This Legal Update contains recently adopted laws and regulations with regard to investing in Cambodia. The information provided is not to be substituted for professional legal advice.

Legal Update

On 28 December 2023, the Ministry of Labour and Vocational Training (“MLVT”) issued a new Instruction 110/23 on the Provision of Foreign Work Permit for Foreign National Employers (“Instruction”) to clarify the on-going questions as to whether certain foreign nationals need to apply for work permits.

The Instruction clarifies as follows:

(1) a foreign national employer whose name appears on a patent tax certificate must have a work permit;

(2) a foreign national employee whose name appears on a patent tax certificate or who is a self-employed person must have a work permit; and

(3) a foreign national who is a shareholder or a member of the board of directors under the company’s articles of incorporation and does not hold a Cambodia visa is not required to apply for a work permit.

The work permit must be applied for via the MLVT’s online portal at

Draft Law on E-commerce has been adopted by the National Assembly on 08 October 2019.

The Draft Law on Construction has been adopted by the National Assembly on 07 October 2019.

Registered taxpayers in Cambodia are now in the process of completing their Annual Tax on Income (“TOI”) declarations for the 2018 tax year. This applies equally to those entities that hold real estate in Cambodia and we provide below some of the key tax issues that those entities should be aware of when submitting their TOI declarations.

– Implications on Land and Share Arrangements Under Landholding Companies

Most landholding companies are structured under loans between the foreign shareholder and the landholding company and/or between the shareholders in the landholding company. As reflected in our Tax Alert of 23 August 2018, Instruction 11946 issued by the General Department of Taxation (“GDT”) on the 21st of August 2018 (“Instruction 11946”) had important implications on the qualification of related party loans. Indeed, Instruction 11946 provided an essential clarification regarding the determination of interest rates between related parties so that the interest rate to be charged on related party loans should be determined based on the rate of interest that would have been charged between independent parties under similar circumstances.

– Interest

Instruction 11946 has now put the speculation to rest by clearly stating that when Cambodian taxpayers lend to, or borrow money from, related parties, the rate of interest to be applied to those loans must adhere to the “arm’s length principle” as set out in the Transfer Pricing regulation – Prakas 986.

In light of the above development, where loans between related parties have been used to acquire land in Cambodia these loans may be impacted by transfer pricing rules and may have to be updated.

When completing the TOI declaration all taxpayers are now required to complete the schedules at the back of the declaration which require all related party transactions to be listed and a declaration to be signed that the taxpayer has contemporaneous transfer pricing documentation in place to support those transactions. 

In recent discussions with the GDT they have confirmed that the loan between related parties should adhere to the transfer pricing regulations. The GDT has further clarified that interest-free loans or low interest rate loans between related parties may still be acceptable in some cases provided they are supported with proper documentation.

In order to confirm that the interest rates used are in line with the taxpayer’s risk profile (credit rating), or to support the application of interest free or low interest rate it is suggested that an independent economic benchmarking study be prepared and included in the taxpayer’s transfer pricing documentation in accordance with Prakas 986.

Further, on 18 March 2019, the GDT issued Circular 4909 on the required documents to support the interest charge of the related party loan (“Circular 4909”). Enterprises are required to maintain and provide the following documents to the tax administration to support the interest charged under a related party loan even if the interest charged is different from the market interest rate:

  • Loan agreement stating the specific borrowing period;
  • Business plan related to the borrowing;
  • Documents explaining the basis of the interest determination;
  • Board resolution passed in relation to the borrowing.

The requirements to maintain the documents outlined above for related party loans come into effect from the date of signing of Circular 4909.

– Booking Assets

It is important that any immovable property – be it land or buildings – is correctly recorded in the TOI return. Land would be typically be recorded at cost and for tax purposes is considered as a non-depreciable asset. Buildings are considered as a depreciable asset and are usually categorized as a Class 1 asset for tax purposes which would be depreciated at the rate of 5% on a straight line basis.

– Withholding Tax Credits

If during the year the real estate entity has leased real estate to a registered taxpayer who has withheld withholding tax on the lease payments then the real estate entity would be able to claim an equivalent withholding tax credit in its TOI declaration to offset against any taxable income it may have for that year.

It is advisable that the real estate entity request from the lessee formal confirmation that the withholding tax payments have been paid to the GDT in addition to ensuring that any lease payments referred to in the underlying lease agreement are stated as inclusive of WHT.

 Disposal of Assets

If during the tax year the real estate entity has disposed of land and building that it owns it will need to account for this in its TOI declaration. For a disposal of land any consideration received from the sale which is in excess of the initial booked cost price will be subject to 20% Tax on Income.

For buildings any consideration received from the sale which is in excess of the adjusted tax book value of the building i.e. Cost – depreciation, will be subject to 20% Tax on Income.

For completeness we note that the sale of a building by a real estate entity would be subject to 10% Value Added Tax (“VAT”). The output VAT received by the real estate entity from the sale of the building would be included in their monthly VAT return which covers the month is which the building as sold.

In the event that the real estate entity sells both land and building, it would require to separate the value of land and building for the VAT purposes as land is not considered a good or service for VAT purposes.

Any resulting Tax on Income from the disposal of land or buildings will need to be paid by the due date of 31 March 2019 which is the same date as the TOI declaration is due.

On 10th October 2017, the Cambodian Ministry of Economy and Finance issued Prakas No. 986. MEF.P. (“Prakas 986”) in order to combat perceived transfer pricing abuses and loss of tax revenue in the country’s state budget.

Cambodia has been relatively slow in focusing on transfer pricing and is now seeking to bridge the gap with its Asian neighbors (including Thailand, China, Vietnam, Malaysia and Indonesia) in respect of transfer pricing documentation rules and a more structured audit process.

In a nutshell, Prakas 986 regulates that Cambodian enterprises that have transactions with related parties must comply with new compliance requirements consisting of:

  1. An annual transfer pricing declaration, to be submitted together with the annual declaration on tax on income.
  2. Annual transfer pricing documentation, to be submitted upon request by the General Department of Taxation (“GDT”).

This form and documentation will then be used the tax authorities to identify taxpayers with significant related party transactions for review, audit and potential adjustment if found not to be “arm’s length”. Put simply the arm’s length principle states that the amount charged by one related party to another for a given product/service must be the same as if the parties were not related.

What is a related party?

To be caught by Prakas 986, the transactions need to occur between two related parties. This is defined in Article 4 as one of the following:

  • Member of the same immediate family
  • One enterprise is directly or indirectly entitled to 20% of the dividend in the direct capital of the other enterprise or equivalent voting rights in the taxpayer’s Board of Directors
  • A third-party enterprise or an individual possesses directly or indirectly at least 20% of the dividend in the direct capital of both enterprises or equivalent voting rights in Board of Directors of both enterprises.


The five methodologies endorsed by Prakas 986 to determine an arm’s length price in a related party transaction are as per those set out by the Organization for Economic Co-operation and Development (“OECD”).

Target transactions

Prakas 986 does not identify any specific target transactions within the scope of the guidelines or potential audit activity, however Articles 15-17 highlights intangible assets and services, which is an indication of one of the likely initial focus areas.

Article 15 introduces the term from the OECD BEPS Actions 8-10 of “DEMPE” functions (development, enhancement, maintenance, protection, exploitation) related to intangible assets. This reflects the application of a “substance over form” principle and the need to show that the party performing these key functions and incurring the associated costs is entitled to the reward. For example, if a Cambodian entity argues that its brand is owned by a related party in the Cayman Islands but the marketing team and associated marketing cost is in Cambodia, such a mismatch is likely to raise scrutiny under these measures.

In respect of intra-group services Prakas 986 requires the following criteria to be strictly applied to support a deduction:

  • Services are delivered, necessary to taxpayer’s business and bring economic benefits/ commercial value to taxpayer

  • The service charge must be at arm’s length.

Timeline and penalties

Prakas 986 is effective from the signing date of 10th October 2017, with no clear indication of the first fiscal year to be applied. However, considering many Cambodian enterprises have fiscal years ending 31 December and the annual corporate tax filing deadline is 3 months from fiscal year end, the assumption is that both the transfer pricing form and documentation should be completed by 31 March 2018.

Failure to comply with the above requirements would lead to:

  • Transfer pricing adjustments, which would result in additional tax
  • Tax penalties, which range from 10% to 40% of the additional tax for violations of the Law on Tax (LOT) according to Article 133 of the LOT, plus an interest charge of 2% on late payment
  • A law suit filed by the local tax administration against enterprises for charges stipulated under the LOT.

It is possible that an extension may be granted to prepare documentation given this is the first year of implementation.

Our recommendations

Transfer pricing is not something that can be addressed at the time of lodging the tax return or preparation of the documentation. It needs to be considered at the time the transactions are entered into, to ensure the outcome is an arm’s length transfer pricing policy and defensible level of profitability.

It is recommended that taxpayers in Cambodia:

  • Identify related parties under Prakas 986 and related party transactions in 2017
  • Revisit significant related party transactions in 2017 (particularly royalties, service fees etc.) and consider potential exposures and the best way to manage them.  This step would be particularly relevant if the company is forecast to have a loss result or low profit in 2017.
  • Kick-start the preparation of documentation following Prakas 986 as soon as possible. The actual preparation of the first year TP documentation may require significant information from the Group entities as well as more analysis, which take time to request, follow up and process.
  • Revisit whether the company has any significant TP risks in years from the 2007-2016 period which could be challenged in an upcoming tax or TP audit. Although there is no retrospective provisions introduced in Prakas 986 practically speaking the tax authorities may seek to roll back the audit period if they identify exposures resulting in adjustments for 2017.

Prakas № 080, Ministry of Commerce dated 05 March 2018.

The Ministry of Commerce of Cambodia (“MOC”) has imposed the business permit requirement for all Cambodian nationals engaging in business, service and commerce activities who are not classified as self-assessment taxpayers as determined under Prakas 025 SHV. BRK. GBD dated 24 January 2018 of the Ministry of Economic and Finance on adjustment of the classification of self- assessment taxpayers. The business permit must be filed with the provincial/municipal Department of Commerce. 
For Cambodian or non-Cambodian nationals who are classified as self-assessment taxpayers, the business permit must be filed via the MOC automated system. 
A business permit is valid for one year from issuance date and renewable.

Any persons engaging in business, services and commercial activities without holding a business permit pursuant to this Prakas will be subject to applicable penalties.

On 21 June 2018, the new amendment to Cambodian law on Nationality has been promulgated.

Prakas No. 012/17 of the Securities and Exchange Commission of Cambodia, dated 12 September 2017

This prakas provides conciliation and resolution mechanisms and procedures for certain types of disputes arising between securities investors and entities regulated and licensed, or otherwise permitted or recognized, by the Securities and Exchange Commission of Cambodia (“SECC”), including securities firms, derivatives brokers and securities issuers, among others. Under this prakas, a party may file a complaint for conciliation with the SECC for disputes related to the securities sector, after which the SECC will appoint one of more conciliators. The conciliation decision is non-binding. In the event there remain any unsettled issues follows the conciliation process, a party may file a complaint for dispute resolution with the SECC or with an arbitration tribunal if agreed by the parties or with a competent court.

Notification 272, dated 31 August 2017, issued by the Ministry of Labour and Vocational Training (“MLVT”)

Under Notification 272, quota application for foreign employees must be submitted via the MLVT online system from 1 September 2017 to 30 November 2017. Once the foreign employee quota approval is secured, work permits must be obtained or renewed for each foreign employee from 1 January 2018 to 31 March 2018 via the MLVT online system. Please bear in mind that this requirement applies to every employer in Cambodia, including representative offices, branches, limited liability companies and NGOs.

Foreign employees must hold a valid work permit in order to apply for a multiple entry business visa (also known as a Visa E). 
Failure to comply with the foreign employee quota and work permit requirements could result in fines being imposed by the labour authority and other relevant authorities in Cambodia. In serious circumstances, imprisonment for up to three months and/or deportation orders may be imposed upon the foreign employee concerned.

We would be pleased to assist your organization in preparing and submitting the 2018 foreign employee quota and work permit applications.

Prakas № 160, 25 October 2017, issued by the Ministry of Tourism (“MOT”).

This Prakas aims to enforce the implementation of codes of professional conduct and ethics for tour operators and travel agents in Cambodia. Segregated into two annexes, the code of professional conduct and code of ethics as per listed below under Annex 1 and 2 respectively.

Annex 1: The code of professional conduct aims to protect, enhance and maintain the propriety of tour operators and travel agents. This will also help to boost and foster greater trust among tourists. This code applies to all tour operators and travel agents operating in Cambodia. Tour operators and travel agents must engage in business activities within the parameters of relevant legal regulations and under an applicable tourism license. When operating its business, a tour operator or travel agent must have its own policy book regarding the delivery of its services to tourists. Of important note, tour operators must not sell tour packages with a zero-rated price or that is below net cost. Any practices violating this code of professional conduct may be investigated by MOT inspectors and, if there is a violation, the MOT will issue a warning letter to the violating party. In case of repeated violations, the violating party will be subject to penalties as set out in Chapter 6 of the Prakas on Licensing of Tour Operators and Travel Agents, and other applicable Cambodian laws.

Annex 2: The code of ethics aims to ensure that tour operators and travel agents provide quality services at appropriate standards to tourists in an ethical and responsible manner in order to foster trust among tourists and promote tourism sector in Cambodia. This code applies to tour operators and travel agents who are members of any tourism association in Cambodia. Of important note, tour operators and travel agents will be held liable under applicable laws if a tourist suffers damages during the provision of tourism services by a tour operator or tour agent. A tour operator or tour agent found to be in violation of the code of ethics will be subject to investigation by the MOT inspectors and other relevant competent authorities.

Prakas no. 1130 MEF.Prk dated 27 October 2017.

The Ministry of Economy and Finance (“MEF”) recently issued a Prakas no. 1130 MEF.Prk dated 27 October 2017, to extend the suspension of the 1% Prepayment Tax on Income for enterprises in textile and garment industry. This suspension only applies to enterprises which are recognized as Qualified Investment Projects until the year-end 2022.

Under this Prakas, the enterprises in the textile and garment industry are referring to enterprises that produce garment, textiles, footwear, bag, handbag and hat for export.  

To be eligible for this suspension, the enterprises in the textile and garment industry is required to:

  • keep proper accounting records in accordance with the provisions of Law on Taxation and the provisions of Law on Accounting;
  • fill and pay taxes by the applicable due date; and
  • Provide an independent annual audit report to the Tax Administration.

Prakas No. B7-017-326 Pror Kor, issued by the National Bank of Cambodia dated 25 October 2017

In order to enhance the effectiveness of the management and supervision of rural credit institutions providing small-scale credit (“RCIs”), the National Bank of Cambodia (“NBC”) has established certain terms and conditions on granting certificates to RCIs.

Effective on 25 October 2017, this Prakas provides that any person wishing to provide small-scale credit must obtain prior authorization from the NBC, having met its particular terms and conditions. RCIs may not engage in any other financial services apart from providing small-scale credit unless otherwise authorized to do so by the NBC.

Under this Prakas, where an RCI wishes to apply for an operating license to conduct micro-finance institution activities, it must satisfy certain conditions, one of which is that it has conducted rural credit operations for at least three years.

This Prakas replaces Prakas No. B7-02-49 Pror Kor on Registration and Licensing of Microfinance Institutions dated 25 February 2002.

Prakas No. B7-017-300 Pror Kor, issued by the National Bank of Cambodia dated 27 September 2017

In force since 27 September 2017, this Prakas aims to enable banking and financial institutions to mobilize and increase funds for business development, by being permitted to list securities on the Cambodia Securities Exchange, so as to more actively participate in the development of the Cambodian Economy.

Any institutions wishing to list securities as mentioned must obtain authorization from the NBC and satisfy certain conditions set out in this Prakas.

Prakas № 636 dated 29 June 2017 issued by Ministry of Economy and Finance

This Prakas is established with a goal to determine a rule and procedure on management and supervise professional on appraisal service on real estate and real estate agent service in Cambodia.

This Prakas provides the classifications of professional certificate and license on appraisal service on real estate and real estate agent service, supervisor authority, method of controlling these business activities, function and obligation of the certificate and license holder, dispute resolution and penalty for non-compliance.

Under this Prakas, all professional certificates and licenses for appraisal service on real estate and real estate agent service are required to obtain a professional certificate and license on appraisal service on real estate and real estate agent service issued by the Ministry of Economy and Finance.

License on Appraisal Service on Real Estate is divided in three categories as follows:

  1. Appraisal Service on Real Estate License;
  2. Real Estate Agent License; and
  3. Immovable property Management License.

Professional Certificate on Real Estate is divided in two categories as follows:

  1. Real Estate Evaluation Certificate; and
  2. Real Estate Agent Certificate.

The business operating license and professional certificate are valid for 3 years (renewable) and are cannot be transferred or sold.

Sub-Decree № 110 from the Ministry of Post and Telecommunication (“MPTC”), dated 21 July 2017

This Sub-Decree aims (i) to set out conditions and procedures for granting, suspending, transferring and revoking a permit when performing operations in the information and telecommunication technology sector and (ii) controlling and monitoring the implementation of permits, certificates and licenses.

Under this Sub-Decree, no person may conduct operations in information and telecommunication technology in Cambodia unless such a person obtains a permit, certificate or license from the MPTC. The General Department of Information and Telecommunication Technology of the MPTC is now vested with the authority to manage, grant, control, and monitor the implementation of these permits, certificates, and licenses to operators.

This Sub-Decree identifies business activities that are subject to permits, certificates or licenses. Of note, the sale of computer equipment, electronic devices or other information technology tools are subject to a relevant permit being obtained. On the other hand, online services and technical services must now hold a certificate issued by the MPTC. The creation and operation of data centers similarly must be licensed by the MPTC.

There are certain regulatory obligations imposed on operators including the submission of audited financial statements and non-financial information to the MPTC on an annual basis, data protection obligations, security, and information technology safety for users.

Prakas № 463 of the Ministry of Labour and Vocational Training (“MLVT”), dated 28 October 2016.

Prakas 463 aims to regulate private agencies providing local recruitment services in Cambodia (“Private Agency”). This Prakas applies to all types of Private Agencies. For the purpose of this Prakas, an entity will be deemed to be a Private Agency if it performs any of the following services: (1) matching job vacancies with job seekers, in which the Private Agency is not a party to the employment relationship; (2) introducing a job seeker to a third party, either an individual or an entity, which will manage and supervise the work; or (3) providing other services related to recruitment in accordance with the Labour Law and other applicable regulations

This Prakas imposes requirements upon entities involved in ‘local’ recruitment services in Cambodia to obtain a licence from the MLVT in form of a Prakas and a certificate confirming the MLVT’s authorization to the Private Agency to perform local recruitment services. This license is valid for a period of five years and can be renewed. In the case of an extension, the application must be filed with the MLVT within 30 days prior to the expiry date.

This Prakas imposes further obligations on the Private Agency, including the obligation to ensure confidentiality, document retention, notice to the local administration in which the recruitment services are performed, disclosure of recruitment data, and reporting of the work results to the relevant labour authorities.

Following the issuance of this Prakas, the MLVT recently issued Notification No. 001/18 dated 9 January 2018 to remind Private Agencies of their obligations to comply with this licensing requirement.

Guide for Investor

Registering a company in Cambodia is relatively straightforward. It has a more liberal business environment since becoming a member of the world trade organization and passing the law on commercial enterprises in 2005.

1. What types of business entities can be formed in Cambodia?

One of the first steps that any investor will take is to select the right structure for their investment. The 2005 law on commercial enterprises lists the principal forms of legal entity- the most common of which by far is the private limited company. The law also allows for the establishment of branches and representative offices, sole proprietorships and partnerships. The most common type of business structure is the limited liability company (LLC).

2. How does an investor set up a private limited company? What are the minimum capital requirements? What are the shareholders’ liabilities?

The first step is to reserve the proposed company name with the ministry of commerce (MOC). Once an acceptable company name has been reserved, an application shall be completed and submitted to the One Stop Service. Once the registration is completed, the investor will receive the following corporate records:

- Memorandum and Articles of Association; 

- Certificate of Incorporation;

- Business Extract;

- VAT Certificate;

- Patent Tax Certificate;

- Tax Registration ID Card;

- Notification on Tax Filing;

- Invitation Letter on Tax Update;

- Declaration of Opening the Enterprise; and

- NSSF Certificate.

The Law on Commercial Enterprises requires a minimum capital investment of four million Cambodian Riel (approximately US$1,000 at the current exchange rate).

The liability of each shareholder is limited to value of its capital contribution.

3. Can a company be 100% foreign-owned? Is a foreign enterprise required to have a Cambodian partner?

A limited company can be 100% foreign owned and a Cambodian partner is not a legal requirement for most business activities, unless the company will own title to land in Cambodia – in which case minimum local shareholding of 51% is required both single shareholder and multiple companies are permissible.

4. What government approvals permits and licenses are required? Which ministries or other government institution are in charge of granting licenses and approval?

All company must have a Certificate of Incorporation from the MOC; a Patent Tax Certificate and a VAT Certificate from the General Department of Taxation; and an office registration letter from the local authority. Depending on the type of business activity, the company may also require specific license(s) from the relevant Ministry; for example, for tourism, mining, handicraft, factories, energy, water supply, banking, construction, land or water transportation, and for agro-industry, forestry and fisheries.

5. How long does it take to register an LLC?

The entire company and tax registration process generally takes around one month. 

Cambodia enacted its current land law in 2001, establishing a national immovable property registration system. Under this system, registration of title on the national register is conclusive evidence of ownership, and all transfers of land must be registered in order for ownership to pass.

1. Property tenure/ownership

Cambodia adopted a freehold system of land tenure under the 2001 Land Law.  Private ownership of land is permissible for all types of land.  At present, three main types of land tenure exist:

  •  Freehold: fee simple, unrestricted;
  • Leasehold: long term leasehold (15 years or greater) creates “in rem” rights.  The new Civil Code provides for a maximum lease period, for all leases entered into after 21 December 2011, of 50 years, with a right of renewal for a further 50 year period; and
  • Concessions: conditional leases granted by the Government over state private land.  Concessions are used for specific development purposes with the land subject to specific conditions of use.  Concessions are used primarily for agricultural projects, island development and mineral exploitation.  The Royal Government of Cambodia temporarily suspended the grant of new land concessions on 7 May 2012.

2. Property acquisition by foreigners

Ownership of land is restricted to Cambodian citizens.  Cambodian citizens include individuals and companies in which 51% or more of the shares are held by Cambodian citizens. 

Despite the restriction, foreigners can acquire land in Cambodia through the following ways:

  • Khmer nominee: some clients elect to register the title deed directly in the name of a Cambodian nominee.  This option can be problematic though in the event of the death or disappearance of the Khmer nominee, or where there is a breakdown in the relationship between the parties.
  •  Cambodian Landholding Company: with 51% shares held by Cambodian nominees (so as to satisfy the Khmer nationality requirements) and the foreigner investor owning 49%. 
  • Strata Title: foreigners may acquire title to qualifying condominiums subject to certain conditions.
  • Short or long-term lease: there are no restrictions on foreigners taking leases (whether short or long-term) of private or state private land.
  • Land concession: foreigners have been permitted to take concessions of state private land (subject to the approval, on a case by case basis, of the Royal Government of Cambodia).
  • Citizenship: it is possible for foreigners to acquire Cambodian citizenship (and with it the right to purchase land), but note that it is a costly and time-consuming process.

3. Hard title

Hard title refers to three types of property title certificates: Certificate of Land Use and Occupation Rights, Certificate of Immovable Property Possession, and Certificate of Immovable Property Ownership. Of the three, the first two are registered sporadically and indicate possessory status whereas the last one, which is registered systematically in relation to the adjoining parcels, is the strongest and definite one and indicates full ownership status. The first two types of hard title remain theoretically contestable, but in fact they are also registered with the national-level cadastral registry, and there has been hardly any case of dispute pertaining to their status.

4. Soft title

Because private ownership was not possible before the enactment of the Land Law, the national land registration process was started only after 2001. In effect, many properties remain unregistered. These parts of land are normally held under a variety of documentary forms, normally recognized by the local level authorities, ranging from an application for land occupation to a letter of transfer acknowledged by local authorities to even a simple and private sale-purchase agreement. All of these are known as “soft title” documents, which are soft legally and physically (i.e. in terms of both the legality and the sheet of paper).

In fact, the phrase “soft title” is neither stated in the Land Law nor any other regulation. However, in practice, this term is being used widely among ordinary Cambodians to refer to any form of land tenure that can serve as evidence of possession or occupation, without any proper registration at the national level with the Cadastral Administration. Thus, soft title is mainly subject to contest by third parties although such an evidential document can act as a step towards legal possession and ownership if it is undisputed and the property is lawfully acquired. Notwithstanding the aforesaid, ordinary Cambodians sometimes accept such a soft title in daily sales and purchases of immovable properties. Also, some financial institutions are known to have accepted soft title documents as collateral for small-scale loans.

When a property is held under a soft title, there is a risk that there might be competing claims to title since it is not confirmed and recorded at the national level registry. A common problem is overlapping boundaries. There was no technically reliable way of demarcating boundaries in the old days, and the overlaps can be substantial. In addition, other problems associated with a soft title may arise, which will potentially lead to disputes, including duplicates of soft title documents issued to different applicants, issuance of a soft title document against the existence of a hard title certificate, issuance of a duplicate soft title while the property has been encumbered, or issuance of a soft title over State’s property.  

- Can a ‘soft title’ be registered?

There are two ways that’s a soft title may be registered at the national level and thereby converted into a ‘hard title’ in Cambodia.

  • Systematic Registration: being a government-initiated process conducted on a rolling village-by village basis (i.e. soft titles or sporadic titles are registered systematically in relation to adjoining land parcels); and
  • Sporadic Registration: being a type of registration conducted on a specific plot of land, on a case by case basis. This form of registration takes account of the slow roll out of the systematic registration process, and allows the holders of ‘soft titles’ to obtain greater certainty regarding the legal status of their land.

Note that sporadically registered title may be converted to full ownership once the systematic registration is conducted.

5. Foreign ownership of co-owned buildings

The Law on Providing Foreigners with Ownership Rights in Co-Owned Buildings (promulgated 24 May 2010) permits foreigners to own certain qualifying condominiums provided that:

a.       the subject building has a “strata” title; 

b.      the subject condominium is located above the ground floor;

c.       foreign ownership of the building does not exceed 70%; and

d.      there is a property management agreement in place amongst the co-owners.

It is predominately newly constructed apartment buildings that have “strata” titles.  It is technically possible to convert the title of an older, existing building to a strata title, but to our knowledge, has not yet been done.

6. Sale and purchase process

The following is intended as a very general summary of the sale and purchase process (and assumes that the client is legally capable of owning the subject property).  As you can appreciate, each transaction is different.





Identification of property/negotiation of terms with the Owner

Clients generally seek our assistance in identifying their preference properties and doing initial negotiation with the owners.



Initial Due Diligence


We often undertake due diligence on the title documents (including investigations with local authorities and the Cadastral office) without a binding sale and purchase agreement (“SPA”) in place.  The purpose of due diligence is to flush out any potential issues or third party claims to the land.  Due diligence in advance of a binding contract generally occurs when a client is confident that the property will not be sold to a third party in the meantime.  Alternatively, the parties can enter into a binding sale contract from the outset, and make provision for due diligence, and the withdrawal of the purchaser if the due diligence findings are not satisfactory.



Sale and Purchase Agreement


We can assist with the drafting, negotiation and execution of the SPA.  In most cases, we incorporate the agreed commercial terms into our base SPA, and thereafter tailor the SPA so that it reflects any other unique client requirements.  The form of the SPA is thereafter negotiated with the Seller.  Some Sellers accept the SPA as originally drafted and others dispute every clause.  This is where increased costs and time delays can occur.  Each situation differs, but generally speaking Khmer Sellers will require the payment of a 10% deposit upon the signing of the SPA, which they will thereafter use to pay the 4% transfer tax (which is based on the Government-assessed value of the land).



Submission of transfer/conversion documents to the Cadastral



Once the SPA has been executed, any conditions precedent are completed, and due diligence has been undertaken to the satisfaction of the purchaser, the next step is for the title transfer documents (and in the case of soft titles, title conversion documents) to be completed and submitted to the Cadastral office for processing.  The Seller usually controls this process, and attends to the payment of the 4% transfer tax.  The Cadastral generally takes 4 to 6 weeks to process the transfer and to issue the new/updated titles deed(s).



Confirmatory due diligence


We undertake final due diligence on the new/updated title deeds (i.e. to confirm that the transfer is valid and that our client is now the registered owner).  It is at this point that the final payment of the purchase monies is made to the Seller.



7. Property Transfer Process

Both parties to a transaction must thump-print (in person before cadastral officials) on any dealing instrument to be registered with the cadastral. The transfer registration can take three (3) to six (6) weeks for the transfer process to be completed, depending on the location of the property.

In the case of companies, the local authorities will require resolution and power of attorney from all shareholders granting power to a person authorize to thumb-print on behalf of the company – this authorized person is usually required to be a Cambodian citizen per customary practice. In the case that of a married person, the spouse also needs to thumb-print on spousal declaration if the property is to be transfer to only a husband or wife, but not a couple, and for an unmarried person, a ‘declaration of single status’ needs to be issued by the local authority and accompany the transfer documents.

The Cadastral officer begins processing the transfer by taking the Vente Definitive and other required documents to the Sangkat (i.e., commune level office).   Certification may be necessary at the Sangkat level where a new owner is unmarried or where a spouse expressly declares no interest in the subject land.

a.  The Sangkat officer certifies on the Vente Definitive.

b.  The Cadastal officer will pick up the Vente Definitive from the Sangkat office.

c.   The Cadastral officer internally verifies the Vente Definitive and other submitted documents (between 1-2 weeks).

d.   The Cadastral officer contacts the person who engaged the officer and notifies that person that the transfer application documents are ready to be picked up and taken to the General Department of Taxation (“GDT”).

e.  The application documents received from the Cadastral Authority are submitted to the GDT and a GDT officer is assigned to the matter.  The GDT officer inspects the land/ property to be transferred and determines the transfer tax amount based on the assessed value of the land (according to the GDT officer).

f.    Within 1-2 weeks, the GDT officer assigned to the matter may be contacted for the amount of transfer tax owed.

g.   The amount of transfer tax owed is paid to the National Bank by the designated party and a receipt is issued to the paying party (the buyer is obligated under law to pay transfer tax but the usual practice is that the seller pays the tax).

h.   All approved documents including evidence of transfer tax payment and Vente Definitive are brought to the Cadastral Authority office at the Ministry of Land Management, Urban Planning and Construction and new title ownership is recorded in the records of the Cadastral Authority and registered at the national level – at the General Department of Cadastre and Geography of the Ministry of Land Management, Urban Planning and Construction (between 1-2 weeks).

i.   The original title in the name of the new owner is issued by the Cadastral Authority and the relevant Cadastral Authority officer will notify the person who first engaged the officer that the transfer is complete and the original title is available to be picked up.

Transfer of soft titles (which are only registered with local authorities) can be effected very quickly, often within several days. Both parties will be required to thumb-print the soft title transfer documentation before the relevant local authorities.

8. Stamp Duty Tax

For transfer application, a 4% (four percent) transfer tax of the Government-assessed value of the land has to be paid as well as any unused land tax (charged on all unused portions of land over a standard size residential block) and any unpaid annual property tax before the authorities will issue the updated title deed. At law, the transfer tax is for the account of the buyer, but in practice it is commonly paid by the seller (who often uses the deposit monies received from the buyer for this purposes).

Foreign investor in Cambodia must pay taxes on income earned in the country, including profits. Cambodian resident including foreigners present in the country one hundred eighty-three (183) days or more a year and companies organized, managed or having their principle place of business in-country must pay taxes on income and profits earned worldwide. 

1. As a foreign investor, what taxes will I have to pay on my business?

Most foreign investments and foreign investor will be affected by the tax on profit, the minimum tax, the value added, various withholding taxes, customs duties and the salary tax on Cambodian and foreign employees.

Other taxes that can affect foreign investors include a specific tax on certain Merchandise and services and other minor taxes. According to the law on Taxation, companies must register with the tax department of the ministry of Economic and Finance within fifteen (15) working days of business registration or commencement of economic activities.

2. What kinds of tax returns must be filed? When are they due?

Every month four (4) separate tax return form must be filed. Due on the 15th of each month are forms the salary tax, return for withholding tax , a return for payment of tax on profit, specific tax on certain merchandise and services, tax on accommodation, tax for the public lighting, and other taxes. On the 20th for each month a return for VAT is due.

The forms must be filed even if returns are nil. There are hefty fines for non-compliance.

The annual Tax on profit returns must be filed on or before 31 March. That is, three (3) months after the end of the government’s fiscal year, which spans the calendar year   from 1 January to 31 December.  A company with a different fiscal year can obtain special approval to use their fiscal year for Cambodian tax purpose.

An annual patent tax return must also be made by all business enterprises on or before 31 March.

3. What taxes will I owe on profit from my investment?

The general rate of the tax on profit is 20% (twenty percent), but the law on Taxation has exception and exemptions. An investment company with a tax holiday enjoy 0% (zero percent) rate. Insurance activities are taxed at a rate of 5% (percent) of gross premium income. Profit of a company investing in oil and gas are taxed at 30%.

Most commercial enterprises are subject to a monthly prepayment of Tax on profit at the rate of 1% (one percent) of monthly turnover inclusive of all taxes except VAT. The payment can be offset against the annual Tax on profit liability and the minimum tax.

The Minimum tax is a separate tax calculated at 1% (one percent) of annual turnover inclusive of all taxes, except VAT. It is payable at the time of annual liquidation of the tax on profit.

4. Will I be required to pay personal taxes in Cambodia?

If you are a Cambodian resident, your personal income is subject to the tax on salary up to 20% (twenty percent). A resident is someone present in the country 183 (one hundred eighty-three) days a year or more.

5. Will I be required to withholding and pay salary or income taxes for my employees? Does that include foreign employees? What about foreign employees who work for short periods?

Both the employer and the employees are jointly liable for the payment of the tax on salary regardless of whether the salary is paid in Cambodia or overseas. However, the employer is the first responsible party. Employers must withhold and pay taxes for both local and foreign employees. If the employer does not pay the tax on salary, the employee must pay.

A withholding tax on salary is calculated according to a schedule of earnings which ranges between 0% (zero percent) and 20% (twenty percent). As of January 1, 2015, the tax is 0% (zero percent) for those earning less than 800,000 Cambodian riel per month (about us$200 per month) and 20% if the earnings are more than 12,500,000 Cambodian Riel per months (approximately us$3125 a month at the current exchange rate). This tax is applied monthly. There is no annual return.

Consultants and other contract workers (non-employees) also must pay taxes, with rates varying depending on whether they are residents or non-residents and what kind of work they do. A resident contractor doing consulting, management and some other service is taxed at 15% (fifteen percent), while non-residents are taxed at 14% (fourteen percent). The withholding tax in these instances is considered as the final tax.

Foreign employees who work in Cambodia only for short periods will be taxed as non-resident taxpayers on their Cambodian sourced income at the flat rate of 20%.

6. Will my business be required to pay value-added tax (VAT)?

Yes, most probably. A 10% (ten percent) VAT is applicable on supplies of most goods and services, with the exception of public postal service, hospital and medical service, public transportation, insurance, certain financial services, important of certain articles for personal use, recognize non-profit public interest activities, and electricity.

Taxpayer subject to vat must register, usually at the time of incorporation, and are thereafter required to file VAT returns and payment of the tax on a monthly basis.

7. What kind of duties apply in Cambodia?

Import duties are variable depending on the goods to be imported, but generally range between 0%(zero percent) and 35%(thirty-five percent). Taxes on luxury items such as automobiles can be considerable higher. There are exceptions for goods for personal use and goods exemption by international treaties, and for international and local NGOs. There is a duty exemption for equipment, construction and raw material if the company gains qualified investment project (QIP) status with the CDC.

Export duties are levied on only a limited number of items, such as rubber, unprocessed precious stones, timber, certain live animals and products (including fish and most seafood), and minerals and oil gas.

8. What accounting requirement are these for foreign business?

The Law on Corporate Accounts, Audit and Accounting requires that a company’s accounting records shall be prepared in Khmer and expressed in Cambodia Riel. Enterprises carrying out business with foreign countries or subsidiaries of foreign companies may be authorized to prepare accounting records in English and in currency other than Riel in addition to the accounting records in Khmer and Cambodian Riel. However, the company’s financial statement must be prepared in Khmer and in Cambodian Riel.

Accounting record, financial statements, ledgers and documentary evidence must be kept for ten (10) years from the end of the financial year to which the record relate. Such ledgers include a general journal, accounting ledger and inventory book.

9. Are there any other taxes in Cambodia?

Yes, fiscal taxes are payable on certain transactions such as filling of applications with governments entities and other documents.

Companies are also required to pay an annual Patent Tax.

Registration tax is payable on the transfer of registration of immovable property, company shares and vehicles and other means of transportation.

Annual immovable property tax is payable on certain properties, usually in urban areas and over 100 million Cambodian Riel (approximately US$ 25,000 at the current exchange rate) in value.

Unused land tax is payable on undeveloped land that is not subject to annual immovable property tax.

Cambodia has adopted a liberal foreign investment law policy without bias or discrimination. The open door policy imposes few restrictions on foreign investment, and with its potentially abundant natural resources, relatively inexpensive and motivated labor force, Cambodia offers advantages and significant potential in many industries. 

1. Where do you start when you want to invest in Cambodia?

For many investors, the place to start is the CDC. Established by the 1994 law on Investment, the CDC is the one-stop decision-making body for private and public sector investment. It is chaired by the prime minister and composed of senior ministers from various government agencies. The Cambodia investment Board (CIB) is the CDC’s operational arm for private sector investment. The CIB reviews investment application and grants concessions to investors and investment project meeting the requirement laid out in the investment law.

2. What incentives and other benefits does the country offer investors? Are there other benefits?

The types of investment incentives that may be available for qualified investment projects (QIPs) include:

  •           Profit-tax exemption for specified periods of up to nine (9) years or special depreciation rights;
  •           Import duty exemptions for production equipment, construction materials and production imports for exported products ;and
  •      Equal treatment of investors regardless of nationality, including no price fixing, no nationalizations, and free purchase, and remittance of foreign currencies, including remittance of royalties, management fees, profits and repatriation of capital abroad.

Some activities are not eligible for incentives, and some are prohibited.

3. Are there any foreign exchange restrictions? Are investors free to take profits out of the country?

There are no foreign exchange restrictions on the transfer of funds into or out of Cambodia through banks. Subject to tax on profits and withholding taxes on dividends, interest, royalist, rent, other income on property, and compensation for management or technical services, investors can freely repatriate the proceeds from their investment. In the event of liquidation, an investor is free to transfer the proceeds (assets).

4. Are there any protections for the investors?

The law states that foreign cannot be discriminated against and are equal in the eyes of the law to national business with the sole exception being ownership of land.

Visa applicants must submit passport, application forms, a recent passport photo, and other documents as determined by the status of stay.

1 - T-Type (Tourist) - VOA

• Cost = $30

• Length of stay = 1 month

• Extension = Can be extended once in country for a further period of 1 month

The T-Type visa can also be pre-purchased online in the form of an e-Visa (electronic visa)

• Cost = $37 + $3 credit card processing fee

• Length of stay = 1 month

• Extension = Can be extended once in country for a further period of 1 month

• Apply for online at

2 - E-Type (Ordinary/business)

• Cost = $35

• Length of stay = 1 month

• Extension = Can be extended for the following periods:

                    - 1 Month    (Single entry)

                    - 3 Months   (Single entry)

                    - 6 Months   (Multiple entry)

                    - 12 Months (Multiple entry)

3 - A-Type (Diplomatic)

• For visiting foreign diplomats, embassy personnel, invited foreign military, etc.

4 - B-Type (Official)

• For NGO/Aid workers, etc.

5 - C-Type (Courtesy)

6 - K-Type (Special) - VOA

• Issued to Cambodian national's entering Cambodia on a foreign passport. (The applicant has to provide well-documented evidence, such as proof that one's parents were Cambodian).

• Cost = Gratis

Visa Exemption:

•The nationals of the Laos, Malaysia, Philippines, Singapore, Vietnam, Thailand, Indonesia do not need a tourist visa and may stay in Cambodia for 21 and 30 days respectively.

NOTE: Some nationalities are required to get visa in advance at Royal Embassy of Kingdom of Cambodia in their country: Afghanistan, Algeria, Saudi Arabi, Bangladesh, Iran, Iraq, Pakistan, Sri Lanka, Sudan, Nigeria.

The tourist (T) and ordinary (E) visas can be extended at the Immigration Department, National Police, or for less hassle can be extended at most guest houses and travel agencies/tour operators.

The Diplomatic (A), Official (B) and Courtesy (C) visas can be extended at the Consular Department, Ministry of Foreign Affairs.

Overstaying your visa will incur a fine of $5 per day of your overstay.

The 1997 Labor Law, as amended in 2007, regulates employment and such matters as benefits and obligations in employment contracts. The law limits the proportion of foreign employees on a payroll but for the most part Cambodian and foreign employees are covered equally. Foreign employees however require visas and work permits.

1. Must investor hire nationals? Is there a minimum number or percentages of nationals? A maximum number of foreign employees?

The law requires employers to give priority to hiring Cambodians. In general, 90% (ninety percent) of a staff must be national. Among the 10% (ten percent) standard quota for foreign employees, 3% (three percent) are office staff, 6% (six percent) are specialized employees, and 1% (one percent) are non-specialized employees. But this is not absolute, and an employer who demonstrates that they need employees with special skills or qualifications not readily available can apply to the Ministry to increase the number of foreign on staff. 

2. Are foreign employees required to have licenses or work permits? How hard is it to get entry permits or visas for them? How long are they allowed to stay and work in Cambodia?

Foreigners need to have a valid visa, a work permit, an employment card, and a residency permit to work lawfully. Work permits and employment cards, obtained at the Ministry of Labor and Vocational Training, are valid for one year. It is also not difficult to obtain visas, and investor and foreign staff may apply for business visas. The initial business visa is valid only for short period of time but can subsequently be renewed for up to one year at a time.

To the extent that there are no local resources available, employers must request advance approval (i.e. quota) from the Ministry of Labor and Vocational Training to hire foreign workers. A request to employ foreign manpower for the coming year must include the numbers of local and foreign employees, the reason for hiring foreign and must be submitted to the Ministry before the end of November each year.

A written employment contract of each foreign must be register with the Ministry (for those who work in Phnom Penh) or at the relevant Provincial Department of Labor and Vocational Training (for those who work in a province.)

The procedures for initial and extension applications for work permits and employment cards vary according to different categories of foreigner: (i) foreigner whose entry visa has a limited period of stay; (ii) Vietnamese or Laotians working in the Cambodia-Laos-Vietnam Triangle Development Zone along the border of certain Cambodian provinces; and (iii) foreigners whose permanent stay in Cambodia is permitted.

Application and payments for extended work permits and employment cards must be made before the end of March each year.

3. What type of employment contracts and agreement exist in law? Which are the most beneficial to foreign investor?

The Labor law outlines two types of employment contracts- the specific duration and the unspecific duration. A specific duration contract must be in writing specifying the starting and finishing dates, and has maximum term of two (2) years. The two types of labor contract have different rules pertaining to termination, benefits and obligations. A fixed duration contract has a unique characteristic- unless the employer gives appropriate advance and written notice to the employee of the contract expiration and non-renewal prior to the expiry date, the contract is automatically renewed upon expiration for a length of time equal to its initial duration, or deemed as an unspecified duration contract if the total length of the contract exceeds two years. It cannot be terminated prior to the end of its term, except due to gross misconduct, act of god (or force majeure), or written agreement in the presence of a labor inspector. An unspecified duration contract does not have to be in writing, but making it in writing and setting out clear terms and conditions of employment will be useful. An unspecified duration contract will continue until it is termination by either or both parties according to the legal procedures.

Each of the two (2) types has its own advantages depending on the circumstance and the needs of the hiring entity. A fix duration contract is usually fit for a short term project, whereas an undetermined duration contract would be more appropriate for long-term employment.

A well-executed labor contract will help minimize the risks of understanding, misstatement and cross-expectation of the contract terms. It will also help bring a healthy and happy employment relationship and more importantly, prevent disputes and save cost, time and reputation.

4. What benefits is an employer required to provide employees?

A number of benefits are required by law, but some requirements are not well defined and employers meet them in various ways. For example, the labor law required employees to provide primary health care. Some employers offer group health insurance, some self-insure, some have trained medical care providers on staff.

Other requirements: a 48-hour (6 days) work week, with annual leave of 18 (eighteen) days, day off for public holidays and says off for special events such as weddings, child delivery and illness of a child or parent (deductible from annual leave).

Cambodian law requires employers to establish clean working environments and maintain standards of hygiene and sanitation for employees. Moreover, a number of benefits including primary health care, breast feeding break, nursing room and day care center (if there are 100 (one hundred) female worker or more) are mandated by the labor law. Additionally, other employments related benefits include:

  •  Weekly time off: maximum working hours are eight (8) hours per day or forty-eight (48) hours per week, and the weekly beak should be at least one full day, which should principally be a Sunday. As per common practice among most companies (other than those in the manufacturing industry), both Saturday and Sunday are granted as weekly day off.
  •  Public holidays: paid public holidays for works/employees of all enterprises are determined by the Ministry in charge of labor yearly through its Prakas (ministerial edict). There is also a sub-decree issued annually by the Royal government specifying public holiday for both government officials and private sector employees within the year. In addition, there may be other incidental holidays which need to be granted such as leave for national election or important national ceremonies. Under the labor law, if a public holiday falls on Sunday, workers will have the following working day as compensatory day off.
  •  Annual leave: in addition to paid public holidays, each employees is entitled to one-and-a half (1.5) days of annual leave per month of continuous service (thus, eighteen (18) days per years). Employees can take annual leave after one full year of service, although in practice a lot of companies allow staff to take accrued annual leave since the first year of employment for administrative convenience.
  •  Annual leave increase one (1) day for every three (3) years of service. Unused annual leave can be carried forward to the next year, on the condition that the deferment cannot exceed three (3) consecutive years and can only apply to leave exceeding twelve (12) working days per year.
  •  Sick leave: whereas the labor law allows employees to take sick leave, it fails to determine that duration of duration paid sick leave. The ministry in charge of labor does not issue any regulation or official guidance dealing with this matter either. However, according to standard internal regulation approved by the Ministry and awards issued by the labor Arbitration council, recommended duration and payment for sick leave are as follows:
  • 100% of wage for the first month;
  • 60% of wage of the seconds month;
  • 40% of wage for the third month; and
  • Unpaid leave for the fourth month until the sixth months.
  • Special leave: Employees can take up to seven (7) days of special leave per year for personal marriage, paternity, child’s marriage, or illness or death of spouse, child or parent. Special leave can be deducted from available annual leave day or subject to make-up work with certain conditions.
  • Maternity leave: A female employee is entitled to ninety (90) days of maternity leave, and, provided that she has been working for at least one year, she is compensated with half pay during this leave.
  • Termination of benefits: Employee entitlements from termination of employment vary according to the type of contract, which may include notice, severance, and damages. In addition, employees enjoy the following benefits.
  • If any annual leave days remain unused at the time of termination, payment in lieu thereof must be paid to the employee.
  • At the termination, employee can request for a certificate of employment, which cannot contain any harmful statement.
  • Wages and indemnity of any kind must be paid within forty eight (48) hours following the date of termination of work.

5. Is there a minimum wage?

Minimum wage has only been set for workers employed in the textile, garment and footwear sector. The current monthly minimum wage for regular workers in 2019 is US$ 182. There are no minimum wages determined for other sectors, but the above rate has also been applied generally in the manufacturing industry.

As yet, there is no minimum wage for the private sector as a whole, but generally employees are paid according to their professional worth.

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