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INVESTMENT
In terms of foreign investment, the Royal Government has enacted a new investment law with great incentives and this law has been in effect since August 4, 1994. In order to improve the poor economy in Cambodia, Canada, Japan, European Union and Australia have already granted Generalized System of Preference (GSP) to Cambodia. US Government has also approved the Most Favored Nation (MFN) status for Cambodia.
All the investment projects made by Cambodian citizens and/or foreigners within the Kingdom of Cambodia, investors have to submit the investment application to Council for Development of Cambodia (CDC) for review and decision. CDC is the sole and one-stop service organization responsible for rehabilitation, development and the oversight investment activities. It is also the ˇ§Etat-Majorˇ§ which is responsible for the evaluation and decision making on all rehabilitation, development and investment project activities.
For facilitating the procedure of investment, Council for the Development of Cambodia (CDC) carries out one-stop-service and shall provide response as to its decision to all investors/applicants within a period of a maximum of twenty-eight (28) days following the date of submission of a complete investment application.
The tax incentives for investment in Cambodia are as below:
* Tax Incentives:
1- A corporate tax rate of 9% except the tax rate on the exploration and exploitation of natural resources, timber, oil, mines, gold, and precious stones.
2- A corporate tax exemption of up to 8 years depending on the characteristics of the projects and the priority of the government which are set in a Sub-Decree. Corporate tax exemption is to take effect beginning from the year the project derives its first profit. A 5-year loss-carried forward is also allowed. In the event the profits are being reinvested in the country, such profits are exempted from all corporate taxes.
3- Non-taxation on the distribution of dividends or profits or proceeds of investments, whether they will be transferred abroad or distributed in the country.
4- 100% import duty exemption on construction materials, means of production, equipment, intermediate goods, raw materials and spare parts used by:
A- An export-oriented project with a minimum of 80% of the production set apart for export, and
B- Located in designated Special Promotion Zone (SPZ) listed in a development priority list issued by the Council;
C- Tourism industry,
D- Labor-intensive industry, processing industry, agro-industry,
E- Physical infrastructure and energy industry.
The 100% exemption of duties and taxes mentioned above are in effect subject to the terms or specifications of the investment projects which are required to produce goods for export in minimum of 80% of overall productivity as stipulated in the above point (4A) and for the investment projects which are located in Special Promotion Zone (SPZ) as set in (4B).
Beside these kinds of investment projects in the above points (4A) and (4B), the 100% exemption of duties and taxes are only authorized for an arrangement of construction period of the enterprises, factories, buildings and the first year of operation business production.
5- 100% exemption of export tax, if any;
6- The permission to bring into the Kingdom of Cambodia foreign nationals who are:
A- Management personnel and experts
B- Technical personnel
C- Skilled workers
D- Spouses and dependents of the above persons as authorized by the Council for Development of Cambodia and in compliance with the immigration and labor law.
* Investment Guarantees:
b Investors are treated in a non-discriminatory manner as set by law, except for ownership of land as set forth in the Constitution of the Kingdom of Cambodia.
b The Royal Government shall not undertake nationalization policy which shall adversely affect private properties of investors in the Kingdom of Cambodia.
b The Royal Government shall not impose price control on the products or services of investors who have received prior approval from the government.
b Free transfers of returns for the followings:
1- Payment for imports and repayment of principal and interest on international loans,
2- Payment of royalties and management fees;
3- Remittance of profits;
4- Repatriation of invested capital;
5- Repatriation of wages and salaries of foreign employees.
* Investment Projects:
The Council for Development of Cambodia shall submit for the approval of the Council of Ministers, any of the following investment projects involving:
b Capital investments of USD 50 million and above
b Politically sensitive issues
b The exploration and the exploitation of mineral and natural resources
b Possible negative impact on the environment
b Long-term strategy
b Projects on a Build-Own-Transfer (BOT) or Build-Own-Operate-Transfer (BOOT) or Build-Own-Operate (BOO) or Build-Lease-Transfer (BLT) basis.
* Investment Procedures:
The basic procedural steps to obtain an investment license and incentives are as follow:
b Prepare the following documents for presentation to the Cambodian Investment Board (CIB):
- CIB Application form and related documents
- Memorandum and Articles of Association of the investment company; or the contract for the Business Cooperation Contract (BCC) or Built-Own-Transfer (BOT).
- Technical and Financial Feasibility Study
b File application with CIB and pay first part of application fee:
- US$100 for investment of US$I million or less
- US$200 for investment over US$1 million
b Meet with CDC and CIB officials to present the project and answer any questions. Usually meetings will be required with the Department of Investment Assessment at the CIB.
b Provide any additional documents required to complete application. Once the CDC considers the application complete, it is required to issue an approval or rejection of the application within 28 working days under the new CDC investment support policies set out at the beginning of this section. Please keep in mind that this 28 day limit is a new initiative of the CDC and that in the past, it was not uncommon for a 45 day limit to be surpassed.
b Receive approval in principle from the CDC and pay second part of application fee:
- US$500 for investment of US$1 million or less
- US$1,000 for investment of US$1 million
b Pay performance guarantee deposit of between 1.5% to 2.0% of the total investment capital at National Bank (the Law is not clear on the time of payment).
b Register legal entity at the Ministry of Commerce.
b Receive formal Investment License from CDC.
b Proceed with investment within six months.
b Refund of performance guarantee after 30% completion of project.
* Forms of Investment and Business in Cambodia:
When considering to invest in Cambodia, the investors should consider about the kind of investment. Currently the legal forms of investment and business are as following:
b Wholly owned domestic capital (100%)
b Wholly owned foreign capital (100%)
b Joint Venture
b Built-Operate-Transfer (BOT)
b Business Cooperation Contract (BCC)
b Branch Office
b Representative Office
* Limited Liability Company:
The Limited Liability Company is the most common form of investment for projects approved by Cambodian Development Council (CDC). It can be 100% owned by Cambodians, 100% of foreigners or any Combination of two or more foreign or Cambodian shareholders.
A Limited Liability Company is formed by registration of Memorandum and Articles of Association at Ministry of Commerce, and receipt of a business license from the ministry.
* Joint Venture:
The proposed investment may be in the form of an incorporated joint venture which may be formed between investors of any nationality. There is no limit on the permitted share holding proportion of each shareholder, unless the joint venture owns or intends to own land in Cambodia, in which case of the foreign shareholding cannot exceed 49%.
* Built-Operate-Transfer (B-O-T):
A Built-Operate-Transfer project is a concession contract usually the government grants a concession to a promoter, who is responsible for the construction, financing, operations and maintenance of a facility over the period of the concession before transferring the facility. During the concession period, the promoter owns and operates the facility and collects the revenue to repay the financing and investment costs, maintains and operates the facility and makes a margin of profit.
* Business Cooperation Contract (BCC):
The Business Cooperation Contract is an investment limited to construction arrangements between a private party and a government entity for the purpose of undertaking joint venture, but without creating a new legal entity. However, the BCC still needs to pay certain taxes under the Tax Laws of Cambodia.
* Branch Office:
A branch office is an office that is opened by a company of another foreign country for the purpose of conducting the commercial activity in Cambodia. It can sell, buy or conduct a regular professional service as Representative Office Agent (ROA). Its management and contract shall be under one or two Directors who may be appointed or removed by the parent company.
* Representative Office:
A Representative Office is established by an eligible foreign investor to facilitate the sourcing of legal goods and services and to collect information for its parent company. They also serve as a channel for promoting and marketing their products.
The Representative Office is not considered a separate legal entity from the parent company and regarded as the cost center and is not subject to Cambodian Tax Laws.
According to the Instructional Circular on Commercial Registration, a private limited company must have between two and thirty shareholders. If it has only one shareholder, it is seemed to be a Sole Proprietorship Limited Company. A public limited company must have at least thirty shareholders.
* Formality for Registration of a Company:
Shareholder or director must come to complete and sign a registration form in person with his or her ID or passport in front of an official at the Legal Affair Division to confirm all the documents are correct and complete. If any ambiguity is found in the documents, the Director of the Legal Affair Division will visit the Director of company to clarify such ambiguity on case by case basis.
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