working period of the person concerned is less than 6 (six) months, the daily average wage shall be calculated based on the actual situation.

Pension for Permanent Disability

The NSSF members who sustain occupational risk leading to permanent disability from 20% or more shall have entitlement to enjoy pension for permanent disability. Formalities and procedures of pension calculation, determination of permanent disability degree and pension provision shall be regulated by Sub-Decree. The National Social Security Funds (NSSF) members who are getting the partial permanent disability pension but sustain the new occupational risk shall receive pension by the total degrees of permanent disability pension.

The total degrees of total permanent disability shall be equivalent to the first permanent disability plus the degree of continual permanent disability of other organs but not exceed 100% Pension for permanent disability shall be considered as a forever temporary pension. NSSF shall renew check-ups and evaluation of the disability degree of the victim regularly.

In case the disability degree of the victim is found the change, the amount of the given pension shall be renewed during the evaluation. A victim cannot oppose the check-up as defined above. In case the victim concerned is absent from the check-up, NSSF shall suspend the pension provision until the victim concerned have a check-up.

Allowance for Permanent Disability

The NSSF members who sustain occupational risk leading to permanent disability less than 20% shall have entitlement to receive an allowance for permanent disability. Allowance for permanent disability shall be given a lump sum. Formalities and procedures of calculating the allowance for permanent disability shall be regulated by Sub-Decree.

Funerary Grant and Survivors’ Pension

For the NSSF members who sustain occupational risk leading to death, NSSF shall provide the funerary grant and survivors’ pension. The funerary grant shall be provided to the beneficiaries under the direct charge of the victim or any person who takes responsibility for holding the funeral. The amount of funerary grant shall be regulated by Prakas of the Minister of the Ministry in charge of social security schemes in compliance with the proposal of the NSSF Governing Body. Survivors’ pensions shall be provided to the beneficiaries under the direct charge of the victim. Calculation, formalities and procedures of providing the survivors’ pension shall be regulated by Sub-Decree.

Rehabilitation Services

The NSSF member who sustains occupational risk leading to permanent disability shall have entitlement to enjoy rehabilitation services including medical rehabilitation, vocational rehabilitation or social rehabilitation services. Medical rehabilitation services shall be provided for supporting the medical care or helping alleviate victims with a permanent disability.

Page 18 of 24 Vocational rehabilitation services shall be provided to the NSSF member who becomes disabled due to occupational risk in a bid to have a chance to receive a new job with earnings suitable with his physical situation. People with disability due to occupational risk shall have entitlement to receive consultation, guidance, mental health education and other social services for the purpose of bettering social psychology and possessing ownership in line with the daily livelihood. Conditions, formalities and procedures of providing rehabilitation service shall be regulated by Sub-Decree.

Source: http://www.nssf.gov.kh/default/wp-content/uploads/2020/09/2.-Law-on-Social-Security-Schemes.pdf

Services Sector Overview

The services sector in Cambodia accounted for 38.9% of Cambodia’s GDP, industry for 34.2%, and agriculture for 20.7% in 2019. Although the contribution of the services sector to the country’s GDP has remained around 40% since 2000, it has seen promising innovation in banking and finance, insurance, and professional services like architecture, real estate, education, and healthcare among others as new products are paired with digital technology offering become increasingly commonplace.

This augurs well for Cambodia because, given its youthful population profile where more than 75% are under the age of 35, more prevalent use of digital technology can help mitigate or address the challenges of low productivity and skills; they can be a catalyst to transform other areas of need and help shorten the time it would take to bridge the gaps in knowledge and skills.

Rather than just focus only on the lack of skilled labour and talent in Cambodia in absolute terms, foreign businesses and investors may find it instructive to note that the contribution from the Services industry to Cambodia’s annual GDP has been growing at an average rate of 8% annually to 39% in 2019. This is a strong testament to how quickly its economy is becoming more sophisticated amidst a youthful population, its high internet and social media penetration (approx. 71% of the population), a growing middle class and rising demand for modern services.

Since 2014, Cambodian businesses have started to diversify beyond tourism and garment/footwear/travel goods exports into niche services such as basic computer animation, software coding and development for local and foreign accounts, insurance and actuarial, information communication technology-related fields, e-commerce and even telemedicine, among others.

A recent OECD report noted that Cambodia and Singapore are both very open to foreign investment in the Services sector viz-a-viz other ASEAN and OECD member countries. In fact, it highlighted that between 2012 and 2016, the Services sector of Cambodia attracted more than 50% of its total FDI inflows, above that of Myanmar at 43% and even Malaysia (38%).

Growth of Service Sector and Subsector 2016-2021

Service Sector Contribution of Economy - 2022 Update
Source: MFAIC Dashboard, published 15 November 2021

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Setting up a Business in Cambodia

** The following information have been compiled from various official and open sources including but not limited to the Ministry of Commerce (MOC), General Department of Taxation (GDT), Ministry of Labor and Vocational Training (MLVT), Ministry of Foreign Affairs and International Cooperation (MFAIC), Council for Development of Cambodia (CDC), among others. It is not meant to be exhaustive, but to provide foreign businesses and investors keen on establishing a presence, investment or partnership in Cambodia with an adequate understanding and appreciation of what it entails to set up a company.

Cambodia is an open economy with business-friendly regulations that welcome foreign businesses and investors keen on establishing a company, investment or partnership in the Kingdom. For example, it allows 100 percent foreign ownership of companies in most sectors; have legislative provision and safeguards for the protection of foreign investments from regulated prices and nationalization; has no foreign exchange restriction on the remittance of profits and no capital gains tax (yet). Although several international surveys do not rate Cambodia well in terms of the ease of doing business, foreign businesses that have been operating here may not share the same dire assessment. Similar to other emerging markets, one should keep an open mind and take the time to understand and appraise the local operating environment; there are often much simpler conduits and local practices that are in fact not as complicated or cumbersome as some have made them out to be. In this section, we provide some of the pertinent information that may be useful to foreign businesses setting up their companies in Cambodia.

Business Hours in Cambodia

In general, Monday to Friday: 8 am to 5 pm and Saturday: 8 am to 12 pm.

What are the Public Holidays in Cambodia?

Cambodia has 21 official public holidays (PHs) in a calendar year of which the most important or celebrated are the Khmer New Year in April and the Pchum Ben in September or October. Several PHs are based on the lunar calendar. An official list of PHs indicating their dates is announced by MLVT. Since September 2021, any PH that falls on a Sunday will not longer be carried over to Monday. 

Setting up a Business in Cambodia – Registration and Formation of a Company

On 15 June 2020, the Cambodian Government launched the single portal (https://www.registrationservices.gov.kh/), a new online business registration portal that allows a private limited company to be incorporated at the Ministry of Commerce (MOC), the General Department of Taxation (GDT) and the Ministry of Labor and Vocational Training (MLVT) in one streamlined process. Other relevant ministries/institutions whose involvement is required for specific license/permit may become involved at a later stage (if any).

In the case of the most common registration of a private limited company, the entire process takes around 8 working days from the date of submission of all required documents to obtaining the digital certificates from the following ministries:

•  MOC

  • Certificate of incorporation;
  • Business Extract; and
  • Articles of incorporation, with the ministerial seal.

•  GDT

  • Value Added Tax (VAT) certificate;
  • Patent Tax certificate;
  • Tax Registration Identification Card; and
  • Tax Instruction letter.

•  MLVT

  • Declaration of Opening of Enterprise.

With effect from 1 September, 2021, 4 other ministries/institutions including the Ministry of Tourism (MOT), the Ministry of Post and Telecommunications (MPTC), the Ministry of Industry Science Technology and Innovation (MISTI) and the Real Estate Business and Pawnshop Regulator of the Non-Bank Financial Services Authority (RPR of NBFSA) were included in the portal.

Requirements for naming a Company in Cambodia

Some of the requirements in registering the name of a private limited company are as follows:

  • Must include the words “Company Limited” or the appropriate abbreviation, “Co., LTD.” at the end.
  • Must not be similar to company names that have been previously registered.
  • Must not be contrary to public order (i.e. names that are offensive or a public nuisance).

Establishment of Business Entities in Cambodia

Cambodia’s Law on Commercial Enterprises (LCE) was promulgated in September 2005 to provide the legal framework for the establishment and operation of businesses in the Kingdom. It allows for the establishment of the following types of businesses.

  • Sole proprietorship
  • General Partnership (partners are personally liable for the partnership’s liability)
  • Limited Partnership (partners are liable only to the extent of their agreed contribution)
  • Limited Liability Company
    • Private Limited Company (may not have more than 30 shareholders; restrict share transfer; may not offer shares to the public)
    • Public Limited Company (may offer shares to the public)

One of the most common types of business entity registered by foreign investors/businesses is the Private Limited Company. Some of its requirements and characteristics include the following:

  • Can be 100% foreign owned
  • A minimum capital requirement of KHR 4 million (equivalent to USD 1,000) – i.e. minimum of 1,000 shares at KHR 4,[email protected]
  • Shareholder(s) liability limited to their value of capital contribution
  • Can have one or more directors (Note: Public Limited Company must have at least 5 but not more than 15 directors)
  • Corporate governance is simple and requires only one director
  • The dissolution process is relatively simple

There are broadly three types of legal entity / personality for foreign businesses that can be registered in Cambodia under the Law on Commercial Entities (LCE).

  • Representative Office in Cambodia. This is established primarily to facilitate sourcing of local goods/services, collect information and market intelligence (i.e. market research) and to promote and market the offshore parent company’s goods/services in Cambodia. It does not conduct commercial transactions per se, and can negotiate commercial contracts but only its parent company can enter into such agreements. not the most appropriate form for foreign investors, because it is usually created for the purposes of marketing, market research, and business networking. It is subject to withholding tax on salaries etc.
  • Branch Office in Cambodia. This is the same legal entity as the parent company and carries the same name of the latter, and is considered an extension of the parent company. It is created to conduct a professional service or particular commercial activity in Cambodia. It is legally liable for the losses and debts of the parent company.
  • Subsidiary Office in Cambodia. This is a separate legal entity from the parent company, the latter for which holds at least 51% of the capital / equity of the locally registered entity. It conducts commercial activities and are liable for local tax obligations. The major practical difference between a branch office and a subsidiary office is that the parent company is not jointly liable for the debts or losses of a subsidiary office.

Taxation in Cambodia

Foreign businesses are subject to local taxation such as the minimum tax and tax on profit, VAT and other applicable Withholding Tax. See section under Legal and Taxation for more information.

Employment and Contracts in Cambodia

Employment contracts in Cambodia are either Fixed Duration Contracts (FDC) or Undetermined Duration Contract (UDC).

A FDC must contain the following:

  • Contract duration – the date of commencement and expiry – with a renewal option so long as the total duration of the contract does not exceed the maximum duration of two years
  • Remuneration (Salaries and Benefits)
  • Working Hours
  • Job Description and Work conditions
  • Other Terms and Conditions

A written UDC must contain the following:

  • Contract duration – the date of commencement and expiry – with a renewal option so long as the total duration of the contract does not exceed the maximum duration of two years
  • Remuneration (Salaries and Benefits)
  • Working Hours
  • Job Description and Work conditions
  • Other Terms and Conditions

Rental, Recruitment and Office Fit-out in Cambodia

Use the Business Tools at no charge to estimate business set up costs, or shortlist service providers from the Business Directory to assist your business registration and set up, as well as the various operational and administrative compliances, including taxation.

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators / observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Tourism and Hospitality

Tourism and hospitality is the Cambodian economy’s second-largest growth driver, and by World Bank (WB)’s estimates, contributed about 21% to the GDP in 2019. According to the Ministry of Tourism, this translated into a gross revenue of around USD 4.92 b, a 13% YOY increase. Without a doubt, the tourism sector which has been on the rise for the past decade, is an important foreign exchange earner, attracting 6.61m international tourists which were a 6.6% YOY increase. China was the largest source at 2.36m visitors, followed by Vietnam and Thailand.

Tourism & Hospitality Statistic of Cambodia
International Tourism Statistic in Cambodia (source: MFAIC Dashboard, published 15 November 2021)

Prior to the Covid pandemic, the growth of tourism and hospitality in Cambodia was already encountering a slowdown. Its over-reliance on Angkor Wat in Siem Reap and Chinese visitors were often highlighted by many as warning signs that should not be ignored, but the fallout from the ban on online gambling in Aug 2019 (effective 1 Jan 2020) further catalyzed the slowdown in arrivals to Angkor sites and elsewhere in the country the following year. The Covid pandemic then dealt a severe blow to the global travel and hospitality industry, and the tourism industry in Cambodia was brought to its knees.

In 2020, just USD 1.023 billion in revenue from 1.3m international tourists were recorded, a 79.4% nosedive from USD 4.92 b and an 80.2% fall from 6.6m international visitors in 2019. This translated into just 3% of Cambodia’s GDP in 2020, a far cry from the 21% chalked up in 2019. Industry experts estimate that it would take 3 to 5 years for Cambodia’s tourism sector to get back on its feet, assuming the pre-Covid fundamental challenges are being adequately addressed.

Tourism & Hospitality sector in Cambodia
International Tourist Arrival in Cambodia 2019 – 2021 (source: MFAIC Dashboard, published 15 November 2021)

Eco-Tourism in Cambodia

Although low-lying central plains make up about three-quarters of its geography, Cambodia has several distinct landscapes that offer very rich biodiversity of flora and fauna. These very vibrant ecosystems are home to hundreds of different species of wildlife including migratory birds, and thousands of species of plants, and are well suited for eco-tourism.

  • Forested highlands (including the Cardamon, Dangrek and Chhlong mountains) and flooded forests at the foot of the mountains;
  • The largest natural freshwater lake in Southeast Asia, the Tonle Sap and the Mekong River system and its many tributaries;
  • The eastern plains or highlands in Rattanakiri and Mondulkiri boasts a landscape and temperate climate resembling that in Europe;
  • The coastal region includes mangrove wetlands; and
  • Offshore islands a short ride by boat from the coastal provinces of Koh Kong and Sihanouk.

The ecotourism sector, hitherto under-developed, has seen a surge in interest in recent years as Cambodia relied more on domestic tourism during the Covid pandemic, raising awareness of the many unspoiled areas of the Kingdom that could be suitable for glamping and small footprint development. Trends of increased visitors to ecotourism sites in Cambodia suggest that ecotourism is a product that could be further developed in terms of sophistication and quality control to optimize its potential.

This can not only help create innovative revenue streams for the Cambodian government and its local communities, but help to preserve and protect its natural forests and habitat; these two endeavors or goals need not be mutually exclusive, and indeed, more private sector players are venturing into ecotourism and proving that they could be as good, if not better, at achieving both goals more efficiently and productively than projects that are run or managed on strictly conservation agenda.

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Legal and Tax

Cambodia’s legal system is a hybrid of Civil Law (inherited from the French colonial era) and Common Law (introduced by international development partners as part of their assistance on legal and judicial reform).

For foreign businesses and investors, it is unavoidable that legal contracts on investments, projects and partnerships here must adhere to the jurisdictional law of the host country, and this may understandably be an issue of anxiety and concern. However, that need not be the case if the right local partner and some commonsense due diligence are undertaken before entering into any formal agreement.

After all, legal protection as enshrined in contractual agreements is supposed to be just that – a contingency, a safeguard, a safety net and for some, the dreaded last resort of choice to ensure an agreeable outcome for all signatory parties. But this requires some familiarity of the local operating context, access to a network of diverse contacts and a conduit that elicits trust, integrity and reasonableness in the conduct of business transactions.

It will be worthwhile to devote more time, attention and resources to ensure these fundamental prerequisites are in place rather than be overly hasty in a business deal on account of the personal referral of persons or entities claiming to have the right “political connection”. A simple anecdote that may be all too familiar to those who had previous business/investment experience in any emerging economy is when someone claims to be well connected to a general (or a few); the reality is that there are more police and military generals per capita in Cambodia than countries that boast much larger security and armed forces.

Nevertheless, foreign business and investors should peruse the Business Directory in this platform at no charge to shortlist legal firms to consult for not only its contractual needs but on a variety of other operational and administrative compliances, including taxation. It would be prudent to pay more attention to clauses on disputes settlement in contractual agreements beyond the usual standard refrains; Aquarii strongly advocates the inclusion of stipulations on amenable resolution, mediation and arbitration.

Feel free to enquire with the Aquarii team should you need further advice.

Taxation in Cambodia

In Cambodia, both companies and individuals are subject to certain tax obligations under the host country’s self-assessment system, regardless of the type of business activity or the level of annual revenue. The tax registration can be concurrently filed with the General Department of Taxation (GDT) when the application for company registration is submitted to the Ministry of Commerce (MOC).

Type of Taxpayer in Cambodia
Type of Taxpayer in Cambodia

Some of the more common taxes that foreign businesses and investors would have to file declaration and comply with are listed below but note that they are not exhaustive and other taxes and duties may be applicable:

1. Taxes on Employment

An individual is considered a tax resident if they have been in Cambodia for more than 182 days in any 12-month period ending in the current year of tax assessment;

Tax resident employees must pay tax on salaries from both Cambodian and foreign sources – employer pays to withholding tax on the gross monthly salary of employee according to a progressive scale/rate;

The monthly salary of non-resident employees for salary derived from Cambodian sources are subject to a flat withholding tax rate of 20%;

Employers must withhold the tax due on an employee’s salary (and 20% of the total value of fringe benefits) and pay the withholding tax to GDT on or before the 25th day of the month following the salary payment;    

2. Tax on Company vehicle

3. Patent Tax, the quantum of which is dependent on the annual revenue viz small, medium or large taxpayers.

4. Stamp tax (exempt for newly established companies) but applicable for mergers, dissolution, transfer of shares and immovable properties and assets.

5. Tax on Income depending on the industry (Note: There is also Prepayment Tax on Profit calculated at the base rate of 1% of the company’s annual turnover which is to be paid by or before the 20th of each month. The cumulative amount shall be deducted against the tax on profit at the annual declaration).

6. Minimum Tax is at the rate of 1% of the annual turnover (inclusive of all taxes except VAT) and is payable along with the tax on profit.

7. Withholding Tax is the tax that a resident taxpayer business withholds when it makes payment in cash or in-kind to a resident or non-resident taxpayer, including bank interest, royalties, rental, dividends, etc.

8. VAT – Value-Added Tax at 10% of the value of the goods or services to be supplied must be charged/added.

9. Capital Gains Tax of 20% was promulgated on 1 April 2020 to be effective from 1 July of the same year, but the implementation was subsequently deferred to 2023 due to economic pressures from the Covid pandemic.

Note: Qualified Investment Projects (QIPs) are exempted from selected taxes and duties

Double Tax Agreements of Cambodia (DTA)

Cambodia has signed Double Taxation Agreements (DTA) with nine countries to avoid the international double taxation of income and properties.

Double Tax Agreement in Cambodia as of 2022

We advocate seeking the professional advice and services of a qualified and reliable accountancy firm to ensure that your tax filing is done correctly and in compliance with GDT requirements from the onset.

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Accountancy and Auditing

Some of the salient legal requirements stipulated for Accountancy and Auditing in Cambodia include but are not limited to the following:

  • Financial statements are the basis upon which tax obligations are premised
  • Full accounting records must be maintained for a period of 10 years, and all financial transactions must be filed with proper supporting documents
  • Accounting records and financial statements are to be in the Khmer language and denominated in Khmer Riel equivalent; a second set of records and statements may be prepared in the English (or foreign language) in which its activities are conducted in
  • The tax and accounting year generally coincides with the calendar year although any deviations are permissible so long as the appropriate approvals are properly documented
  • All business entities must submit their annual financial statements to be audited by an independent auditor who is registered with the Kampuchea Institute of Certified Public Accountants and Auditors (“KICPAA”)

Similar to most countries and jurisdictions around the world, Accountancy and Audit are subject matters that require professional expert advice and services to ensure corporate compliance and adherence to host country legal and taxation regulations. This is especially important in emerging markets when the bureaucracy and institutions are still developing or undergoing reform, and where there may be variances in the interpretation of obligations and requirements because of different country systems, cultural practices and expectations, among other variables.

Accountancy and Audit in Cambodia - Type of Audit

Unlike Multinational Corporations (MNCs), SMEs may have smaller operating budgets and hence find it challenging when considering which of these professional service providers should they consider. Factors such as the affordability, reliability, customer service, attention to details among others would weigh heavily in their considerations. We encourage you to peruse the Business Directory in this platform at no charge to shortlist Accounting and Audit service providers for your company’s operational and compliance needs. If you are unable to decide whether it is necessary to engage the services of a big accounting audit firm with an international reputation or a lesser known local or foreign firm that is not as well known, or any other number of choices in between, feel free to enquire with the Aquarii team for further advice.

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Banking and Finance

When it comes to banking and finance in Cambodia, the National Bank of Cambodia (NBC) is Cambodia’s central bank and monetary authority. It is the supervisory regulator of all financial institutions in the Kingdom, including Microfinance Institutions (MFIs), Microfinance Deposit-taking Institutions (MDIs), specialized banks and commercial banks, and operators of e-wallets, remittance services, insurance companies among others. NBC has the authority to inter alia license banks and issue permits for e-wallet providers, regulate money transfers and remittances, manage and conduct foreign exchange transactions, provide credit, and establish credit ceilings and interest rate guidelines.

In recent years, NBC has proactively promoted the use of the Khmer Riel to mitigate the risks inherent in a highly dollarized economy; as Cambodia aspires towards middle-income status, high dollarization leaves the country vulnerable to external shocks and can threaten its hard-earned economic gains. This will serve to bolster its role as the country’s central bank as a more effective monetary policy will be one of the policy instruments it needs to promote price stability and sustainable economic development for the Kingdom.  For example, all taxes and utilities are to be paid in the local currency, and the value of the Khmer Riel is maintained through a stable exchange rate.

The minimum capital requirement for commercial banks is USD 75 million, but this will be raised gradually to USD 200 million over the next few years. Specialized banks must maintain at least USD 15 million in registered capital whereas that for MFIs is USD 1.5 million. MFIs are generally authorized to engage in credit services and savings, but an MDI license is required for the collection of deposits from members of the public. According to NBC’s record as of 31 December 2020, there were 47 commercial banks, 12 specialized banks, 6 MDIs and 73 MFIs in the Kingdom. These numbers would be subject to change due to the exacting and cumulative challenges brought about by the Covid pandemic over the past two years, as some could have undergone mergers and acquisitions. A quick survey of the banking landscape reveals a broad spectrum of representation from various countries such as Canada, China, Cambodia, France, Japan, Malaysia, South Korea, Singapore, Thailand, and Vietnam.

The only Singaporean-owned bank in the Kingdom is Phillip Bank, a member of Phillip Capital Group established since 1975.

Fixed Deposit Rates in the Kingdom are one of the most attractive in the region at an average of 5.5% to 8% depending on the tenure and currency (in line with NBC’s efforts to encourage the use of the Khmer Riel, Fixed Deposits in Khmer Riel attract a higher FDR than USD). Accordingly, local loans are not cheap and are typically for the short term; interest rates are in fact relatively high compared to those found in developed countries, and security or collateral is often a necessity. In spite of the higher cost of lending, lending activities have increased in the past decade, keeping pace with the Kingdom’s rapid rate of economic development, especially in the infrastructure, construction and tourism activities. Aquarii’s preferred banker of choice, Phillip Bank is one of the largest commercial banks in Cambodia in terms of branch network, with more than 80 branches throughout the country. Phillip Bank offers a wide range of financial services and products catering to Corporate, SME and Retail customers.

Supplementary

Banking System in Cambodia
Banking System in Cambodia 2020 2021
Source: Phillip Bank
Inflation and Exchange Rate 2015-2021
Inflation all item YoY
Source: Phillip Bank

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Insurance and Actuarial

Cambodia’s insurance market is still at early stage of development but has become noticeably more active as more international players enter the market in each succeeding year. There are currently 17 general insurance companies, 12 life insurance companies, 6 micro-insurance companies and 1 re-insurance company in the market. According to local regulations, life insurance companies and general insurance companies are each separately licensed with a minimum registered capital requirement of USD 7 m and are required to maintain a 10% fixed guarantee deposit with NBC.

Insurance operators in Cambodia 2022
Insurance Operators in Cambodia (Source: Insurance Association of Cambodia)

According to a report from the Insurance Association of Cambodia (IAC), the insurance sector continued its positive momentum through the first quarter of 2021 with a growth rate of 16.3%, down from 20.8% YOY. Total insurance premiums for the same period were $85 million, with general insurance increasing by almost 20% to USD 39.1 m and life insurance premiums increasing by 15.5% to USD 44.6 m, whereas microinsurance premiums contracted by 27% to USD 1.2m. 

Insurance Premium and Claim in Cambodia
Insurance vs. Claim from 2016 to 2020 (source: Insurance Association of Cambodia)

ICA estimated the insurance market size to be 1.2 million customers comprising 380,000 policyholders of life insurance, 510,000 in general insurance (health and individual accident insurance) and 280,000 in micro-insurance. Across the board, premium growth was about 7.3% in 2020 at about USD 271.5 m whereas claims paid out to policyholders in 2020 totalled USD 11.3 m.

Share of Insurance Premium in Cambodia
Share of General Insurance Premium (left); Share of Life Insurance Premium (right) – Source: Insurance Association of Cambodia

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

IT and Telecommunications

Cambodia’s telecommunications sector is fast developing and its overall outlook is promising and likely to enjoy robust growth in the years to come. There are several key observations to note:

The lack of regulatory restrictions or limitations on foreign ownership of telecommunications players

Government efforts to liberalize the telco market by allowing private investment and promoting competition has also attracted several foreign and local investments, a few of which are Chinese private entities

With lower-than-average mobile phone tariffs compared to other Southeast Asian countries, mobile services in Cambodia have surpassed the growth of fixed-line systems, the latter of which remains relatively underdeveloped

Increasing internet access and penetration among the Cambodian population, especially among the youths (75% of the population under the age of 35). Compared to neighbouring countries, subscription rates are still very low

Some telecom operators are upgrading their internet infrastructure to 5G, offering faster speeds and more reliable internet connections on smart devices. Reforms in telecommunications regulatory environment, and clearer delineation of the duties and responsibilities of Telecommunication Regulator of Cambodia (TRC) from the parent Ministry of Post and Telecommunications (MPTC).

MPTC’s digital government policy for 2021-2035 to serve as a roadmap for providing better public services through the use of digital technology, with priority emphasis on building more telecommunications infrastructure, improving telephone and internet services, etc

According to MPTC, as of April 2021, Cambodia has:

  • 5 mobile service providers – Smart Axiata, Cellcard, Viettel, Cootel and SEAtel
  • 47 ISP licenses were issued
  • 12 m social media users or 71.3% of total population, a 24% YOY increase or 2.3 m over the same period in 2020
  • 17.48 m Mobile internet subscribers or 104% of total population, a 7% YOY increase

Supplementary

Telecommunication Infrastructure Index of Cambodia 2020
IT and Telecommunication Infrastructure Index of Cambodia 2020
Source: United Nations E-Government Survey, E-Government Development Index (EGDI) 2020. (Scoring scale 0-1, where 0 = lowest and 1 = Highest)
Number of Mobile Phones in Cambodia
Number of Mobile Phone in Cambodia
Source: Statistical Yearbook of Cambodia 2021 – National Institute of Statistics
Internet Service Subscribers in Cambodia
Telecommunication in Cambodia
Source: Ministry of Post and Telecommunication

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Human Resource, Recruitment, and Training

The 1997 Labor Law (“Labor Law”) is the primary legislation governing all employment activities in the Kingdom of Cambodia and is enforced by the Ministry of Labor and Vocational Training (MLVT).  With rising awareness of labor/employee rights and an increase in trade unions, foreign businesses and investors in Cambodia, especially those that employ large numbers of employees/workers, should be familiar and have a good working knowledge of the Labor Law and its regulations, terms, and conditions.

There are no restrictions on the employment of Cambodians, but foreign businesses will have to apply for a business visa (or E-visa) and work permit for each foreigner they choose to hire and must comply with MLVT’s foreign employee quota system. Under the latter, the number of foreigners that a business can employ must not be more than 10% of the total number of company employees, of whom 3% can be office employees, 6% skilled labor, and 1% can be unskilled.

This quota may be increased, at the discretion of the MLVT, particularly if the specific skills required by the company are currently unavailable or difficult to source in Cambodia. Businesses that flout the quota regulation can be fined between USD 630 to USD 900.

While there is generally a lack of skilled and experienced human resources for certain positions and job responsibilities, what is more, important is to identify the right recruitment conduits through which competent, qualified and reliable candidates can be shortlisted and interviewed.

A few salient matters that foreign businesses may wish to note concerning the local employment practices and regulation:

Seniority Payments

In response to rising incidents of factory owners reneging on salary payments to garment workers, an important vote bank in local elections, MLVT introduced new regulations requiring employers to pay employees under Undefined Duration Contract (UDC) seniority payments payable once every 6 months in June and December each year.  This is akin to advance payment of severance payment in other countries. The employee will be entitled to seniority payment equal to 7.5 days for each particular half-year or 15 days per year.

Wages

No minimum wage has been established by law except for the garments, textiles, and footwear manufacturing industries, where the minimum wage for probationary employees (currently USD 194 per month WEF 1 Jan 2022). The minimum wage is subject to negotiated change every year through their tripartite mechanism between the Garment Manufacturers Association of Cambodia (GMAC, on behalf of factory owners), the trade unions (on behalf of the workers), and MLVT (representing government). Other mandatory benefits that only workers in the garments, textile, and footwear sector are entitled to include attendance bonuses, seniority bonuses, and allowances for travel, accommodation, and overtime meals.

Mandatory Employee Benefits

  • Maximum working hours are normally 8 hrs/day or 48 hrs/week
  • Hourly overtime is compensated at 1.5 to 2 times the normal hourly wage
  • Annual leave entitlement is 1.5 days for each month of employment or 18 days per year, with an additional day every three years of employment
  • Maternity leave of at least 90 days at half salary if she has worked one continuous year or more for the company
  • Special leave (eg: funerals, weddings) at a maximum of 7 days per year and can be deducted from the employee’s annual leave (if such is available) or compensated for through overtime work (calculated at the normal rate for this purpose) by the employee

National Social Security Fund (NSSF)

Covers three pillars: (a) occupational risk (work-related accident and occupational disease) insurance; (b) health insurance; and (c) retirement pension.

Supplementary

Working Age Population in Cambodia in 2020
Working Age Population in Cambodia
Source: Cambodia Socio-Economics Survey (CSES), National Institute of Statistics (NIS)
Employment Population (aged 15-64 years) by Main Industry and Sex
Employment Population by Industry in Cambodia
Source: Cambodia Socio-Economics Survey (CSES), National Institute of Statistics (NIS)

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Chambers and Associations

A chamber or association is a network of businesspeople designed to promote and protect the interests of the members. Generally, they are made up of business owners that share a locale, or common interests. Chambers can be regional, national, and international in scope. Corporate make-up, leadership, and representation vary depending on the chamber.

There are many types of Chamber such as Community Chamber, State Chamber, City Chamber, National or International Chamber. The board of directors of the Chamber may includes Chief Paid Executive, Operations Executive, Finance, Communications and Membership.

From an international perspective, chambers of commerce exist in almost all countries of the world. Their primary function is to promote business exchanges between the countries they represent and the host country they are in. This is achieved through building attractive communities, ensuring the advancement of the community via a pro-business climate, promoting the community, representing the voice of the business community, and reducing transactional friction by maintaining a network.

Generally, chambers of commerce represent sovereign nations, but can also represent bodies such as the European Union, or non-sovereign entities such as Hong Kong which have a high degree of autonomy despite not being independent states.

There are several noticeable Business Chambers and associations in Cambodia such as AmCham, EuroCham, IBC, IndoCham, MBCC, CCC, JBAC, YEAC, CWEA, Khmer Enterprise etc.

We welcome service providers or subject matter experts for this sector to provide relevant insights and pertinent information, which shall be attributed to your business (subject to Aquarii’s curation and edits).

To contribute to this section, please contact us here.

Health Care Scheme under NSSF for Persons Defined by the Provisions of the Labour Law

Medical Care Services

Medical care services for the NSSF members who are defined by the provisions of the Labour Law including personnel serving in air and maritime transportation as well as domestic workers shall be entitled to enjoy medical care services only if they have registered and paid contributions to the Health Care Scheme.

Medical care services are as follows:

1. Inpatient department includes:

– Treatment and care services with medical professional technics

– Diagnosis, laboratory and other medical screening services

– Surgical apparatus and other medical equipment in the need of treatment

– Prescribed medicine

– Inpatient room.

2. Outpatient department includes:

– Treatment and care services with medical professional technics

– Diagnosis, laboratory and other medical screening services

– Surgical apparatus and other medical equipment in the need of treatment

– Prescribed medicine.

3. Delivery and prenatal-and-postnatal services

4. Physiotherapy and kinesitherapy services or other medical rehabilitation services

5. Emergency service: in the case of an emergency, the victim can access medical care services at the nearest health facility. If such a health facility does not have an agreement with NSSF, the person concerned or representative of the victim shall inform NSSF promptly.

6. Health prevention services.

7. Patient or victim referral services and corpse transportation.

Patient or victim referral services shall be provided in the case of emergency by the ambulance of the health facility only.

Hopeless patient or corpse transportation shall be provided based on the price of health facilities recognized by NSSF.

8. Medical rehabilitation services

Medical rehabilitation services for supporting the medical care or helping alleviate patient or victim during treatment.

Daily Allowance for Sick Leave

The NSSF members who are defined by the provisions of the Labour Law including personnel serving in air and maritime transportation as well as domestic workers shall have entitlement to enjoy daily allowance for sick leave only if they: – Registered in Health Care Scheme – Paid contributions in a qualifying period of 2 (two) consecutive months or 6 (six) months within a period of the last 12 (twelve) months. – Hospitalized in the health facility for 8 (eight) days or more.

A daily allowance shall be provided from the first day of the abstention from work because of the hospitalization in the health facilities. A daily allowance shall be equivalent to 70% of the daily average wage for contribution payment in a qualifying period of not exceeding 6 (six) months before encountering health problems. Page 14 of 24 Conditions, formalities, and procedures of providing a daily allowance for sick leave shall be regulated by Prakas of Minister of the Ministry in charge of social security schemes in compliance with the proposal of the NSSF Governing Body.

Maternity Allowance

The NSSF members who are defined by the provisions of the Labour Law including personnel serving in air and maritime transportation as well as domestic workers shall be entitled to enjoy the maternity allowance only if they: – Registered in Health Care Scheme – Paid contributions for at least 9 (nine) months within the last 12 (twelve) months until the date of delivery.

The maternity allowance shall be equivalent to 70% of contributory wage in a qualifying period of not exceeding 6 (six) months before the delivery month for 90-day maternity leave. Conditions, formalities and procedures of providing maternity allowance are regulated by Prakas of Minister of the Ministry in charge of social security schemes in compliance with the proposal of the NSSF Governing Body.

Source: http://www.nssf.gov.kh/default/wp-content/uploads/2020/09/2.-Law-on-Social-Security-Schemes.pdf

Education and Skill Training

We welcome service providers or subject matter experts for this sector to provide relevant insights and pertinent information, which shall be attributed to your business (subject to Aquarii’s curation and edits).

To contribute to this section, please contact us here.

Medical and Wellness

We welcome service providers or subject matter experts for this sector to provide relevant insights and pertinent information, which shall be attributed to your business (subject to Aquarii’s curation and edits).

To contribute to this section, please contact us here.

Supplementary

Indicative Recurrent Budget Expenditure for Public Health in Cambodia (in million USD)
Indicative Recurrent Budget Expenditure for Public Health in Cambodia
Source: Health Strategic Plan 2016-2020, NSDP 2014-2018 and DPHI estimation for 2019 and 2020

Fintech and E-Commerce in Cambodia

Cambodia is primarily a cash-based economy but in recent years have seen a greater prevalence in the use of cashless payments through credit cards, digital payments, and transfers through online or mobile banking apps, e-wallets, etc. National Bank of Cambodia (NBC) has been at the forefront of this transition by encouraging and supporting innovation, improving interoperability between the various banks and financial institutions, as well as the provision of digital financial services to reduce costs and promote financial inclusion.

Fintech Ecosystem in Cambodia 2021
Cambodia Fintech Ecosystem (Source: Cambodia Fintech 2021, Mekong Strategic Partner)

The Kingdom of Cambodia has made significant progress to regulate the digital economy. The promulgation of the first Cambodian Law on E-commerce has created a significant improvement for electronic commerce in the country. The law covers the issues of electronic communication, electronic record and signature, intermediary and e-commerce service providers, electronic evidence, and so on. 

In October 2020, it formally launched Cambodia’s first and only blockchain-based integrated payment system, called the Bakong, where e-wallets, mobile payments, online banking, and financial applications can all be used through one system interface.  The digital payment system enables Cambodians to use a free mobile app to make payments and transfer money through any bank on the platform, even if they don’t have a traditional account with the bank.

According to the ASEAN+3 Macroeconomic Research Office (AMRO), the Fintech ecosystem in Cambodia, particularly in digital payments and transfers, has greatly expanded in recent years. In fact, the Covid pandemic may have helped to catalyze this shift to cashless transactions. It assessed that this increased pace of adoption of digital payments and mobile banking has helped to lower the costs of financial services (for the unbanked) and operational costs (for the payment service institutions), providing an overall more efficient, convenient, and secure services to all. AMRO noted that despite a late start:

  • Mobile money services have expanded rapidly within 5 years from just 34 agents per 100,000 adults in 2015 to 400 per 100,000 adults in 2020
  • The number of registered e-wallet accounts increased more than 20 times to 9.6 m in 2020, accounting for more than 80% of the adult population, higher than deposit accounts with commercial banks or MDIs
  • The number and value of mobile e-transactions also expanded rapidly to 266.5 m in 2020, with a total value of 168.6% of Cambodia’s GDP

Some of the commercial banks that offer their own mobile payment gateways are:

Some of the e-wallet / e-payment industry players are:

  • Pi Pay
  • UPay
  • DaraPay
  • Smart Luy

Supplementary

Startup Landscape by Category
Fintech Startup in Cambodia
Source: Startup Kingdom: Cambodia’s Vibrant Tech Startup Ecosystem, Mekong Strategic Partners and Raintree 2018
Cambodian Payments Topology
Cambodia Fintech - Payment Topology 2021
Source: Cambodia Fintech 2021, Mekong Strategic Partner

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Real Estate, Property Management and Maintenance

Cambodia experienced a boom in the construction and real estate industry since 2000, but construction activities and real estate prices defied reality particularly from 2016 to 2019. Between 2000 to 2018 alone, Cambodia’s Ministry of Land Management, Urban Planning, and Construction (MLMUPC) approved 43,136 construction projects with an estimated investment value of USD 43.3 b. But according to the National Bank of Cambodia’s estimates, MLMUPC approved USD 11.4 b worth of new construction projects in 2019 alone. The residential, commercial, and industrial segments accounted for about 46-50%, 30-35%, and 14-15% share of new projects respectively.

Construction & Real Estate in Cambodia
Number of Approved Projects (left) and Approved Amount in Million USD of Construction Projects (right) – Source: Ministry of Land Management, Urban Planning and Construction

Most of the money going into these projects was locally sourced, with China accounting for most of the foreign investment. Real estate companies estimated that the total number of condominiums in Phnom Penh alone jumped by 120% in 2019 and 300% in 2020, with foreigners on average accounting for 60-70% of condominium sales in Cambodia. If the cityscape of Phnom Penh has changed drastically, then the port city of Sihanoukville has been transformed beyond recognition as the coastal provinces of Koh Kong and Preah Sihanouk were also changed with numerous tourism and mixed development projects.

However, following the global economic slowdown in 2019, Cambodia’s ban on online gambling in Aug 2019 (effective 1 Jan 2020) had a chilling effect on the construction frenzy and frothy real estate prices. The total value of approved projects dropped to just USD 7.8 b in 2020, a YOY fall of 26.9%. This was exacerbated by the Covid pandemic which wreaked havoc in the global supply chain and caused unprecedented travel restrictions to be imposed, severely disrupting the availability and pricing of construction materials and labour, as well as shutting out buyers, investors and businesses. In 2021, the total number of approved projects was 4,303 at an estimated total investment value of USD 5.33 billion.

However, given Cambodia’s high vaccination rate where nearly 90% of its population have been fully vaccinated and the bold steps are taken to reopen its economy by lowering quarantine measures for vaccinated travelers to the Kingdom, the construction and real estate sector in Cambodia should rebound in 2022. According to NBC’s outlook for 2022, the latter will eventually catch up with its economic growth, supported by the inflows of domestic revenue and investments to Cambodia. In tandem with the rapid growth of the construction and real estate sector, the number of agencies and service providers in real estate, property management and maintenance has also grown. In particular, real estate agency services have witnessed a larger footprint in the online and digital space, although it will require more international players and brand names such as Century 21 to be the benchmark the market in terms of the level of professionalism, value-added service, transparency in information, and the quality of customer and after-sales service.

Supplementary

Share of Approved Projects by Sector by Surface Area in 2020 (left) and Import of Construction Materials 2016-2020 (right)
Real Estate in Cambodia
Source: Ministry of Land Management, Urban Planning and Construction, General Department of Customs and Excise, and National Bank of Cambodia’s staff calculation

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Transportation, Logistics, and Supply

According to the OECD Competition Assessment Reviews: Logistics Sector in Cambodia in 2021 and updates/figures from the Asian Development Bank (ADB) and World Bank (WB), Cambodia’s transportation and storage market in 2019 was worth USD 2.1 billion, representing 7.8% of the country’s GDP. Connectivity in Cambodia has improved drastically in the past decade, thanks mainly to the huge private and Overseas Development Assistance (ODA) investment projects spearheaded by China, Japan, and South Korea among other development partners.

Logistics costs over sales in Cambodia were estimated at 20.5% in 2018, higher than some ASEAN countries such as Thailand and Viet Nam, and the global average of 10-12%, but lower than others such as the Philippines and Indonesia. According to the WB, the informal logistics charges levied by government agencies remain significant at an estimated 48% of logistics administration costs. Improving transport infrastructure in Cambodia is essential to reduce logistics costs.

The salient characteristics of Cambodia’s logistics sector are briefly appended below.

Largely dominated by Road Freight Transport

  • The primary road network has 2,254 km of national paved roads (1-digit roads) that connect the country with its borders, the GMS, and the ASEAN network; 5,007 km of inland national roads (2-digit roads), of which 72% are paved; and 9,031 km of provincial roads (3- and 4-digit roads), of which only 30% are paved.
  • The number of registered trucks more than doubled between 2008 and 2016.
  • Continues to be the dominant mode of transport in Cambodia.
  • Fixed costs are low as the physical transport infrastructure, such as roads and highways are publicly funded.
  • Variable costs include fuel costs (subject to oil prices), maintenance charges, road use and congestion.
  • Often the transport mode of choice as it allows door-to-door delivery without need to transfer cargo between different vehicles, which means lower costs for senders / recipients and reduced risks of loss or damage.
  • Border cities of Poipet (Cambodia-Thailand border) and Bavet (Cambodia-Vietnam) see thriving cross-border trade; several SEZs are also located in proximity.

Inland waterway and maritime freight transport

  • Represents a smaller proportion of the freight transportation sector in Cambodia, but remains an important element for the country’s local economy and exports.
  • Two international ports – Phnom Penh Autonomous Port (PPAP) and Sihanoukville Autonomous Port (SAP) – as well as inland waterways for freight and passenger traffic. SAP is the only deep-water seaport in Cambodia and PPAP a river port, but the import-export volume through the latter in 2018 was higher than that of SAP. Both ports recorded solid growth in 2019 in terms of volume handled (SAP: 633 099 TEUs and PPAP: 275 000 TEUs).

Airports and Air Cargo

  • Cambodia’s international airports are in Phnom Penh (new international airport being built in Takmao, Kandal Province), Sihanoukville and Siem Reap. Several smaller airports are being constructed or planned in other provinces.

Rail Freight Transport (linking Phnom Penh and Sihanoukville)

  • Rail network covers 652 kilometres consisting of the Northern line (386km), which links Phnom Penh to the Thai border at Poi Pet, crossing Battambang and the Southern line (264 km), which links Phnom Penh to the port of Sihanoukville. There is also a 6.5 km branch line linking the Phnom Penh railway station with petroleum depot facilities along the Tonle Sap River.
  • Nonexistent in 2010, but Southern line reopened to freight traffic in 2013 mostly for bulky, non-perishable goods such as rice and petroleum. Northern line is still undergoing significant rehabilitation.
  • Overall freight volume negligible compared to road transport.

Freight forwarding and warehousing

  • Several freight forwarding companies that rely on large and medium trucks, vans and motorbikes. Low use of digital technology to track goods / cargos, or in management of inventory.
  • Warehousing is fragmented and largely built by supply chain and logistics companies (eg: supermarkets, food distributors, etc) for their own use.
  • Cold chain warehousing is severely lacking.

Impact of Covid on Logistic and Transportation

  • Covid pandemic has severely disrupted supply chains and limited the flows of trade and investments. According to the Cambodia Freight Forwarders Association (CAMFFA), about 10 to 15% of logistics providers were heading for bankruptcy as of June 2020.

Supplementary

Logistics Performance Ranking of Cambodia and Its Neighbors, 2010–2018
Cambodia Logistic Performance as Compared with its Neighbors
Source: World Bank 2018 Logistics Performance Index
Cambodia’s Ranking based on Indicators in the Logistics Performance Indicators, 2016 and 2018 (Score)
Cambodia's Logistics Performance Ranking by Indicator, 2016 and 2018 (Score)
Source: World Bank’s Logistics Performance Index 2016 & 2018. (Scoring scale 0-5, where 0 = lowest and 5 = Highest)
Cambodia Road Indicator
Logistic and Transport in Cambodia
DBST = double bituminous surface treatment, km = kilometer, m = meter, MPWT = Ministry of Public Works and Transport, MRD = Ministry of Rural Development. Source: MPWT and MRD
Railway Traffic Volume (in thousand tons)
Cambodia's Railway Freight Volume
Source: Royal Railway

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Economy Outlook

There are many publications, reports, statistics and analyses on the performance of Cambodia’s economy. However, a foreign business or investor can often find it difficult and perhaps frustrating to know which figure or report is the most representative of the prevailing ground situation. In this section, we have sieved through various sources to provide, at a glance, facts, figures and analysis or considered opinion that are easy to understand and that hopefully will help elucidate the next step of your business consideration.

Cambodia Economy

According to the World Bank in Oct 2021, the economy of Cambodia has sustained an average annual growth rate of 7.7% from 1998 to 2019, making it one of the fastest-growing economies in the world. The Kingdom’s GDP in 2019 reached an all-time high of USD 27.089 billion. The services sector accounted for 38.9% of the GDP, industry for 34.2% and agriculture for 20.7%. In 2019, GDP per capita also reached a high of USD 1,700. According to the National Bank of Cambodia, GDP per capita will be upgraded to $1,842 in 2022, a 6.4 percent increase compared to $,1771 in 2021, $1,771.

The country has attained Lower Middle-Income (LMI) status in 2015 according to the World Bank’s classification and aims to recover from COVID-19 and become an upper-middle-income country by 2030. 

GDP per Capita 1
Cambodia’s GDP per Capita and Country Income Classification (Source: MFAIC Dashboard, published 15 November, 2021)

The economy was significantly impacted by the COVID-19 pandemic in 2020, registering a contraction of 3.1%. However, according to an estimate from the World Bank’s publication “The Macro Poverty Outlook (MPO) for East Asia and the Pacific Report, Cambodia’s economy will return to positive growth at 4.5% in 2022 and 5.5% in 2023 in tandem with its socio-economic recovery on the back of ultra-high vaccination rates and the easing of travel restrictions for domestic and foreign travelers.

Cambodia is an active trading country and recorded a total export of USD 15.61 billion in the first eleven month of 2021. The country’s exports, composed mainly of garments and agricultural products, have increased steadily since the 1990s and account for more than 60% of the GDP. Exports of Cambodian agricultural products such as rice, rubber, cassava, mangoes, bananas, pepper, cashew nuts, corn, palm oil, and tobacco, among others have increased 7.98 million tons year-on-year and generated a gross revenue of USD 4.96 billion in 2021, an increase of 63.8 percent from the previous year.

import and export of cambodia economy
International Trade by Country-in Million USD (Source: MFAIC Dashboard, published 15 November, 2021)

Total exports in January and February 2022 showed a remarkable increase. Exports of Cambodian agricultural products such as rice, rubber, cassava, mangoes, bananas, pepper, cashew nuts, corn, palm oil, and tobacco, among others have increased 7.98 million tons year-on-year and generated a gross revenue of $4.96 billion in 2021, an increase of 63.8 percent from the previous year.

Cambodia’s geostrategic location in the heart of mainland Southeast Asia is within easy reach by flight from most major cities in Asia, by road through its border checkpoints with Thailand, Vietnam and Laos, and complemented by a deep-sea port in Sihanoukville, an autonomous port in Phnom Penh and numerous smaller river ports throughout Cambodia’s provinces.

Businesses and investors have yet to fully optimize the tariff exemption/preference schemes that the developing country enjoys from the European Union Everything-But-Arms (EBA)and the US Generalized Scheme of Preferences Plus (GSP+), and the Free Trade Agreements (FTA) with China and South Korea.

Cambodia’s public debt which consists solely of external debt is rising but the risk of debt distress remains low due largely to the authorities’ borrowing principle of only contracting external debt on concessional terms. Cambodia’s debt-to-GDP ratio reached 33.6 percent of GDP (US$8.8 billion in outstanding debt) in 2020 and is projected to increase to 35.2 percent of GDP (US$9.6 billion) in 2021. Unlike during the past several years, when the largest contributions to loan disbursement growth came mostly from bilateral creditors such as China and France, in 2020, the contribution of loan disbursement by the ADB was the largest, accounting for 30.4 percentage points of the 40.3 percent increase in total loan disbursement. Disbursement from the ADB peaked at US$421.9 million in 2020, up from US$159.11 million in 2019. The contribution of debt disbursement from Japan was next, accounting for 7.6 percentage points (US$149.8 million) of the increase, followed by those from China and the World Bank, accounting 4.0 percentage points and 3.5 percentage points, respectively.

Composition of Gross External Debt 1
Composition of Gross External Debt (in the percentage of GDP)Source: Financial Stability Review 2020, National Bank of Cambodia (NBC)

A new Law on Government Securities was adopted in December 2020, paving the way for issuance of the first government securities in the near future for the establishment of a domestic debt market and providing an overall legal and regulatory framework for issuing, trading, and managing government securities to support public debt management and debt sustainability. When established, the domestic debt market will help gradually diversify financing sources with a shift toward public domestic debt, while promoting domestic savings.

Supplementary

Real GDP Growth Contribution
financial stability review of cambodia economy
Source: Financial Stability Review 2020, National Bank of Cambodia (NBC)
Cambodia’s Budget in Brief 2021
Economy Outlook 2022
Source: MFAIC Dashboard, published March, 2022
Budget Framework (2021)
Economy Outlook 2.png
Source: MFAIC Dashboard, published March, 2022

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Trade in Cambodia – Facts, Figures and Trends

Cambodia’s major export products are garments, footwear, travel goods, bicycles, furniture and agriculture. It mainly imports refined petroleum, knitted fabric, gold, vehicles, construction raw materials and all sorts of consumer goods due to the lack of manufacturing facilities. Its top export markets in 2019 were the US, EU, Japan, China, UK, Canada, Thailand, Vietnam and Singapore, whereas its top import partners were China, Thailand, Vietnam, Japan, EU, Singapore and the US. The trade volume between Cambodia and US increased by 42% to USD 7.8 billion in 2021, compared to USD 5.5 billion in 2020 despite the impacts of the Covid-19 pandemic. China-Cambodia trade volume reached USD 3.75 billion, up 39.2% year-on-year, the highest growth rate in bilateral trade with China and another ASEAN member country while EU trade volume is 3.8 billion in 2020.

According to statistics from the General Department of Customs and Excise (GDCE), Cambodia’s trade volume clocked in at USD 17.65 billion in the first four months of 2022. Export volume reached USD 7.61 billion, an increase of 32.06% from USD 5.76 billion in the same period last year. Import volume was USD 10.04 billion, a year-on-year increase of 5.44% from USD 9.52 billion. Trade deficit in the same period fell by 35.27 per cent from 3.76 billion to USD 2.44 billion.

(Note: These are based on Cambodian official figures and publications by other foreign sources may show different results as their computation and collation of trade figures vary. However, the top 3 remain the same across different methodologies).

International Trade by Country 1
International Trade by Country-in Million USD (Source: MFAIC Dashboard, published 15 November, 2021)

According to various reports/publications in 2020/2021 by the Organization for Economic Cooperation and Development (OECD), the World Bank (WB), Garment Manufacturing Association of Cambodia (GMAC), the Ministry of Foreign Affairs and International Cooperation (MFAIC) among others, Cambodia continues to be an active trading economy, recording a robust 16.72% YOY increase in total exports in 2020 despite the Covid pandemic, a plummet in global demand and the partial withdrawal of the EU’s Everything But Arms (EBA) tariff exemption for Cambodia which affected about 20% of its exports to the EU. Amazingly, Cambodia’s total exports for 2021 looks set to equal or exceed that in 2020 with diversification of merchandise exports beyond just garments despite rising costs of logistics amidst a global disruption of the supply chain.

Cambodias Import and Export
Cambodia’s Import & Export by Products – in Million USD

Analysts and observers attribute Cambodia’s resilience and rebound to several factors – the (still) low cost of labour and production despite the increase in the minimum wage in recent years (US$194 per month in 2022, up from US$192 a month in 2021), its political stability, business-friendly economy (despite what some publications have claimed otherwise), and its geostrategic location in the heart of mainland Southeast Asia. The latter means that Cambodia is within easy reach by flight from most major cities in Asia, by road through its border checkpoints with Thailand, Vietnam and Laos, and by sea through its deep-sea port in Sihanoukville, the autonomous port in Phnom Penh and its many smaller ports along the Mekong and its tributaries that course through Cambodia.

Quick Facts of Trade in Cambodia: In first nine months of 2021

  • Total merchandize exports (excluding gold) rose 23% YOY to US$12.6 billion (compared to 25.5% YOY in January 2020)
  • Top four manufacturing exports (67.5% of total merchandize exports): garment, travel goods, footwear, and bicycle products
Cambodia's Main Export Product 2022
  • The fifth- and sixth- largest exported products are agricultural commodities, and milled rice and rubber, totaling USD 285 million and USD 266 million respectively.
  • New manufacturing products that have emerged include electrical, electronic, vehicle parts, and cables with a combined total of USD 412 million, a YOY increase of 23.1 %.
  • US continues to be Cambodia’s largest export market with exports to the world’s largest economy surging by 31.9% to USD 3.4 b despite uncertainty in the renewal of the Generalized System of Preferences (GSP) where developing countries are able to export their goods to the US exempt from tariff; Cambodia is a beneficiary of the program
  • The EU continues to be Cambodia’s 2nd largest export market. Cambodia’s exports to the EU grew 15% to USD 2.2 b despite the August 2020 partial withdrawal of EU’s EBA tariff exemption for Cambodia (announcement in Feb 2020 and affecting 20% of exports to the EU; prompted withdrawals by certain manufacturers/labels and caused others to shelf plans to open in Cambodia, causing much uncertainty to the industry, resulting in 35% decline in Cambodia’s exports of garments, footwear and travel goods to the EU in 2020)

Not many may be aware that an agreement with the European Patent Organization came into force at the beginning of 2018, providing validation of EU patents in Cambodia and signatory states, or essentially protecting the innovation of manufactured products by EU companies in Cambodia for the Asian market. Moreover, given the tariff exemption/preference schemes under the EBA and GSP that the EU and the US respectively accord to the Kingdom, the Free Trade Agreements (FTA) that Cambodia signed with China (July 2021) and South Korea (Oct 2021), as well as the Regional Comprehensive Economic Partnership (RCEP, Nov 2020), businesses and investors should leverage on the comparative advantage of setting up their manufacturing or assembly facilities in Cambodia for export to these overseas markets.

Supplementary

Export, Import, Trade Balance (percentage of GDP)
Import Export Trade Balance
Source: General Department of Customs and Excise, and National Bank of Cambodia staff calculation
Structure of Cambodia Exports 2018
Cambodia’s Exports in 2018 in Percentage
Structure of Cambodia Imports 2018
Cambodia’s Imports in 2018 in Percentage

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Investment in Cambodia – Facts, Figures, and Trends

The attraction of Cambodia to foreign businesses and investors that realized its potential and opportunities were and continue to be attracted by its business-friendly open economy, low labour, and production costs, and its strategic location and close proximity to production facilities in Thailand and Vietnam as well as favourable access to the Chinese, US, EU, Japan, and South Korea markets.

Cambodia’s investment laws allow 100% foreign ownership of companies in most sectors, and provision for the protection of investments from regulated prices and nationalization. There has been no foreign exchange restriction on the remittance of profits and no capital gains tax, although new legislation on the latter that was introduced in April 2020 has seen its implementation postponed to 2023 due to the economic pressures brought about by the Covid pandemic.

Geographical Advantage of Cambodia
Cambodia’s Geographical Advantage

The Kingdom’s many Special Economic Zones (SEZ) are a good option to consider for export-based manufacturing, and most are located in border cities with Thailand or Vietnam, and/or near ports, airports and national highways. Tenants in SEZs enjoy inter alia corporate tax exemption up to 8 years as well as exemption on profits if they are reinvested in the country; complete duty and tax exemption on imports and exports; among other incentives.

Specialized Economic Zones in Cambodia
Cambodia’s Specialized Economic Zone (Source: MFAIC Dashboard, published 15 November 2021)

Cambodia’s top investment partners over the past few years have been China, Vietnam, South Korea, Japan, Singapore, Malaysia, Thailand, the UK, Canada, and the US. The ranking of the countries may be slightly different depending on whether it is a cumulative investment or for a particular year, and the classification of investment under a particular country could be subjective (eg: a company incorporated in X country but listed in Y country invests in Cambodia with equal shareholdings by A, B, and C of different nationalities), but China is indisputably the top investor in the Kingdom.

The establishment of Capital-Provincial Investment Sub-Committees (CPISC) under the Council for the Development of Cambodia (CDC) allows the sub-committee to review and approve private investment with capital under USD 5 million and resolve disputes related to investment projects. The sub-committee is responsible for reviewing and deciding on the registration, providing incentives, purchasing and assurance, merging, deleting and resolving disputes related to private investment projects.

Investment by Country (Flow)

Investment in Cambodia by Source Country
Investment by Country (Flow) – In Million USD (Source: MFAIC Dashboard, published 15 November 2021)

In 2019 when Cambodia’s GDP hit an all-time high of USD 27.1 b, its total stock of FDI also reached a high of USD 34 b. Prior to the ban on online gambling which was effective 1 Jan 2020 after it was first announced in Aug 2019, the sectors that attracted the most Foreign Direct Investments (FDI) were real estate and construction, garment manufacturing, tourism, other forms of light manufacturing, services and agriculture. Cambodia’s major export products are garments, footwear, travel goods, bicycles, furniture, and agriculture. In 2020, FDI in the real estate and construction sector plummeted to less than 10% (USD 140m) of that in 2019 (USD1.79b), with a larger proportion going to energy, healthcare, and manufacturing including signs of recovery in the garment industry. Tourism has seen a rebound in investment figures, but it is not broad-based due to a large investment in a hotel/theme park project. The tourism industry will likely only recover when international travel resumes in earnest. According to the National Bank of Cambodia (NBC), FDI for 2020 was USD 3.5 b, one percent lower than that in the previous year.

FDI Inflow by Sector and FDI Flows of Financial Activities in CAmbodia
FDI Inflow by Sector and FDI Flows of Financial Activities in Million USD (Source: Council for the Development of Cambodia and National Bank of Cambodia)

The continuing Covid pandemic, disruption to global supply chains, rising costs in raw materials and travel restrictions have severely impacted Cambodia’s open and export-oriented economy. FDIs remained relatively weak at USD 538m or a YOY decline of 83.6% for the first nine months of 2021.

Cambodia still remains as the second most vaccinated country in South East Asia with 90.1% of its population with the fourth dose starts rolling out throughout the country. As the result of the vaccination campaign of the country, Cambodia was one of the very first few countries to open borders to vaccinated passengers without quarantine.

Prime Minister has recently announced to begin vaccinating 3 and 4-year-olds after finding young children accounting for many new infections. The 3 to 5-year-olds vaccination campaign targets 700,000 children across the country and will go nationwide later this month. However, given Cambodia’s high vaccination rate where 90.1% of its population have been fully vaccinated and the bold steps to reopen its economy by lowering quarantine measures for vaccinated travelers to the Kingdom, the growth trajectory for its economy for 2022 and beyond looks promising. Both the World Bank (WB) and the Asian Development Bank (ADB) have projected Cambodia’s economic growth for 2022 to be between 4.5% to 5.5% respectively.

Supplementary

Investment by Sector (Flow) – in Million USD
FDI in Cambodia by Sector
Source: MFAIC Dashboard, published 15 November 2021

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Industry Overview

According to the OECD Competition Assessment Reviews: Logistics Sector in Cambodia in 2021 in 2019, the services sector accounted for 38.9% of Cambodia’s GDP, industry for 34.2% and agriculture for 20.7%. The contribution of the services sector to the country’s GDP has remained around 40% since 2000, while the contribution of the agriculture sector has been declining, in favor of the industry sector.

Industries in Cambodia are mostly within the garment, light manufacturing, agricultural, construction, and tourism sectors, with a nascent emerging mining and exploration industry.

Industry Sector in Cambodia - Growth 2016-2021
Growth of Industry Sector 2016-2021 (source: MFAIC Dashboard, published 15 November 2021

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Construction, Engineering and Building Safety

Cambodia experienced a boom in the construction and real estate industry since 2000, but construction activities and real estate prices defied reality particularly from 2016 to 2019. Between 2000 to 2018 alone, Cambodia’s Ministry of Land Management, Urban Planning, and Construction (MLMUPC) approved 43,136 construction projects with an estimated investment value of USD 43.3 b. But according to the National Bank of Cambodia’s estimates, MLMUPC approved USD 11.4 b worth of new construction projects in 2019 alone. The residential, commercial, and industrial segments accounted for about 46-50%, 30-35%, and 14-15% share of new projects respectively.

Growth on Construction in Cambodia

Unfortunately, building and workers’ safety lagged behind the frenetic pace of construction activities as unauthorized projects launched by opportunistic developers rushing to capitalize on rising real estate prices were pushed ahead. Just 6 months following the death of 3 workers in the collapse of a temple under construction in Siem Reap, a seven-story building under construction in Sihanoukville collapsed in Jun 2019, killing 28 workers sleeping inside. The government amended the Law on Construction in November 2019, including stricter requirements on safety measures at work sites, mandating building safety inspections, and further strengthening permit requirements. Several illegally constructed buildings in Sihanoukville and elsewhere were declared unsafe and demolished. Buildings under construction now require the safety and quality of their structures to be inspected by independent inspectors licensed by MLMUPC.

Construction Continued to be Subdued Due to Excess Supply

The slowdown in the global economy in 2019 was weighed down further by the Covid pandemic which caused severe disruption in the global supply chain and lockdowns/restrictions on international travel. As foreign investors/buyers accounted for 60-70% of sales in the real estate and property market in Cambodia, external demand for the excess supply of condominiums, apartments, commercial offices, and other mixed development projects was likewise interrupted. This was exacerbated by the lack of supply (and rising prices) of construction materials, labor, and funds. Many projects such as FDI-financed property investment, especially in high-rise development projects in Phnom Penh and Sihanoukville, were suspended.

Construction Materials Import to Cambodia
Construction Material Import. Source: MFAIC Dashboard, published 15 November 2021
See also section under Real Estate, Property Management and Maintenance

Real estate sale and rental prices in residential, commercial, and industrial sectors have been declining. Condominium and private apartment prices have been hit particularly hard. With excess supply and lower foreign investor/buyer appetite to invest in property development projects, the value of approved construction permits has also plummeted, contracting by as much as 63% in 2020. Most observers and experts in the real estate industry expect supply and average property prices to slip further before a slow and gradual recovery.

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Energy and Electricity

The energy sector in Cambodia has grown rapidly over the past decade, driven by the Royal Government of Cambodia’s (RGC) key priorities to increase energy access, reduce the cost of energy, and diversify energy security for the country. There are two sources of energy generation: (1) domestic generation and (2) import from neighboring countries.

Source of Energy

According to Electricity Authority of Cambodia, as of 2021, 51.17% of the country’s domestic energy production are from renewable sources. The majority was hydropower 44.17%, while solar and biomass accounted for around 7%. Almost 49% source of energy production comes from non-renewable sources which include coal and fuel oil.

The country was able to meet its power demands with domestic generation resources during the rainy season. However, it still relies on imports, mainly from Vietnam, to cover shortfalls in hydro power production during the dry season, as well as to meet peak daytime demands and for grid stabilization throughout the year.

1
Source of Energy Generation in Cambodia, source: Electricity Authority of Cambodia

The increase in consumption has been supported by the build-out of a national transmission backbone, expansion of domestic energy generation capabilities and an electrification program which has connected more than 99.88% of all villages and 86.43% of all households at the end of 2021.

2
Source: Electricity Authority of Cambodia
3
Source: Electricity Authority of Cambodia

Development of Energy Sector

In recent years, however, the RGC has moved with global trends to construct and commission new large-scale solar power projects, functioning as power plants, in an effort to further diversify Cambodia’s energy portfolio and to include more renewables.

4
Development of Power Source in Cambodia, source: Electricity Authority of Cambodia

National Grid

Under the Kingdom’s Development Plan of the National Grid by 2025, the three main objectives are:

  1. Provide an opportunity to develop and integrate all power sources in the country into one grid system
  2. Control power sources based on time and season to meet the electricity demand
  3. Transmit power to all cities and provinces throughout the country

By the end of 2021, four transmission lines covering 3,443.42 km had been installed. This allows electricity access to 54 substations which supply directly to 24 cities/provinces throughout Cambodia.

5
Source: Electricity Authority of Cambodia

In addition to that, in 2022, a project worth EUR 86.41 million (USD 92 million) to build electricity transmission lines and distribution networks in 3 provinces (Kampong Cham, Kratie and Koh Kong) to improve energy supply for the region’s rural population has been officially launched. The financing for the project was arranged by Electricité du Cambodge (EDC) with loans and grants from the French and the EUEDC. Foreign investments in solar panels are expected to grow after a US government announcement to grant temporary suspension on import duties on solar and modules from Cambodia and three other Southeast Asia countries.

Hydropower

Blessed with vast water resources including the Mekong River, hydropower is Cambodia’s main source of electricity. In 2018 the country took an important step forward in achieving its energy goals with the commissioning of the 400 MW Lower Sesan II, the Kingdom’s largest hydropower project. Located in the northeast of the country on a major tributary of the Mekong River, it was built at a cost of USD 780 million and is a joint-venture between China, Cambodia and Vietnam. Lower Sesan II will boost electricity production by 20 per cent with the electricity being sold to the state-owned utility Electricité du Cambodge (EDC) at a base price of USD 0.0695 cents/kWh.

With Lower Sesan II entering into operation, Chinese built hydropower projects in Cambodia have an installed capacity of over 1,300 MW and account for half of the country’s total installed capacity from all energy sources.

Several more hydropower projects have been proposed in recent years including the 2,600 MW Sambor project located on the mainstream of the Mekong River. An additional 7 hydro power plants sized between 36 MW and 120 MW are scheduled to come into operation in 2022 and 2023 for a total added capacity of 544 MW. In 2025 the first phase (600 MW) of the proposed Sambor hydro dam is scheduled to come into operation with phase 2 and 3 to come online in 2026 and 2027, adding an additional 1,200 MW to the grid.

Solar

Cambodia has some of the best solar resources in the region, due to high average irradiation. Theoretically, the Kingdom has around 134,500 km2 of land with potential for photovoltaics (PV) development. It is by far the cheapest source of new power supply, with sale prices to EDC between 3.9–6.9 cents per kilowatt hour (kWh).

The RGC has been working with ADB to deploy phase two of the solar park, which will include tendering the remaining 40MW of capacity. In late 2017, the RGC started an initial feasibility study for the development of a 100 MW solar park. The solar park was developed in two phases of approximately 30 MW and 70 MW.

In a press release by the Ministry of Mines and Energy, Cambodia will add 495MW of solar power capacity from seven projects by 2023, which will represent 20% of the total energy supply.

Coal

Over half of Cambodia’s electricity is generated in coal power plants, almost all built with Chinese involvement. Coal’s share in the energy mix was set to increase to 75 percent by 2030. The Kingdom’s coal power capacity is projected to reach 4,675 megawatts (MW) within the next 10 years. Of that, only 675 MW is operational, and over 900 MW is under construction. The remaining 3,100 MW, two-thirds of the planned capacity, may be at risk, including the 2,400 MW which is supposed to be imported from projects planned in neighboring Laos.

The Challenges

According to a recent release by RHTLaw Asia, despite the RGC’s efforts to increase renewable energy supply,​ Cambodia still faces some challenges as follows:

  • Demand outstrips Supply: This has in fact been recently confirmed by the Ministry of Mines and Energy in its recent Power Development Plan of 2021.
  • Aging Network & System: According to the ADB, there has been a substantial lack of investment into the electricity infrastructure of the country, and this was clearly evident in the wide spread power cuts and outages in 2019 that cause a deficit of not less than 400 MW daily, lasting from two to five hours every day and this persisted for the entire hot season that year.
  • Uncompetitive Prices: The cost of electricity is probably the biggest most critical factor. Compared to its Southeast Asian neighbors, the county’s electricity tariffs are significantly higher and this creates a huge deterrent when companies are deciding where to set up their factories.
6
Power Tariffs in Major Southeast Asian Economies 2019, source: Climate Investment Funds citing ESDM, EIA

RGC’s Initiative Toward the Development of Energy Sector

In its attempt to attract more investments into the energy sector, the RGC has enacted a new Law on Investment (LOI) in October 2021 which focuses on renewable energy as one of the sectors to be incentivised.  It provides additional tax incentives for green energy producers by registering as Qualified Investment Projects (QIPSs) (read RHTLaw Asia’s article on Solar Power: A Beacon of Hope for Cambodia).

Additionally, the Environmental Code of Cambodia is being reviewed by the government and once promulgated, it should provide much needed clarity and certainty for green energy producers. Potentially, these include the following:

  • Access to companies and consumers using solar energy to connect to the national grid;
  • Development of a net metering system.
  • Up to 20% reduction in profit taxes for any company generating at least 20% of its own renewable energy.
  • Implementation of a one-year pilot for a feed-in-tariff system with a fixed rate for solar energy fed into the grid

It is predicted that the adoption of the new Investment Law incentives and clarity from the Environmental Code and its implementation regulations will be a strong catalyst for further for investment into renewable energy in this Kingdom.

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Manufacturing

Garment, footwear, and travel goods manufacturing are important components of the manufacturing industry and are considered the main engines of growth for the Cambodian economy. Garment manufacturing alone accounts for 80 percent of Cambodia’s exports and employment of more than 600,000 workers, mostly women.

Manufacturing in Cambodia
Import & Export in 2019 and 2020. (Source: MFAIC Dashboard, published 15 November 2021)

Garment (No.1) and footwear (No. 2) continue to be the two largest exports of manufactured products to Cambodia’s overseas markets. Food and beverage is another prospective sector of export products to overseas and there is an opportunity for manufacturers to take advantage of the tariff exemption programs that have been accorded to Cambodia by the US (under GSP), the EU (under the EBA), as well as under the provisions of various FTAs that Cambodia has signed with China and South Korea.

Manufacturing in Cambodia - Top Export Products
Top Export by Product in Cambodia. (Source: MFAIC Dashboard, published 15 November 2021)
See also section under Trade – Facts, Figures, and Trends

We welcome service providers or subject matter experts for this sector to provide relevant insights and pertinent information, which shall be attributed to your business (subject to Aquarii’s curation and edits).

To contribute to this section, please contact us here.

Agriculture and Aquaculture

According to the OECD Competition Assessment Reviews: Logistics Sector in Cambodia in 2021, in 2019, the services sector accounted for 38.9% of Cambodia’s GDP, industry for 34.2%, and agriculture for 20.7%.

Agriculture

Some salient facts concerning Cambodia’s agriculture sector, according to Asian Development Bank (ADB)’s report in July 2021, are briefly appended below.

  • The share of agriculture value-added to the total GDP averaged around 30% during 2000−2014 but fell to 22.1% in 2019
  • Within the sector, crop production has the largest output contribution to total national GDP at 13.0%, followed by fisheries (5.5%), livestock (2.6%), and forestry (1.6%). However, the growth of agriculture value-added has been limited (0.85% annually, on average) since 2013 due to the long-term low labor productivity, lack of rice milling facilities, downturn in international commodity prices and adverse weather conditions
  • Only about 10% of Cambodia’s total agricultural outputs are processed within the country, whereas processed agricultural exports represent only 8% of total official exports by value. Other than rice milling and basic processing of rubber and pepper, the agro-processing sector is largely underdeveloped.
  • Cambodia’s fertilizer use per hectare of cropland increased from 10 kg in 2005 to 33 kg in 2018. Pesticides are also imported, but are allegedly either poorly regulated or unregulated.
  • Notwithstanding, many of Cambodia’s agricultural products that are not for export market (i.e. from individual farms or smaller plantations) are either organically grown or use very little pesticide. If these sources can be better organized and incentivized, there is great opportunity to exploit growing global demand for organic products for export.
  • Access to markets, transport, and logistics continue to be limited or dictated by the larger buyers from Thailand and Vietnam. Farmers are predominantly price takers. Most sell their crops to traders from Thailand and Vietnam just after harvest (or take up loans from them before the next season, thus owning a debt which they are obligated to pay by selling the following season’s harvest to them).
  • Varieties are mixed and only small volumes of pure varieties are found, which hinder value recognition and addition. this includes organic or naturally grown products that use very little pesticide. For further value addition in agriculture, access to international markets and early funding for farmers is important. Efficient transport and logistic infrastructure and services are also necessary to strengthen agri-food value chains.
  • The majority of the country’s agriculture exports are still in raw form and heavily dependent on crops. The main export products are rice and rubber, with an increasing share of cassava. From 2010 to 2018, the biggest reduction of export value was seen in maize.
  • Some previously cultivated cash crops (e.g., soybean, peanuts, sesame, sugar cane, jute, tobacco) have seen area and production declines of almost half compared to 2012. However, subsidiary annual crops (e.g., maize, cassava, sweet potatoes, vegetables, and mung bean) saw cultivated area increases from 727,740 ha in 2017 to 1,006,542 ha in 2018.
  • Perennial crop area (including cashew nut, mango, banana, coconut, orange, jackfruit, durian, and black pepper) expanded from 953,597 ha in 2014 to 1,091,000 ha in 2018. Similarly, perennial crop production increased from over 14.7 million tons in 2014 to 16.6 million tons in 2018, up 10.5% over the past 5 years.
Estimated Value of Agriculture Export from Cambodia
Estimated Value of Agriculture Export

Geographical indication (GI) protection is available where the quality or reputation of the goods is essentially attributable to its place of origin. To date, the following have been accepted for GI protection in Cambodia:

Cambodia also plans to submit six products for GI registration in the EU:

  • Pursat oranges
  • Kampot durians
  • Kampot salt (produced in Banteay Meanchey Province’s Phnom Srok district)
  • Steamed balut (fertilized duck egg) from Takeo province’s Sre Ronong commune
  • Rice from Battambang province’s Thma Koul district

Aquaculture

Cambodia’s wetlands cover about 30% of the country and support one of the world’s biggest, most diverse, and intensive freshwater fisheries. Most harvested fish are from the Tonle Sap and are migratory species. At least 20 species are important for both domestic consumption as well as exports. Some salient facts concerning Cambodia’s aquaculture, according to Asian Development Bank (ADB)’s report in July 2021, are briefly appended below.

  • Capture fisheries reaching their sustainable limits. Fisheries production has increased by nearly 20% since 2013, but the majority of fisheries output still comes from capture fisheries. Volumes of inland capture fisheries have remained roughly static with 527,795 tons of catch recorded in 2017 and marine capture with just over 121,025 tons.
  • Increasing aquaculture production. Aquaculture production is estimated at 207,443 tons annually in 2017, which is equivalent to 24% of all fisheries production. Production has increased by about 30,000 tons a year in the preceding two years.
  • Current policy emphasis is on community fisheries development. There are presently 475 inland community fisheries and 41 marine community fisheries. This community-based model is suitable for high-value fisher exports but lacks an appropriate value chain structure and organization.
  • Cambodia exports fresh and processed fish (in smoked and frozen forms) to Hong Kong, China; Malaysia; the Republic of Korea; Singapore; Thailand; and Viet Nam. However, the largest volumes by far are informal or unrecorded flows of fresh or dried fish trucked to Thailand, especially from the Tonle Sap region. There is enormous potential to add value to the national fish catch by processing fish at or near the source. This can range from making sauces, fillets, and packaged or convenience meals.
  • At present, there are few freezing plants or cold chain facilities in the country. There are no industrial-scale commercial exporters transporting frozen fish products in reefer containers from Sihanoukville or shipping fresh fish from Phnom Penh. Cambodia could tap into overseas markets, such as China, EU, US or the food security needs of Southeast Asian countries.

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

QIP Investment Incentives

Investment activities registered as QIP are entitled to choose basic incentives under the following two options:

Option 1: Income Tax Exemption

  • Income Tax exemption for 3 (three) to 9 (nine) years, depending on the sector and investment activities, from the time of earning its first income. Sectors and investment activities, as well as the period of income tax exemption, shall be determined in the law on financial management and/or the Sub-Decree.
  • After the income tax exemption period has expired, the QIP is entitled to paying income tax at a progressive rate proportional to the total tax due as follows:
  • 25 (twenty five) percent for the first 2 (two) years;
  • 50 (fifty) percent for the next 2 (two) years; and
  • 75 (seventy-five) percent for the last 2 (two) years.

Further, this option includes:

  • Prepayment Tax exemption during income tax exemption period;
  • Minimum Tax exemption provided that an independent audit report has been carried out;
  • Export Tax exemption, unless otherwise provided in other laws and regulations; or

Option 2: Special Depreciation

  • Deduction of capital expenditure through special depreciation as stated in the tax regulations in force;
  • Eligibility of deducting up to 200 (two hundred) percent of specific expenses incurred for up to 9 (nine) years.  Sectors and investment activities, specific expenses, as well as the deductible period, shall be determined in the Law on Financial Management and/or the Sub-Decree;
  • Prepayment Tax exemption for a specific period of time based on sectors and investment activities to be determined in the Law on Financial Management and/or the Sub-Decree;
  • Minimum Tax exemption provided that an independent audit report has been carried out;
  • Export Tax exemption, unless otherwise provided in other laws and regulations.

In addition to the incentives of option 1 or option 2:

A.       Export QIP and Supporting Industry QIP are entitled to customs duty, special tax and value-added tax exemption for the import of Construction Material, Construction Equipment, Production Equipment and Production Inputs;

B.       Domestically Oriented QIP is entitled to customs duty, special tax and value-added tax exemption for the import of Construction Material, Construction Equipment, and Production Equipment. The incentives for Production Inputs shall be determined in the Law on Financial Management and/or the Sub-Decree.

Additional Incentives

In addition to the basic incentives, investment activities registered as QIP receive additional incentives as below:

  1. Value-added tax exemption for the purchase of locally made Production Inputs for the implementation of the QIP.
  2. Deduction of 150 (one hundred and fifty) percent from the tax base for any of the following activities:
    • Research, development and innovation;
    • Human resource development through the provision of vocational training and skills to Cambodian workers/employees;
    • Construction of accommodation, food courts or canteens where reasonably priced foods are sold, nurseries and other facilities for workers/employees;
    • Upgrade of machinery to serve the production line;
    • Provision of welfare for Cambodian workers/employees, such as comfortable means of transportation to commute from their homes to factories, accommodation, food courts or canteens where foods are sold at reasonable prices, nurseries and other facilities.
  3. Entitlement to income tax exemption for the Expansion of QIP which will be determined in the Sub-Decree.

Special Incentives

Any specific sector and investment activities having high potential to contribute to Cambodia’s national economic development may receive specific special incentives to be set out in the Law on Financial Management.

The new Law on Investment provides tax exceptions on imported capital goods for both QIPs and Supporting Industry QIPs. However, the incentives are different between the Export QIP and Domestically Oriented QIP. The Export QIP and Supporting Industry QIP are entitled to customs duty, special tax and value-added tax exemption for the import of Construction Material, Construction Equipment, Production Equipment and Production Inputs. Domestically Oriented QIP is entitled to customs duty, special tax and value added tax exemption for the import of Construction Material, Construction Equipment, and Production Equipment. The Law on Financial Management and/or the Sub-Decree shall determine the incentives for Production Inputs.

Source: http://www.cambodiainvestment.gov.kh/wp-content/uploads/2021/12/LOI_English-Updated-13Dec21.pdf

Source: RHT Legal Update

Qualified Investment Sectors and Activities for QIP

The following investment sectors and activities are entitled to investment incentives:

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

More information can be found here: http://www.cambodiainvestment.gov.kh/
Online registration: https://qip.cdc.gov.kh/login

Investment Projects that have obtained a Registration Certificate may be implemented automatically, but it does not exempt the Investment Project from obtaining other permits as required by the laws and regulations in force. All Investment Projects shall be subject to monitoring and inspection through the One Stop Service mechanism coordinated by the CDC to ensure their compliance with the laws and requirements for obtaining the Registration Certificate. The person carrying out an Investment Project shall provide a report on the implementation of the project according to the specific schedule set by the CDC. The detailed format of the report template shall be determined by the CDCs guidelines.

Source: http://www.cambodiainvestment.gov.kh/wp-content/uploads/2021/12/LOI_English-Updated-13Dec21.pdf

Geography and Demography of Cambodia

Overview of Cambodia

The better you understand the business environment and what makes it tick, the less likely your decision will be premised on emotion, hearsay or just because someone claiming to be ‘connected’ said so. Not unlike Singapore, Cambodia is sandwiched between two larger neighbours – Thailand to the north and west along an 817 km border, and Vietnam to the east and south-east along a 1,158 km border. It also shares a 555 km long border with Laos to its north. Cambodia’s geography consists of several mountain ranges and vast swathes of wetlands and agricultural land. Its agricultural land has been assessed to be one of the most fertile in the region. 

The kingdom’s 25 provinces (the capital city of Phnom Penh is a municipality and is generally regarded as having the same status as a province) are connected by national roads and highways which in recent years, the government has invested in improving highways with the assistance of foreign aid and loans from its development partners (see map below). Most notably National Highway 6, connecting Siem Reap & Phnom Penh,  National Highway 4 connected Phnom Penh to the coastal province of Sihanoukville, and the government is scheduled to complete roadworks in 2022 on National Highway 5 connecting Phnom Penh and Battambang (leading subsequently to the Thai border). 

geography of cambodia
Map of Cambodia National Roads developed with aid from China, South Korea, USA, and Japan respectively.

Cambodia enjoys a strategic location in the heart of mainland Southeast Asia and is well connected with countries in the Asia Pacific and beyond through multiple international flights a week. Because of its high vaccination rate (90.1% as of February 2022) and ability to acquire or procure vaccines from different sources and through COVAX, some international flights to Cambodia have resumed. Consistent with its business-friendly approach, it is one of the first countries in the region to open its economy and borders to vaccinated business and leisure travellers. Its new international airport in Kandal (35 km from the centre of Phnom Penh) is on track to be completed in 2023.

P9GFWwXv4rwiMXptQtHDGGtoMYrihs57L1Fj3LQQjdhfviec9D6m2pAzEOv4WxJYps2gx3gewJcokiRXSHbg1t9pHKJpMQ0XUpGjVwbxZy 51Feq OQ26Miergnh0A
Passenger Traffic, Aircrafts Movements & Cargo Statistics 2020-2019
k TSYrVQPsK3BscS88d 0AtusWpK6CGEZul3e8RI0czXmtpTjJO XR0zmrqO8K0j3VxuF8SJo9831v1JpItfYvKUcPyhxoD9tAZEI
Source: Cambodia Airports – Passenger Traffic, Aircrafts Movements & Cargo Statistics 2019-2021

The train route from Bangkok – Poipet – Phnom Penh, currently operating for cargo with the goal of opening public transport by 2024. The Southern Economic Corridor is a proposed transport route that would connect the port of Dawei in Myanmar to ports in Vietnam, via Thailand and Cambodia. This is an alternative route to the East-East Economic Corridor and will be very beneficial to Cambodia which is in the epicentre of all proposed routes.

International flights routes around Cambodia. Source: MFAIC

Population of Cambodia

Cambodia has a population of nearly 17 million people (16.83 million in January 2021, with a 1.5% growth rate). The average age is 26.6 years old and 81.7% of the population aged 15-59 years are in the labour force with unemployment estimated at 1.2%. However, it is estimated that unemployment may rise to 4.8% due to the economic impact of Covid 19. The labour force is becoming increasingly skilled as nation-wide literacy and graduation rates rise however, employers often struggle to find local skilled labour and should be prepared to conduct extensive training programmes for their local staff. 70% of the population of Cambodia are under 35 years of age there are stark differences between the younger and older generation regarding their level of education and consumer behaviour. Young Cambodians have more consumer awareness and purchasing power than ever before as and their appetite for quality goods and services is being met in urban areas with dozens of malls, commercial centres and international franchises launching every week.

demography of cambodia
Source: National Institute of Statistics, Ministry of Planning General Population Census of the Kingdom of Cambodia 2019: Provisional Population Totals

Rural, Urban & Housing

In the past decade, Cambodia has seen an increase in rural to urban migration with 40% of the population now living in urban areas. Most people in rural areas are involved in the agriculture sector with 90.6% homeownership compared to 81.9% in urban areas. Although there has been a notable boom in Cambodia’s construction and real estate markets Cambodia’s real estate market, these properties are typically being sold to foreigners with 60% of all sales in 2018 to Chinese investors alone.

See our section on Real Estate for more information.

Mobile & Internet

Only 38% of urban households have access to wifi however, there were a total of 21.42 million mobile phones accounted for in 2020, which corresponds to an average of 1.3 per person, the fourth-highest phones per capita in the world. 

The number of social media users in Cambodia was equivalent to 71.3% of the total population in January 2021, with users favouring Facebook, YouTube, Tik Tok and Instagram. Social media marketing is crucial for businesses in Cambodia, most local businesses will have Facebook pages for their companies instead of websites.

See our section on IT & Telecommunication for more information.

Transport 

The majority of the country travel by motorbike with 95% of households owning motorbikes compared to 12% car ownership according to the 2019 census. Public transport is limited in urban areas with a handful of bus routes available in Phnom Penh, however, this is offset by the low cost of ride-hailing apps such as Grab and Pass App charging as low as 3000R (75c) per kilometer. Minibusses and taxis are used for travel to provinces and remote areas. Road safety has increased substantially in recent however many Cambodians are still reluctant to travel at night, particularly women. If you are considering developing a business in a remote location you may need to consider providing safe transport options for your staff, this is common practice in garment factories. 

See our section on Transportation, Logistics, and Supply for more Information.

Language

Khmer

The Khmer language is the official language of Cambodia which is widely spoken by 90% of the population, Khmer has the longest alphabet and is considered one of the most difficult languages in the world to learn as its alphabet has never been simplified like Thai, Vietnamese, Chinese, Korean, Japanese etc. For this reason, coupled with poor quality education in the post-war era, much of the older generation of Cambodians are illiterate in Khmer but can read in the Roman alphabet.

English

Most business is conducted in English however if you are dealing with the Royal Cambodian Government and ministries Khmer is used for contracts and formal documentation. Foreigners are not expected to learn Khmer however any efforts to do so are much appreciated by the local community. Due to the prevalence of western media most Cambodians in urban areas speak English quite well, especially when compared to neighbouring Thailand and Vietnam. English is less common in rural areas.

French

Cambodia is a former French colony however, most Khmer French speakers were assassinated during the Khmer Rouge so the language is not spoken as widely as before. Academic subjects such as Medicine are still taught in French but typically it is not required for doing business in Cambodia.

Chinese

Chinese is considered an important language for business in the country albeit not essential. Many investors in Cambodia are Chinese, often they will speak English as a second language and less frequently Khmer. The Chinese language has become a popular choice with Khmer students in recent years as the demand for business translators increases. 

Religion & Holidays

Buddhism is the national religion with 90% of the population identifying as Buddhist and the remaining 10% as Muslim, Christian, or other. Religion does not typically interfere with the business however, there are many religious holidays throughout the year, mandated by the Ministry of Labour. Most notably business grinds to a halt twice a year for at least one week (lunar calendar dependent);  Pchum Ben Festival (Sep-Oct). Some businesses may also close for Chinese New Year,  western holidays are formally recognized but may be celebrated socially.

Elections

Cambodia is a one-party dominant state with the Cambodian People’s Party currently in power. Cambodia’s legislature is chosen through a national election. The country has the longest-serving prime minister in the world, H.E Samdech Hun Sun who has been in power since 1985. The general election is held every five years in the fourth Sunday of July. The Parliament of Cambodia has two chambers. The National Assembly has 125 members, each elected for a five-year term by proportional representation. The Senate has 62 members, mostly indirectly elected. Cambodia’s upcoming elections are;

The 2022 Cambodian Communal Elections will be held in Cambodia on 5 June 2022. 1,652 communes in all 25 provinces of Cambodia will be contested, for a total of 11,622 commune council seats. Elected councillors will go on to determine the majority in the 2024 Senate election.

The 2023 General Elections will be held in Cambodia in July that year to elect members of the seventh National Assembly. The Cambodian People’s Party (CPP) currently holds all seats in parliament. Prime minister Hun Sen will seek another term in office, with his eldest son Hun Manet expected to take over on an unspecified date, either after 2023 or 2028.

Climate

Cambodia’s climate is tropical and has a high temperature that is influenced by the monsoon. There are only two main seasons in Cambodia – the rainy season, which lasts from May to October, and the dry season, which runs from November to April. Due to its geographical advantages, Cambodia is considered one of the countries with a low risk of encountering natural disasters except for storms, floods, and droughts.

In the current day, Cambodia is raising numerous awareness campaigns toward climate change. The global campaign known as Race to Zero brings together real economy actors such as cities, businesses, and investors to build momentum towards a net-zero-emission economy by the middle of the century. It is worth noting that Cambodia is in the rapid development stage and is known as an investment-friendly country, it is also time to bring the country toward a greener environment. Local businesses must also take part in the corporate climate ambitions, not just business from foreign investors. In 2021 the Ministry of Environment hosted the first Climate Change Summit and attended COP26 in the UK. 

Feel free to enquire with the Aquarii team should you need further advice.

If you are looking for a more nuanced insight or advice in terms of other indicators/observations not commonly found in publications for a better understanding of how a business or investor can navigate the local environment or seek out collaboration opportunities and trustworthy partners, get in touch with our team at Aquarii. Ask to speak to our CEO if you wish to know why he has decided to make Cambodia his 2nd home, perhaps the strongest testament of his conviction in the potential and opportunities in the Kingdom.

Severance Pay

The Labor Law provides for both severance pay and redundancy pay. Payments at the end of the contract include payment of last month’s wage, payment for unused leave and severance pay as applicable.

On the expiry or termination of a fixed-term contract, the employee has the right to receive severance pay. Severance pay must be at least 5% of the total wages paid to the worker during the length of a fixed-term contract.

On termination of the employment, severance pay is payable to retrenched workers (terminated for economic reasons and other reasons except for serious misconduct), depending upon the length of service, at the following rates:

  • 7 days wages for employment from 06 months to 12 months; and
  • 15 days wages for every year of employment (up to a maximum of 6 months wages)

Workers are also entitled to severance pay on contract termination due to health reasons. No severance payment is granted if a worker’s employment contract is terminated due to serious misconduct. The limit on severance pay to the maximum of 6 months’ wages has been removed in the 2018 amendment. If a worker cancels the fixed-term contract without any legal reason, he/she must pay the employer for any damages suffered by him/her as a result. On the other hand, if an employer cancels a fixed-term contract without any legal reason, he must pay the worker the full amount (of wages) that the worker would have received if he/she had been allowed to work until the end of the contract.

The calculation of severance/redundancy payment is based on average earnings over the past 12 months. The Arbitration Council has however found that the overtime and bonuses received by the worker in the 12 months prior to dismissal should also be included in the calculation. The severance pay is not payable in the case of serious misconduct on the part of the worker or resignation by the employee. However, severance pay is payable if the employer pushed the worker to resign through serious misconduct (on the part of the employer).

An employer is required to pay damages (in addition to severance/redundancy pay) if they terminate an indefinite term contract without a valid reason. Workers, unfairly dismissed, are entitled to the damages of at least the same amount which they received as severance compensation on contract termination.

The normal remedy for unfair dismissal is damaged however a court may award reinstatement. Employers are also eligible for such damages if workers terminate the employment contracts without valid reasons. These damages are not the same as compensation in lieu of notice. The worker, however, can request to be given a lump sum equal to the dismissal indemnity. In this case, he is relieved of the obligation to provide proof of damage incurred.

The damages for breach of the labour contract without valid reasons, as well as those owned by the employer as per provision of Article 90, are determined by the competent court and based on local custom, the type and importance of the service rendered, the worker’s seniority and age, the pay deductions or payments for pension, and other circumstances that justify the existence and extent of the damage.

If a worker unfairly terminates an employment contract and takes a new job, the new employer is jointly liable for damages caused to the former employer if it is proven that he encouraged the worker to leave the earlier job.

Source: https://prake.org/labour-law/employment-security/notice-and-severance

Fixed Duration Contract (FDC)

Clarifications on Fixed Duration Contracts and Renewals

On March 17, 2019, the MLVT enacted its Instruction on Determination of Type of Employment Contracts, which clarifies the duration of an FDC. Under the instruction, an employer can enter into an initial FDC with any local or foreign employee for a duration not to exceed two years.

After the initial contract, the employer can renew the FDC one or more times so long as the total duration of the renewals does not exceed two years. If the renewals exceed two years, then the FDC will be deemed a UDC.

For instance, if the initial FDC had a fixed term of six months, then the maximum duration of the FDCs could be two years and six months. If the initial FDC had a fixed term of one year, then the maximum duration of the FDCs would be three years. Likewise, if the initial FDC had a term of two years, then the maximum duration of FDCs could be four years. 

If an employee reaches the maximum duration for an FDC and the employer wants to continue the employment on an FDC basis, a one-month break must be inserted between the expiration of the FDC and the start of a new one. If there is no one-month break in employment, the employee will be deemed to be working under a UDC.

Source: https://www.tilleke.com/insights/cambodia-issues-new-rules-contracts-and-compensation/

Tax on Salary (ToS)

There is no personal income tax, per se, in Cambodia. Instead, a monthly salary tax is imposed on individuals who derive income from employment. General consulting income is excluded from salary tax but is subject to tax on income (see the Taxes on corporate income section in the Corporate tax summary for more information on CIT), although rules exist that may deem certain consultants as employees.

A Cambodian resident’s worldwide salary is subject to Cambodia salary tax, while non-residents are taxed on Cambodian-sourced salary.

Salary tax rates

1. Residents

The monthly cash salary of residents is taxed at the following rates:

Monthly salary (KHR*) 

– 0 to 1,300,000 = 0%

– 1,300,001 to 2,000,000  = 5%

– 2,000,001 to 8,500,000  = 10%

– 8,500,001 to 12,500,000 = 15%

– Over 12,500,000 = %20

2. Non-residents

Non-residents are taxed at a flat rate of 20%, which constitutes a final tax.

3. Fringe benefits

Fringe benefits are taxable at the flat rate of 20% of the amount paid.

Source: https://taxsummaries.pwc.com/cambodia/individual/taxes-on-personal-income

Residents and Non-residents

Residents are persons domiciled in or having a principal place of abode in Cambodia or present in Cambodia for more than 182 days in a 12-month period.

Source: https://taxsummaries.pwc.com/cambodia/individual/residence

Prepayment of Tax on Profit (PTP) / Minimum Tax (MT)

Resident taxpayers must pay monthly 1% PTP on monthly turnover inclusive of all taxes, except VAT. The PTP must be paid by the 25th day of the following month. The PTP can be used to offset against the annual TOP or MT liability, whichever is higher.

The following entities are exempt from paying the 1% PTP:

  • QIP industry during the Tax Holiday Period
  • Any legal entities which purchase and cultivate paddy rice, and produce milled rice for exportation during the tax incentive period
  • Non-for-profit organization recognized by MEF

Source: https://bun-associates.com/wp-content/uploads/2018/07/BA-Tax-Practice-eBrochure.pdf

Tax on Fringe Benefit (TOFB)

Fringe benefits provided directly or indirectly to physical persons in cash or in-kind are subject to TOFB at a rate of 20% of the gross value of the benefits. The value of the fringe benefit is the fair market value inclusive of all taxes. The following benefit will be considered fringe benefits:

  • a vehicle of any kind;
  • food;
  • a house or housing;
  • utilities;
  • loan less than market rate of interest;
  • discount on the sale of goods;
  • educational assistance not related to the work of the employee;
  • life and health insurance premium unless the same benefit is provided to each employee regardless of employment or job classification;
  • the un-reasonable and un-necessary expense to the business of the employer;
  • contribution to social security funds in excess of the levels provided in law;
  • pension plan in excess of 10% of the employees’ monthly salary exclusive fringe benefits;
  • expenses on entertainment, amusement, or recreation which is not part of an employment relationship.

Source: https://bun-associates.com/wp-content/uploads/2018/07/BA-Tax-Practice-eBrochure.pdf

Value Added Tax (VAT)

The Tax Administration imposes 2 (two) VAT rates. The standard VAT rate of 10% applies to all taxable supplies. Additionally, goods exported from Cambodia and services rendered outside of Cambodia will be subject to a VAT rate of 0%.

Source: https://bun-associates.com/wp-content/uploads/2018/07/BA-Tax-Practice-eBrochure.pdf

Accommodation Tax (AT)

The AT is imposed at 2% of the accommodation charge/fee in a hotel while including other taxes and service charges except VAT. In addition, “Hotel” refers to Hotel, Hotel Apartment, Suite Hotel, Resort Hotel, Motel, Bungalow, Guesthouse, Tourist Camping, and other accommodation services.

Source: https://bun-associates.com/wp-content/uploads/2018/07/BA-Tax-Practice-eBrochure.pdf

Public Lighting Tax (PLT)

PLT is a tax imposed on locally produced and imported alcohol and cigarettes at a rate of 3%. Further redistribution, the PLT base is at 20% of the Sale price.

Source: https://www2.deloitte.com/content/dam/Deloitte/kh/Documents/tax/kh-tax-guide-to-taxation-in-cambodia-2020.pdf

Tax on Income (TOI)

The TOI rate for registered entities in Cambodia ranges with the following business Activities:

  • Enterprises oil or natural gas production or exploitation of natural resources, including timber, ore, gold and previous stones (30%)
  • QIPs during tax holiday period (0%)
  • The gross premium realised by general insurance, reinsurance, and micro-insurance enterprises (5%*)
  • The income realised by a legal person, life insurance, and reinsurance enterprises (20%)
  • TOI shall be determined at 5% of the gross premiums received in the tax year while 20% TOI is applicable for other income.

Source: https://www2.deloitte.com/content/dam/Deloitte/kh/Documents/tax/kh-tax-guide-to-taxation-in-cambodia-2020.pdf

Tax Year-End

The default tax year for all registered entities is the calendar year commencing from 1 January to 31 December. However, any registered entity with 51% foreign ownership is allowed to request for new tax year-end different from the calendar year.

Source: https://www2.deloitte.com/content/dam/Deloitte/kh/Documents/tax/kh-tax-guide-to-taxation-in-cambodia-2020.pdf

Small Taxpayer

Level of turnover:

  • From KHR250 million (~USD62.5K) to KHR700 million (~USD175K); or
  • Join in bidding, price consulting or price surveying in supplying goods and services

Source: https://www2.deloitte.com/content/dam/Deloitte/kh/Documents/tax/kh-tax-guide-to-taxation-in-cambodia-2020.pdf

Medium Taxpayer

Level of turnover:

– From KHR700 million (~USD175K) to KHR4,000 million (~USD1M); or

– A registered legal entity, representative office; or

– A national and sub-national institution, association and non-governmental organization; or

– Foreign diplomatic and consular mission, international organization and other governement’s technical cooperation agencies

Source: https://www2.deloitte.com/content/dam/Deloitte/kh/Documents/tax/kh-tax-guide-to-taxation-in-cambodia-2020.pdf

Large Taxpayer in Cambodia

Level of turnover:

– More than KHR4,000 million (~USD1M);

– A subsidiary of a multinational company, a foreign branch; or

– A Qualified Investment Project (QIP)

Source: https://www2.deloitte.com/content/dam/Deloitte/kh/Documents/tax/kh-tax-guide-to-taxation-in-cambodia-2020.pdf

Forms of Entity

According to Law on Commercial Enterprise (LOCE) in Cambodia, the investor intending to open a business is required to set up an entity either in the form of a sole proprietorship, general or limited liability, partnership, public limited liability company, the foreign branch, and the RO, with either a foreign or Cambodian national.

Private Limited Company

To establish a Private Limited Company, the entity should have from 1 to 30 shareholders. The Private Limited Company is not allowed to offer its shares or other securities to the public; however, it is allowed to transfer its shares to the other shareholders.

Public Limited Company

The process of running a Public Limited Company is regulated and has more restrictions compared to other forms of entities. There shall be at least three directors managing the Public Limited Company. The shareholders shall elect directors by an ordinary resolution of shareholders who have the right to vote.

The form of this entity may offer the securities to the public – financial institution and insurance company; however, it is required to have the approval from the relevant authorities.

Foreign Company

A foreign company may set up a branch to start up a business operation in Cambodia which has the same legal entity as its principal.

– Foreign branch: Before commencing a business, a foreign branch should apply for the business registration with the MoC. The procedure of registration of the foreign branch is similar to the Private Limited Company except its own articles of incorporation. In addition, all the liabilities of the branch office will belong to its principle.

– Representative Office (RO): Foreign companies that wish to explore the feasibility of doing business in Cambodia may register as a RO with the MoC. The RO’s activities are confined to market research, feasibility studies, advertising and marketing activities on behalf of its head office. The RO is prohibited from entering into any contractual arrangements facilitation for selling goods or services.

– Subsidiary: Foreign investors who wish to have at least 51% shareholding of a legal entity in Cambodia should establish their entity in the form of a limited company which maintains nationality as a foreign entity. However, a foreign nationality in Cambodia is not eligible to hold the land right as mentioned above.

Source: https://www2.deloitte.com/content/dam/Deloitte/kh/Documents/tax/kh-tax-guide-to-taxation-in-cambodia-2020.pdf

Public Holiday

The Ministry of Labor and Vocational Training (“MLVT”) has recently issued Prakas No. 277/21 on Public Holidays for 2022, dated 27 October 2021 with a total of 21 Public Holidays. The purpose of this Prakas is to inform that workers/employees of all factories/enterprises stipulated in Article 1 of the Cambodian Labor Law shall be entitled to the following paid holidays in the year 2022:

  • 01 January International New Year’s Day 01 day off
  • 07 January Victory Over Genocide Day 01 day off
  • 08 March International Women’s Day 01 day off
  • 14-15-16 April Khmer New Year’s Days 03 days off
  • 01 May International Labor Day 01 day off
  • 14 May King Norodom Sihamoni’s Birthday 01 day off
  • 15 May Visak Bochea Day 01 day off
  • 19 May Royal Plowing Ceremony 01 day off
  • 18 June Queen Norodom Monineath Sihanouk’s Birthday 01 day off
  • 24 September Constitutional Day 01 day off
  • 24-25-26 September Pchum Ben Day 03 days off
  • 15 October Commemoration Day of Former King Norodom Sihanouk 01 day off
  • 29 October King Norodom Sihamoni’s Coronation Day 01 day off
  • 07-08-09 November Water Festival 03 days off
  • 09 November National Independence Day 01 day off

Source: https://www.bun-associates.com/wp-content/uploads/2021/11/Labor-Alert_PRK-No.-277-on-Paid-Public-Holiday-2022-1.pdf

Special Leave

(Effective Date: 31-Mar-1997): The employer has the right to grant his worker special leave during the event directly affecting the worker’s immediate family.

If the worker has not yet taken his annual leave, the employer can deduct the special leave from the worker’s annual leave.

If the worker has taken all his annual leave, the employer cannot deduct the special leave from the worker’s annual leave for the next year.

Hours lost during the special leave can be made up under the conditions set by a Prakas of the Ministry in Charge of Labor.

Source: https://www.mlvt.gov.kh/index.php/en/official-docs/royal-code/40-%E1%9E%96%E1%9F%92%E1%9E%9A%E1%9F%87%E1%9E%9A%E1%9E%B6%E1%9E%87%E1%9E%80%E1%9F%92%E1%9E%9A%E1%9E%98/88-%E1%9E%85%E1%9F%92%E1%9E%94%E1%9E%B6%E1%9E%94%E1%9F%8B%E1%9E%9F%E1%9F%92%E1%9E%8A%E1%9E%B8%E1%9E%96%E1%9E%B8%E1%9E%80%E1%9E%B6%E1%9E%9A%E1%9E%84%E1%9E%B6%E1%9E%9A-labour-law.html

Paid Annual Leave

(Effective Date: 31-Mar-1997): Unless there are more favourable provisions in collective agreements or individual labour contracts, all workers are entitled to paid annual leave to be given by the employer at the rate of one and a half workdays of paid leave per month of continuous service.

LABOR LAW (1997)

Any worker who has not worked for two continuous months is entitled, at the termination of his labour contract, to compensation for paid leave calculated in proportion to the amount of time he worked in the enterprise.

For jobs that are not performed regularly throughout the year, a worker is considered to have met the condition of continuous service if he works an average of 21 days per month.

The length of paid leave as stated above is increased according to the seniority of workers at the rate of one day per three years of service. Official paid holidays and sick leave are not counted as paid annual leave.

Source: https://www.mlvt.gov.kh/index.php/en/official-docs/royal-code/40-%E1%9E%96%E1%9F%92%E1%9E%9A%E1%9F%87%E1%9E%9A%E1%9E%B6%E1%9E%87%E1%9E%80%E1%9F%92%E1%9E%9A%E1%9E%98/88-%E1%9E%85%E1%9F%92%E1%9E%94%E1%9E%B6%E1%9E%94%E1%9F%8B%E1%9E%9F%E1%9F%92%E1%9E%8A%E1%9E%B8%E1%9E%96%E1%9E%B8%E1%9E%80%E1%9E%B6%E1%9E%9A%E1%9E%84%E1%9E%B6%E1%9E%9A-labour-law.html

Minimum Wage

On 28 September 2021, the Ministry of Labour and Vocational Training (“MLVT”) issued Prakas 264 on the Determination of Minimum Wage for Workers in the Garment, Textile, Footwear, Travel Product and Bag Sectors (“Prakas 264”), to set new minimum wage for 2022, which will be effective from 1 January 2022.

Under Prakas 264, workers in the relevant sectors will be entitled to the following new minimum wage:

  • For regular workers, USD 194 per month.
  • For probationary workers, USD 192 per month.

Prakas 264 also sets the minimum wage for piece-rate workers.  For such workers, the pay rate is to be determined based on their level of production and, in case such production gives rise to a higher pay rate than the minimum wage, the workers will be entitled to such a higher amount.

However, if their production gives rise to a pay rate lower than the minimum wage, the employer must adjust the workers’ pay, such that the total pay is at least equal to the minimum wage (USD 194 for regular workers and USD 192 for probationary workers).

Other benefits that such workers have received remain unchanged, such as compensation for transportation or accommodation allowance of USD 7 per month, attendance bonus of USD 10 per month, the food allowance of USD 0.5 per day (or one free meal per day) for those who work overtime and seniority bonus from USD 2 to USD 11 per month for those in their second to the eleventh year of work. 

Under the Law on Minimum Wage, which was promulgated on 6 July 2018, the key factors in determining the minimum wage include social considerations (such as inflation rates and living expenses); and (2) economic considerations (such as productivity, competition, job market status and profitability of a particular industry). The discussions on the minimum wage are conducted on an annual basis unless decided otherwise by the National Council on the Minimum Wages, and such minimum wage is determined by a Prakas issued by the MLVT.

Source: https://www.dfdl.com/resources/legal-and-tax-updates/cambodia-increase-in-minimum-wage-for-2022-garment-textile-footwear-travel-product-bag-sectors/

VAT for E-Commerce

From 8 September 2021 non-resident entities who provide digital goods/services or e-commerce activities to Cambodian consumers and who expect to have sales of USD15k or more before the end of the year, over three consecutive months, have 30 days to register for VAT with the General Department of Taxation (GDT) in Cambodia.

From 2022 onward the same non-resident entities, as described above, expect to have sales of USD62.5k or more in 2022 or future years, or expected sales in any calendar year of USD15k or more for three consecutive months, will need to register for VAT within 30 days.

Once registered for VAT non-resident entities will need to invoice customers in Cambodia with respect to B2C and B2B transactions. The VAT registered non-resident will need to file monthly VAT declarations and pay the 10% VAT on B2C sales to the GDT.

Registered taxpayers who receive digital goods/services or e-commerce activities from a non-resident (B2B transaction), whether the non-resident has registered for VAT or not, will need to pay 10% VAT to the GDT on behalf of the non-resident under a VAT reverse charge mechanism.

Detailed Analysis

In April of this year, Sub-decree No. 65 S.E on the Implementation of Valued Added Tax on E-Commerce (“Sub-decree 65”) was enacted with the stated purpose of introducing the conditions and mechanism for the collection of VAT on the provision of digital products, services and e-commerce activity by non-resident entities to consumers in Cambodia. Please refer to our earlier update here.

The issuance of Sub-decree 65 was a response by the Cambodian authorities to the growth of e-commerce trade in the Kingdom which has allowed overseas suppliers to provide digital goods and services to customers in Cambodia without the need to have a brick and mortar office in-country thereby making it difficult to tax these transactions. This type of special circumstance was contemplated in Article 75(2) of the Law on Taxation.

Article 75(2) of the Law on Taxation provided the ability to the Cambodian Government to issue a Sub-decree to impose special conditions concerning the liability to collect, declare and pay VAT where the supplier of the taxable supply that is consumed in Cambodia is not engaged in business in Cambodia or where there are other obstacles relating to the collection of VAT from the supplier.

Prakas 542 MEF.P on the Rules and Procedure for the Implementation of VAT on E-Commerce (“Prakas 542”) was passed on the 8th of September 2021 and as its name suggests it provides further detail on how Sub-decree 65 will be implemented. We provide further detail on the salient points of Prakas 542 below.

Who is Impacted?

Those parties primarily impacted by the recent regulatory updates are non-resident suppliers of digital goods, services and e-commerce activity (“Non-resident E-Supplier”) and importantly those registered taxpayers in Cambodia (“Taxable Person”) who transact with the aforementioned non-resident suppliers under a B2B transaction. The obligations for both Non-resident E-Suppliers and Taxable Persons are far-reaching and the failure to comply with these obligations could result in severe penalties.

Non-resident E-Supplier in Cambodia

Under a Prakas 542 a Non-resident E-Supplier who expects to have annual turnover to its Cambodia consumers (both individual and business) of Khmer Riel 250 million (approximately USD62.5k) or expected turnover within any three consecutive months that end in the current calendar year that exceed Khmer Riel 60 million (approximately USD15k) are now obliged to register for VAT within 30 days.

Practically what this means is that from September 2021 Non-resident E-Suppliers need to ask themselves will my revenue generated from sales to Cambodia customers exceed USD15k by the end of 2021? If the answer is yes then those suppliers would have 30 days to register for VAT – if the answer is no then the suppliers can wait until 1 January 2022 and then make an assessment at that time whether they will have turnover in 2022 of more than USD62.5k or expect to have turnover in any three consecutive months in 2022 that exceeds USD15k.

For those Non-resident E-Suppliers who do meet the threshold to register for VAT the new Prakas outlines the process and documentation that is required. Practically speaking Non-resident E-Suppliers may need to use a registered Tax Agent in Cambodia to complete the Tax Registration process for them which requires the following documents, (if not in Khmer or English language translated documents are required), to be submitted:

  • VAT registration application,
  • Non-resident taxpayer registration documents,
  • Valid identification documents of owner or representative (ID card or passport),
  • Two current 35 x 45mm passport photos not older than 3 months of the director or representative,
  • Bank account details of the non-resident issued by or printed from the bank.

The fee to register for VAT is Khmer Riel 400,000 (approximately USD100) and should there need to be any updates to the information provided the fee for such updates is Khmer 200,000 (approximately UDS50).

Upon completion of the VAT registration process the Non-resident E-Supplier shall receive the following:

  • A simplified VAT registration certificate,
  • Tax registration certificate,
  • Notice on tax compliance.

If a Non-resident E-Supplier fails to register for VAT, whether voluntarily or at the invitation of the tax authority in Cambodia, the tax authority can unilaterally register the Overseas E-Supplier and issue a tax re-assessment of the taxes that they believe have not been paid – along with penalties and interest. Obstruction of the tax law includes failure to register with the tax authority and an entity that obstructs the implementation of the tax law is liable to a fine from 5 million Khmer riel (approximately USD1,250) to 10 million Khmer riel (approximately USD2,500) and/or to imprisonment from 1 month to 1 year.

Invoicing

Once registered for VAT in Cambodia the Non-resident E-Supplier will need to issue tax invoices for each transaction it makes to consumers in Cambodia. That would include transactions with individuals (B2C) and transactions with Taxable Persons in Cambodia (B2B).

Invoices issued by the VAT registered Non-resident E-Supplier would need to include:

  • The name, address, and VAT registration number of the Non-resident E-Supplier
  • Name and address of the customer, and in a B2B transaction their VAT registration number
  • Invoice number and date of issuance,
  • Description of the good/service
  • The taxable value and VAT (in a B2B transaction) or the total value of the supply inclusive of VAT (in a B2C transaction).
  • In a B2C transaction the Non-resident E-Supplier would need to declare and pay the VAT charged to the GDT by the 20th of the month following the month in which the supply was made. A supply is determined to be made at the earlier of when the invoice was issued, goods delivered or payment received.

In a B2B transaction, the Non-resident E-Supplier would need to show the VAT charged as a separate line item in the issued invoice and declare the VAT charged in its monthly VAT declaration however the obligation to actually pay the VAT charged by the Non-Resident E-Supplier to the GDT rests with the Taxable Person under the VAT reverse charge mechanism.

Taxable Person

The VAT reverse charge mechanism is novel to Cambodia and increases the compliance obligation significantly for those Taxable Persons in Cambodia who transact with Non-resident E-Suppliers. An important point to note is that the obligation for a Taxable Person to apply the VAT reverse charge exists regardless of whether the Non-resident E-Supplier has registered for VAT in Cambodia or not.

Under the VAT reverse charge mechanism a Taxable Person who receives a supply of digital goods, services or e-commerce activities from a Non-resident E-Supplier, regardless of whether or not they are registered for VAT, will need to declare and make the payment of the VAT to the GDT by the 20th of the following month in which the supply takes place.

This works in a similar fashion to the withholding tax regime in Cambodia whereby a registered taxpayer who makes payments of Cambodian sourced income to a non-resident is obliged to withhold and pay withholding tax to the GDT on their behalf. In practice, however, the compliance obligation for a Taxable Person under Prakas 542 seems to be somewhat higher than that of a Withholding Agent.

Under Prakas 542 a Taxable Person would need to undertake the following:

When dealing with a Non-resident E-Supplier that has not registered for VAT, the Taxable Person would need to make a judgment as to whether or not the supply constitutes a digital good, service or e-commerce activity.

The latter is a little complex as can be seen by the extensive and non-exhaustive list of e-commerce activities annexed in Sub-decree 65 which can include for example tangible products purchased online, online advertising, customer support, online consultancy, data-warehousing, streamed content, online shopping portals etc.

Tax advisors and internal finance personnel will now be required to learn very quickly what constitutes e-commerce activities to ensure that the requirement to pay the VAT reverse charge is adhered to by their clients and businesses respectively.

A Taxable Person will also need to be aware that for VAT invoices issued by Non-resident E-Suppliers who have registered for VAT that they will also be responsible for paying the 10% VAT to the GDT, on behalf of the VAT registered Non-resident E-Supplier, under the reverse charge mechanism.

When it comes to the Taxable Person actually declaring and making the payment of the VAT reverse charge there is also currently uncertainty as to how this is done. A bank receipt could be provided evidencing that the VAT reverse charge has been paid to the GDT but there is currently no provision in the monthly VAT declaration to show the VAT reverse charge details.

VAT Input Credit

A Taxable Person is allowed to claim a VAT input credit on the supplies it receives from a Non-resident E-Supplier provided that the Taxable Person has paid the VAT reverse charge to the GDT. Interestingly a VAT input credit appears to be allowed even in the event that the Non-resident E-Supplier has not registered for VAT which is re-enforced by the obligation under Article 40 of the Sub-decree on VAT, requiring a tax invoice or bill of entry for import, being deliberately excluded from the criteria under which an input credit can be claimed in Article 8 of Prakas 542.

Commentary

The enactment of Sub-decree 65 and Prakas 542 in Cambodia were inevitable when we look at global development trends with respect to the taxation of e-commerce as governments around the world become more concerned around tax leakages arising from the inability to tax a supplier who does not have a physical presence in their jurisdiction.

It will be interesting over the coming months to see how many of the large players in the e-commerce sector feel compelled to register for VAT in Cambodia under this new development. Concerns still linger with respect to the interplay of the VAT registration requirement under Prakas 542 and the expansive definition of permanent establishment (PE) under Cambodia’s Tax on Income regulations which provide that a non-resident taxpayer who carries out e-commerce activities is considered to have a created a PE if the goods or services are supplied or used in Cambodia.

By specifically stating that VAT registration is required for Non-resident E-Suppliers who do not have a PE in Cambodia the new e-commerce regulations appear to have knocked back the wide expanse of the PE definition. If the tax authority wishes to encourage compliance and VAT registration by the large e-commerce players we suggest that it should clarify this issue which could be seen as a deal breaker for some when it comes to the registration obligation.

Some may also see the liberal allowance of obtaining VAT input credit in the instance that a Non-resident E-Supplier does not register for VAT as not incentivizing voluntary VAT registration. If a VAT input credit was not allowed, in the scenario where the Non-resident E-Supplier was not VAT registered, the tax registered consumer in Cambodia would need to bear the cost of making the VAT reverse charge but would not be allowed the input credit thereby dis-incentivizing it to transact with unregistered Non-resident E-Suppliers.

What is also problematic is the additional compliance obligation that is now place on those registered taxpayers who in a number of cases may be the unwitting consumer of an e-commerce activity that would be captured under the expansion list of e-commerce activities in Sub-decree 65. Failure of a registered taxpayer to pay the VAT reverse charge from September 2021 is going to result in re-assessed tax, penalties and interest and the potential to be unable to obtain a corresponding VAT input credit. The stakes are quite high and it will be incumbent for tax advisors and internal finance teams alike to educate themselves on the types of transactions that will create a VAT reverse charge obligation for their clients and businesses respectively.

We understand and sincerely hope, that further clarification will be forthcoming over the coming weeks from the GDT regarding the implementation of Prakas 542.

Source: https://www.dfdl.com/resources/legal-and-tax-updates/cambodia-new-prakas-on-vat-for-e-commerce/

National Social Security Fund (NSSF)

Pursuant to Prakas 448 on the Registration of Enterprises and their employees with the National Social Security Fund (“NSSF”) for persons governed by the Labour Law (“Prakas 448”), all enterprises regulated by the Law on Social Security Schemes must immediately register themselves and their employees for the occupational risk scheme (covering work-related accidents and occupational disease insurance) and healthcare scheme. Enterprises that are already operating but are yet to register with the NSSF must do so by 10 December 2017.

Enterprises that are established after the issuance of Prakas 448, must register with the NSSF within 30 days from the commencement of operations.

Enterprises that are already registered with the NSSF for the occupational risk and health care schemes are not required to re-register with the NSSF.

Moving forward, enterprises must register their employees with the NSSF no more than three days after the commencement of employment, except for employees who already hold an NSSF membership card. This requirement does not apply to employees who already possess a valid NSSF membership card.

Every business employing one or more workers must register its business and workers with the NSSF for the Occupational Risk Scheme (for work-related accidents and occupational diseases) and the Health Care Scheme. Once registered, the business must pay to the National Social Security Fund (NSSF):

  • A monthly contribution equivalent to 0,8% of each worker’s monthly average wages (between USD0.40 and USD2.40 per month per worker) for the Occupational Risk Scheme.
  • A monthly contribution equivalent to 2.6% of a worker’s monthly average wages (between USD1.30 and USD7.80 per month per worker) for the Health Care Scheme.

The government issued Sub-Decree No. 32 dated 4 March 2021 on the Pension Fund Scheme for persons defined in the Labour Law (Sub-Decree 32). Under Sub-Decree 32, a business that employs one or more employees must register with the National Social Security Fund (NSSF) for the Pension Fund Scheme within 30 days after the sub-decree becomes effective.

If the business is already registered for the Health Care Scheme and Occupational Risk Scheme, it must register workers with the Pension Scheme within three days from the date of the worker’s commencement of employment. Contribution to the compulsory pension scheme will be jointly paid by the employer and the employee at the same rate of 2% (total of 4%) of the contributable wage for the first five years. Sub-Decree 32 does not indicate the date on which the Pension Scheme will be implemented. It merely states that this will be determined by a separate joint Prakas of the MLVT and MEF.

Source: https://www.dfdl.com/resources/legal-and-tax-updates/cambodia-legal-alert-new-national-social-security-fund-registration-requirements/

Qualified Investment Project (QIP)

QIP refers to an investment project that has received a registration certificate from the Council for the Development of Cambodia or a Municipal-Provincial Investment Sub-Committee.

Under new Law on Investment, 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.

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 Subcommittee (PMIS) or via an online portal.

The investment application shall be reviewed and decided via 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 CDC.

CDC shall issue the Certificate of Registration within 20 working days upon 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.

  • Does the New Investment Law Impact Existing QIP Projects?

The New Investment Law states that investment projects that receive investment incentives and guarantees from the CDC/PMIS under the Former Investment Law shall be considered as QIPs or an IGP under the New Investment Law and related Sub-Decrees. The New Investment Law clarifies that existing QIPs which receive tax on income exemption prior to the adoption of this law shall continue to receive profit tax exemption for the remaining period.

Source: http://www.cambodiainvestment.gov.kh/wp-content/uploads/2021/12/LOI_English-Updated-13Dec21.pdf

Export Qualified Investment Project

A QIP that sells or transfers any proportion of its products to purchasers or recipients outside the Kingdom of Cambodia.

Source: http://www.cambodiainvestment.gov.kh/wp-content/uploads/2021/12/LOI_English-Updated-13Dec21.pdf

Seniority Payment

MLVT Notification No. 023/19 dated 8 July 2019 on the entitlement to retroactive seniority payments (prior to 2019) and ongoing seniority payments (from 2019 onwards) for the textile, garment, and footwear industries.

Once again, all employers are reminded that the seniority payment described in the amendment to the Labor Law is applicable to employees that are employed under a UDC.
Employees employed under a fixed duration contract (“FDC”) are instead entitled to severance pay, proportional to their wages and the duration of the contract. The exact severance amount may be determined in a collective bargaining agreement, but if it is not, the severance pay will be set at 5% of the wages employees have been entitled to during the duration of their contract.


Per prior MLVT regulations, the duration of an FDC cannot be longer than two years. The FDC may be renewed or extended one or more times as long as the total duration of all renewals or extensions does not exceed two years. If an FDC exceeds such limits, it automatically becomes a UDC. Employers who have been using FDCs that exceed the maximum duration will have those FDCs become UDCs by the end of 2019 at the latest, and must then pay seniority payments from the date that the FDC became a UDC, in accordance with Prakas No. 443 and other applicable regulations.


If employees under such converted UDCs have already received severance pay of 5%, they are not entitled to claim a seniority payment.
Both retroactive and ongoing seniority payments are exempt from taxes.
Employees are not entitled to a seniority payment in the case of an employee’s unilateral resignation or serious misconduct.


Ministerial Instruction No. 057/19 dated 10 June 2019 on the payment of retroactive seniority payments by employers in the textile, garment, and footwear industries

This is applicable to employers and employees in the textile, garment, and footwear industries, and covers retroactive seniority payments only.

METHOD TO COUNT AN EMPLOYEE’S WORK SENIORITY IN CAMBODIA


Years of service prior to 2008 are not subject to the retroactive seniority payment. The maximum ceiling of the retroactive seniority payment to be paid is capped at six months (equal to 156 days) of the actual average wages(excluding fringe benefits) of each particular year for service years from 2008 to 2018.

In the first year of employment, a confirmed employee who has continuously worked for an employer for from one to six months (excluding the probation period) is entitled to a seniority payment calculated at 7.5 days. If s/he has worked longer than six months, the retroactive seniority payment would be for the full year, calculated at 15 days.

METHOD TO CALCULATE THE RETROACTIVE SENIORITY PAYMENT

Ministerial Instruction No. 057/19 provides a formula with examples (not discussed here) to calculate the retroactive seniority payment for each applicable year from 2008 to 2018.

Step 1: Calculate the average actual wage per month
Average actual wage per month = Total monthly actual wages during the period for which the retroactive seniority payment applies ÷ Number of total months during the period for which the retroactive seniority payment applies

Step 2: Calculate the average actual wage per day
Average actual wage per day = Average actual wage per month ÷ 261

Step 3: Multiply the average actual wage per day with the number of days of the retroactive seniority payment
Retroactive seniority payment per year = Average actual wage per day × 152

METHOD OF PAYMENT FOR THE RETROACTIVE SENIORITY PAYMENT

Payments equal to 15 days of average actual wages must be made twice a year. The first payment is payable at the same time as the second installment payment of wages due in June, and the second must be paid at the same time as the second installment payment of wages due in December. Retroactive seniority payments must be paid based on the actual years of service of each employee for the period from 2008 to 2018.
Employers must separate employees’ monthly wages from the retroactive seniority payment to avoid any confusion regarding tax obligations.

RETROACTIVE SENIORITY PAYMENTS BASED ON EMPLOYMENT CONTRACT CATEGORY

If an FDC was used for a period exceeding the limits of the law (as explained above), counted as of 2018, the retroactive seniority payment must be determined as below.

If an employee has already received severance pay (5%) at each FDC’s expiration date, s/he is not entitled to a retroactive seniority payment.
If an employee has not received severance pay (5%) at each FDC’s expiration date, a retroactive seniority payment must be made and calculated as explained above by counting the employee’s seniority from the date of signing the first employment contract.
If an FDC becomes a UDC in any year up to the end of 2018, the retroactive seniority payment must be paid as follows:

If an employee has already received severance pay (5%) at each FDC’s expiration date during the period when the FDC was used, the employer must pay retroactive seniority payments that have not been paid from the time when the UDC was put in place up through 2018 only.
If an employee has NOT received severance pay (5%) at each FDC’s expiration date, the employer must pay retroactive seniority payments in compliance with the basis, formula, and methods described above. In such a case, work seniority must be counted from the date the employee signed the first employment contract.

EMPLOYEE TERMINATION

If employees are terminated without a valid reason, they are entitled to the following items:
Unpaid wages up to the termination date
Compensation in cash in lieu of prior notice (applicable in a case where an employer has not given prior notice as required by the applicable laws and regulations)
Compensation in cash for untaken annual leave up to the termination date
Seniority payment entitlement for the half-year in which the employees are terminated, equal to 7 days of wages and fringe benefits if employees have remaining work seniority of from one month to less than six months
Total retroactive seniority payments that have not been paid
Besides items 1 to 4 above, employees may claim damages equal to the seniority payment owed to them, but not exceeding six months of wages and fringe benefits. In this case, employees are released from obligations to provide proof of their damages claim. However, if the employer does not agree with the damages claim, the employee may submit the case to the competent ordinary court for a decision.
Employees terminated for serious misconduct are entitled to the following items:
Unpaid wages up to the termination date
Compensation in cash for untaken annual leave up to the termination date

Common Principles


The work seniority used to calculate the retroactive seniority payment must be counted from the date the confirmed employee signed the employment contract excluding the probation period.
Confirmed employees who have worked for employers at least 21 days are considered as having worked for one full month and are entitled to receive the retroactive seniority payment.
The actual wages used for the basis of calculating the retroactive seniority payment due are the actual wages excluding other benefits such as healthcare benefits, occupational risk benefits, and overtime payments.
For employees who have retired or died any time from 2019 onwards, employers must pay all of the remaining seniority payments to those employees or their living heirs.
Periods of maternity leave, sick leave, and work-related accident leave are counted as employees’ work seniority for the purpose of calculating the retroactive seniority payment.
Retroactive seniority payments must be paid together with the second instalment payment of wages for June and December. Thus, when employers pay the second instalment payment of wages for June and December each year, employees in the textile, garment, and footwear industries who have work seniority before 2019 will receive: (i) the second instalment payment of wages for June and December; (ii) the current seniority payment of each half-year calculated at 7.5 days; and (iii) the retroactive seniority payment (if any).
Employees and employers must keep evidentiary documents, such as payslips or receipts or the equivalent and have them signed or thumb-printed by both parties for each retroactive seniority payment.
Ministerial Instruction No. 058/19 dated 10 June 2019 on the payment of ongoing seniority payments

The instruction applies in general to all employers within the scope of the Labor Law, regardless of whether they are or not they are in the textile, garment, and footwear industries.

METHOD TO COUNT WORK SENIORITY


From 2019 onward, employees’ work seniority for ongoing seniority payments are counted each half-year: the first half-year is counted from January to June, and the second from July to December.
Confirmed employees who have worked for from one to six months within each half-year and have worked until the end of each half-year (June and December) are entitled to an ongoing seniority payment equal to 7.5 days of wages and fringe benefits for each particular half-year.
Employees that have resigned before the end of June or December are NOT entitled to the ongoing seniority payment for that particular half-year.


METHOD TO CALCULATE ONGOING SENIORITY PAYMENTS


Step 1: Calculate wages and fringe benefits per month
Wages and fringe benefits per month = Total wages and fringe benefits for the half-year ÷ 6 months or the number of actual months worked3

Step 2: Calculate wages and fringe benefits per day
Wages and fringe benefits per day = Wages and fringe benefits per month ÷ 22 days or 24 days or 26 days (based on the actual number of working days per month)

Step 3: Calculate the ongoing seniority payment for each half-year
Ongoing seniority payment for each half-year = Wages and fringe benefits per day × 7.5

METHOD TO PAY THE ONGOING SENIORITY PAYMENT


Ongoing seniority payments must be paid together with the second instalment payment of wages to employees (paid twice a month) for June and December.
Employers must divide the monthly wages and ongoing seniority payment into two separate payment packages for ease of tax payment.


EMPLOYEE TERMINATION


If employees are terminated without a valid reason, they are entitled to the following items:
Wages that have not been paid up to the termination date
Compensation in cash in lieu of prior termination notice (if employees have not been given the notice as required by the applicable laws and regulations)
Compensation in cash for annual leave that has not been taken up to the termination date
Ongoing seniority payment for the particular half-year in which the employees are terminated, equal to 7 days of wages and fringe benefits if employees still have work seniority of from one to six months
Total retroactive seniority payment that has not been paid to the employees


Besides the first four points above, employees have the right to claim damages equal to the ongoing seniority payment employees are entitled to, but not exceeding six months of wages and fringe benefits. in such a case, employees are released from obligations to provide evidence of their damages claim. However, if the employer does not agree with the damages claim, the employee may submit the case to the competent ordinary court for a decision.


Employees terminated for serious misconduct are entitled to the following items:
Wages that have not been paid up to the termination date
Compensation in cash in lieu of the remainder of all untaken annual leave.


COMMON PRINCIPLES


The work seniority used to calculate employees’ ongoing seniority payments must be counted from the date the confirmed employee signed the employment contract excluding the probation period.
Confirmed employees who have worked for employers for at least 21 days are considered as having worked for one full month and consequently, will be entitled to ongoing seniority payment.
Wages and fringe benefits used for the basis of calculating the ongoing seniority payment due from 2019 onward are the gross amount before tax.
For employees who have retired or died any time from 2019 onward, those employees or their heirs will receive the following:
The remaining retroactive seniority payment they are entitled to
The ongoing seniority payment of any particular half-year during which employees have retired or died, equal to 7 days of wages and fringe benefits if they have work seniority with the employer of from one to less than six months
Periods of maternity leave, work-related accident leave, and sick leave are counted as work seniority for the basis of calculating the ongoing seniority payment. In contrast, other benefits, such as occupational risk benefits and healthcare benefits received during the above-listed leaves are not included in the calculation of the ongoing seniority payment.
From 2019 onward, each time employers make the second installment payment of wages for June and December, they must make the following payments:
The second installment of wages for June and December
The ongoing seniority payment of 7.5 days for each particular half-year
The retroactive seniority payment, if any
Employees and employers must keep evidentiary documents, such as payment slips or receipts or the equivalent and have them signed or thumb-printed by both parties for each half-year seniority payment.

Source https://www.vdb-loi.com/kh_publications/cambodia-legal-update-seniority-payments-new-regulations-bring-some-things-into-clearer-focus/

Supporting Industry Qualified Investment Project

A QIP in which any proportion of its products is supplied to export industries.

Source: http://www.cambodiainvestment.gov.kh/wp-content/uploads/2021/12/LOI_English-Updated-13Dec21.pdf

Expanded Qualified Investment Project (EQIP)

EQIP refers to an expansion of a Qualified Investment Project (QIP) in any form, including expansion of existing production, expansion through product line diversification within the same lines, expansion through the use of new technologies that enhance productivity or protect the environment, expansion of infrastructure to serve basic telecommunications services, or expansion in any other forms to be determined by the Sub-Decree.

The New Investment Law allows investors to register their investment projects such as a QIP, an expansion of a qualified investment project (“EQIP”) and a project that is eligible for only an investment guarantee (“IGP”) with the CDC/PMIS. An EQIP that is registered with the CDC/PMIS under this New Investment Law is entitled to receive investment incentives under the New Investment Law.

Source: http://www.cambodiainvestment.gov.kh/wp-content/uploads/2021/12/LOI_English-Updated-13Dec21.pdf

Domestically Oriented Qualified Investment Project

A QIP that does not export.

Source: http://www.cambodiainvestment.gov.kh/wp-content/uploads/2021/12/LOI_English-Updated-13Dec21.pdf

Guaranteed Investment Project (GIP)

GIP refers to an investment project registered with the Council for the Development of Cambodia or a Municipal-Provincial Investment Sub- Committee, and being clearly mentioned as a GIP not eligible for tax incentives.

Source: http://www.cambodiainvestment.gov.kh/wp-content/uploads/2021/12/LOI_English-Updated-13Dec21.pdf

Interest Free Loans

Effective Date (18-Mar-2019): Following the introduction of Prakas 986 (transfer pricing regulations), Instruction Letter 151, which permitted interest-free loans between related parties, was withdrawn, and under Instruction 11946, such loans are required to bear interest on an arms-length basis.

On 18 March 2019 the GDT issued Instruction Letter 4909, which states that taxpayers with loans from related parties must have the following documentation:

  • A loan agreement in which the terms of the loan are clearly stated;
  • A business plan describing the needs for the loan and intended uses of the funds;
  • A document explaining the basis used to determine the interest rate; and
  • A Board of Directors’ resolution approving the taking of the loan.

The Instruction Letter also provides that the loan must be properly supported by transfer pricing documentation even if the interest applied is lower than the annual market rate issued by the tax authority.

We understand that in certain circumstances interest-free shareholder loans may still be permissible provided that the criteria outlined above are followed and that the loan is used for capital expenditure in Cambodia and not profit extraction.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Limited Liability Company

The limited liability company is the most common form of investment vehicle in Cambodia. It is usually established as a subsidiary of an investor’s offshore holding company. The limited liability company can be 100% Cambodian-owned, 100% foreign-owned, or have any combination of Cambodian or foreign shareholding, subject to certain restrictions.

A limited liability company is formed with registration of its articles of incorporation (Articles) at the MOC, and receipt of a certificate of incorporation from the MOC. Any changes to the Articles and other corporate documents must also be registered in a timely manner at the MOC to be valid.

After establishment, a limited liability company must prepare and maintain, at its registered office, the following records:

  • the Articles and the bylaws and all amendments thereto;
  • minutes of meetings and shareholders’ resolutions;
  • copies of all notices to be sent or filed in accordance with the LCE;
  • a securities register; and
  • accounting records

A limited liability company must issue a minimum of 1,000 shares with a par value of not less than KHR 4,000 per share (approximately one US dollar). The company has only one class of share unless the Articles specify other classes. Subject to differing class rights, shareholders have the right to vote at any meeting of the shareholders, receive any dividends declared by the company, and receive the remaining property of the company upon dissolution. If the Articles provide for more than one class of share, the rights of each class of share may (theoretically) be absolute, relative, or contingent, and the rights, privileges, restrictions, and conditions attaching to the shares of each class must be detailed in the Articles.

The board of directors has broad powers to manage the business and affairs of the company,

Including the powers to:

  • appoint and remove officers and fix their salaries;
  • issue, reissue or sell securities of the companies;
  • adopt resolutions; and
  • provide guarantees on behalf of the company.

Directors must act in good faith, within the scope of the company’s business objectives, within the framework of the company’s Articles and in compliance with applicable laws. Additionally, directors must comply with relevant registration, filing, and publication requirements of the company. Accounting books and records of the relevant financial year must be duly maintained at the registered office for ten more years.

At every annual shareholders’ meeting, the directors must present an annual financial statement to the shareholders. Annual financial statements must be approved by the board of directors and be accompanied by the auditor’s report (subject to limited circumstances whereby appointment of an auditor may be waived by shareholder resolution) before being issued, published and circulated.

Type of Limited Liability Company

Under the LCE, the types of limited liability companies permitted are listed below. The LCE describes in detail the distinction between these forms.

Form Characteristics:

– Single-Member Private Limited Company

A private limited company with one physical or legal person as the shareholder. Requires a minimum of one director.

– Private Limited Company

A limited liability company with two to 30 shareholders. Requires a minimum of one director. May have restrictions on the transfer of each class of shares as provided for by the Articles.

– Public Limited Company

A limited liability company authorized by the LCE to issue securities to the public. Requires a minimum of three directors.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Branch Office

A foreign or local entity may operate its business in Cambodia through a branch office. Although relatively common in the banking community, the government’s policy, historically, was to limit branches to foreign investors that have executed contracts with the government. Such a limitation is not present under the current law. One notable consideration for branches is that the foreign parent company may be liable for the losses and debts of the branch. Branches cannot hold QIPs and do not have separate legal personality from their principal parent company.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Representative Office

For some investors, the need to establish a subsidiary or branch of their offshore company, while foreseeable in the longer term, may not immediately be necessary. A more appropriate form may be that of a representative office. Representative offices are primarily used for the sourcing local goods and services and gathering local information for the parent company. They also serve as a vehicle for promoting and marketing the offshore parent’s products and services in Cambodia. They are thus best suited to assisting foreign investors wishing to gain entry to the Cambodian marketplace.

A representative office is not allowed to engage in active trading or provide services in Cambodia. It may not purchase, sell, or conduct any service or activity considered to be within the usual scope of the parent company’s business. It also may not engage in manufacturing, processing, or construction. Permitted activities include the right to employ local workers, and to market products and services at trade fairs. The representative office may negotiate commercial contracts on its parent company’s behalf, but the contract may only be entered into by the parent company.

The representative office is a non-taxable legal entity precisely because it is not permitted to engage in any sort of taxable activity. Doing so would expose the representative office to tax liability. The representative office, however, is required to withhold salary tax on salaries paid to employees and pay patent tax (an annual business operation tax). Representative offices cannot register for QIP status.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Partnership

A “general partnership” is a contract between one or more persons to combine their property, knowledge or activities to carry on business in with a common view to profit. They are jointly and severally liable for the obligations of the partnership to third parties.

A “limited partnership” is a contract of partnership between one or more general partners who are the sole persons authorized to administer and bind the partnership, and one or more limited partners, who are bound to contribute to the capital of the partnership. The general partners are jointly and severally liable for the debts of the partnership to third parties, whereas the limited partners are liable only to the extent of the sum of money or value of the property they agreed to contribute. While this form is common for local and small businesses it is less so for larger investments, as the processes used by the MOC for registering this business form are unclear given the lack of precedent to date.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Restrictions on Foreign Shareholdings

Cambodia places very few restrictions on the level of foreign participation in investments. As a result, a substantial proportion of investors choose to establish 100% foreign-owned limited companies. However, it should be noted that only a Cambodian company or citizen may own land and foreign ownership restrictions apply to certain sectors.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Types of Tax

Annual Taxes

  • Tax on Income (“TOI”)
  • Minimum Tax (“MT”)

Monthly Taxes

  • Prepayment of Income Tax (“PIT”)
  • Withholding Tax (“WHT”)
  • Tax on Salary (“TOS”)
  • Value Added Tax (“VAT”)

Other Significant Taxes

  • Patent Tax (“PT”)
  • Specific Tax on Certain Merchandise and Services (“ST”)
  • Accommodation Tax (“AT”)
  • Tax on Public Lighting (“TPL”)
  • Tax on Unused Land (“TUL”)
  • Tax on Immovable Property (“TIM”)
  • Additional Tax on Dividend Distribution (“ATDD”)

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Patent Tax (PT)

Businesses are required to pay PT upon business registration and every year thereafter for each business activity that they carry out.

In previous years the Government fee required to obtain a PT Certificate was approximately USD 285. The revised PT fees are as follows:

  1. Small Taxpayer KHR 400,000 / USD 100
  2. Medium Taxpayer KHR 1.2 million / USD 300
  3. Large Taxpayer KHR 3 million or KHR 5 million* USD 750 or USD 1,250

*If the annual turnover of the Large Taxpayer exceeds KHR 10 billion (USD 2.5 million) then the PT payable will be USD 1,250. If the annual turnover of the Large Taxpayer is less than KHR 10 billion (USD 2.5 million) the PT payable will be USD 750.

The PT must be paid at the place where taxpayers have their specific/real business operation. A taxpayer which has a branch office, warehouse, factory and workshop with the same business objective in the same location (city-province) must only pay one PT fee.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Specific Tax on Certain Merchandise and Services (ST)

The ST is imposed on a number of local and imported products and services. The rates range from 3% to 45%. Goods subject to this ST include soft drinks, alcoholic beverages, cigarettes, and certain services such as entertainment, domestic and international air tickets, and telephone services.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Tax Penalties

Tax penalties are imposed for violations of the LOT and its regulations. The level of the penalty depends upon the nature of the violation, and is determined as follows:

  • Where a taxpayer or withholding agent is considered negligent (the amount of deficient tax paid is 10% or less than the amount of taxes due) the penalty is 10% of the unpaid tax;
  • Where a taxpayer or withholding agent is considered seriously negligent (the amount of deficient tax is more than 10% of taxes due) or the taxpayer has failed to settle tax liabilities by the due date as stated in a tax notification on late payments issued by the GDT, the penalty will be 25% of the unpaid tax; and
  • Where a tax audit conducted by the GDT exposes an underpayment of taxes, the penalty will be 40% of the unpaid tax.

In addition, penalties are imposed for late payment of taxes and late lodgment of returns, together with interest charged at 1.5% per month.

Source: https://www.dfdl.com/resources/publications/investment-guides/cambodia-2020/

Double Tax Agreements (DTA)

Cambodia has signed Agreements for the Avoidance of Double Taxation (“DTAs”) with Singapore, China, Brunei, Thailand, Vietnam, Indonesia and Hong Kong. The DTA with Singapore and Thailand came into force on 1 January 2018 and those with China, Brunei and Vietnam entered into force on 1 January 2019. DTAs are expected to reduce barriers on cross-border investment and trade between the countries, along with the fostering of heightened future economic growth in Cambodia. Of note is the reduction in the standard WHT rates for payments made to non-residents whereby the standard Cambodian WHT rate of 14% with respect to payments of interest, royalties, service fees and dividends are reduced to 10% in most cases for those taxpayers who qualify and obtain approval from the GDT under the DTA.

Source: https://drive.google.com/file/d/1ZsnUB3DiybFaGG2FOmBZNWtVd6pVTF-M/view?usp=sharing

Withholding Tax (WHT)

Withholding tax in Cambodia needs to be withheld on payments made by residents (and it seems only to those who fall under the self-declaration regime). The withheld tax constitutes a final tax when withheld in respect of resident and non-residents. The types of payments caught are as follows. WHT on payment to residents Interest: 15% (except payment to a Cambodian-registered bank or financial institution). Royalties: 15%. Rental: 10%. Interest (except local bank and financial institutions): 15%* Interest for fixed deposit: 6%* Interest for saving deposit: 4%* Services: 15% (except payments to a registered taxpayer and supported by a valid VAT invoice). WHT on payment to non-residents Under the Law on Financial Management 2017, which is effective from 1 January 2017 onwards, any resident taxpayer carrying on a business, including a PE of a non-resident person, who pays any Cambodian-source income as defined under Article 33 of the Law on Taxation to a non-resident taxpayer must withhold tax at 14% of the amount paid. WHT does not apply to property or risk reinsurance premiums in Cambodia. According to Article 33 of the Law on Taxation, Cambodian-source income includes: Interest paid by a resident enterprise, resident pass-through, or a governmental institution of Cambodia. Dividends distributed by a resident enterprise. Income from services performed in Cambodia. Compensation for management and technical services paid by a resident person. Income from movable or immovable property, if the property is situated in Cambodia. Royalties from the use, or right to use, intangible property paid by a resident person or paid by a non-resident person through a PE maintained in Cambodia. Gain from the sale of immovable property located in Cambodia or from the transfer of any interest in immovable property situated in Cambodia. Premiums from the insurance or reinsurance of risks in Cambodia. Gain from the sale of movable property that is part of a PE’s business property maintained by a non-resident taxpayer in Cambodia. Income from business activities conducted by a non-resident through a PE in Cambodia. WHT is due when the amount is paid. An expense is considered ‘paid’ when it is recorded in the accounting records. Except WHT on the rental of movable and immovable properties as stated in Article 25 and 26 of the Law on Taxation, small taxpayers are exempted from being the WHT agents for other WHT implications. * The data is from Deloitte tax guide 2020, page 20.

Source: https://taxsummaries.pwc.com/cambodia/corporate/withholding-taxes

Business Chambers/Associations
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