What foreign investors need to know


At the end of 2021, Cambodia introduced a new investment law to increase the country’s competitiveness for foreign investors by upgrading local industries and protecting investors’ rights. The new law provides a variety of incentives, such as income tax exemption and customs duty incentives.

On October 15, 2021, Cambodia enacted a new investment law, officially called the law on investment in the Kingdom of Cambodia (the law”). The law governs domestic and foreign investment in the country. The Cambodian government first enacted the law’s predecessor in 1995 and amended it in 2003.

The law aims to modernize and streamline Cambodia’s investment environment, further aligning regulations with ASEAN best practices. It was spurred, in part, by the government’s need to boost Cambodia’s economic recovery from the effects of COVID-19.

Here we examine the main features of the law as they affect foreign investors.

General provisions

Section 1 of the law sets out its general objectives: to create an open, transparent, predictable and favorable legal environment to attract and promote domestic and foreign investment in Cambodia. He lists the four ways the law intends to do this:

  1. Increase Cambodia’s competitiveness to make its economic structure more diversified and crisis-resilient;
  2. Modernize and increase the productivity of local industries and strengthen connectivity with regional and global supply chains, including by promoting capital inflows and the transfer of technology, knowledge and know-how;
  3. Establish a transparent, predictable, non-discriminatory and competitive investment incentive regime to support socio-economic development policies; and
  4. Ensure the protection of the rights and legitimate interests of investors through the establishment of a comprehensive and equitable legal framework consistent with national interests.

The law advances these objectives by simplifying registration procedures, strengthening investor guarantees and encouraging investment in strategic sectors, among other areas.

Registration procedures

Chapter 4 of the law contains updated procedures for the registration and implementation of investment projects. By Section 10Investments can be registered with the Council for the Development of Cambodia (CDC) or municipal-provincial investment sub-committees in three categories:

  • Qualified Investment Project (QIP): Eligible for investment incentives, as confirmed by a registration certificate.
  • Extended Qualified Investment Project (EQIP): An expansion of a QIP, for example by increasing production, implementing new technologies or improving infrastructure.
  • Guaranteed Investment Project (PGE): Not eligible for tax incentives.

The law introduces the possibility for investors to register projects online via a single portal. As described in Section 12, the ministries concerned will examine and decide on the investment requests submitted on the single portal within 20 working days. According Section 13investment projects can be implemented upon receipt of the registration certificate, provided other permissions and requirements are met.

Investment guarantees and protections

The law includes several new measures on guarantees and protections of investments in Chapter 5. A key provision is Section 19, which stipulates that investors have the right to freely purchase foreign currency and repatriate such foreign currency to settle financial obligations related to their investment through approved intermediary banks. These transfers expressly include:

  1. Capital contributions, including initial capital contributions;
  2. Income, capital gains, dividends, royalties, license fees, management and technical assistance fees, interest and other investment income;
  3. Income from the total or partial sale or dissolution of the company implementing the investment project;
  4. Payment of importation and repatriation of loan principal and interest;
  5. Payment of compensation in the event of civil unrest, expropriation or confiscation by the State;
  6. Payment resulting from the settlement of a dispute by any means, including court decisions or arbitration awards; and
  7. Other employee income and wages.

The law contains many other sections outlining safeguards and protections, including Section 22, which outlines the right to obtain and/or apply for residence permits in Cambodia for investors, foreign employees and their families. Of note, these provisions come with a number of caveats, such as allowing the hiring of foreign employees depending on the circumstances and requirements to meet other visa application procedures.

Encouraged industries

Chapter 6 of the law defines the incentives to encourage industries and activities. The law lists those industries and activities encouraged in Section 24. Many of these industries are in areas that are strategically important to government development, such as high-tech and green technologies, as opposed to areas where Cambodia is already strong, such as garment manufacturing.

The encouraged industries are:

  1. High-tech industries involving innovation or research and development;
  2. New innovative or highly competitive or high value-added manufacturing industries;
  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. Parts, assembly and installation industries;
  7. Mechanical industries and machines;
  8. Agriculture, agro-industry, agro-food industry and agro-food industries serving the domestic market or the export market;
  9. Small and medium enterprises in priority sectors and development of clusters of small and medium enterprises, industrial parks and science, technology and innovation parks;
  10. Tourism and tourism-related activities;
  11. Special Economic Zones;
  12. digital industries;
  13. Education, professional training and product promotion;
  14. Health;
  15. Physical infrastructure;
  16. Logistics;
  17. Environmental management and protection, biodiversity conservation and circular economy;
  18. Green energy and technology contribute to climate change adaptation and mitigation;
  19. Other sectors and investment activities considered by the Cambodian government have potential for socio-economic development.

Investment incentives

According Rule 25, investments in encouraged industries are eligible for basic tax and/or customs incentives, unless they are included in the negative list. Investors can claim the incentives after obtaining a registration certificate that certifies the Qualified Investment Project (QIP) status of the investment. QIP registration certificates can be issued by the Cambodia Development Council and municipal-provincial investment sub-committees.

Eligible investors have two options for claiming basic tax incentives, as set out in Rule 26:

  • Option 1: Income tax exemption for three to nine years, depending on the nature of the investment. Thereafter, investors pay 25% of the total tax due for two years, 50% for the following two years and 75% for the following two years. Investors are also exempt from tax on prepayments, minimum tax if an independent audit has been carried out and export tax, unless otherwise stated.
  • Option 2: Deduction of investment expenses by way of derogatory depreciation in accordance with the tax regulations in force. Deduction of up to 200% of specific expenses incurred for a maximum of nine years, depending on the investment activities. As with option 1, investors are exempt from tax on prepayments, minimum tax if an independent audit has been carried out and export tax, unless otherwise stated.

In addition to these two options, exemptions from customs duties, value added tax (VAT) and special taxes are available for imports and exports of construction materials and equipment, construction equipment and inputs. production.

Moreover, by Section 27investments with a PAQ registration certificate are eligible for additional incentives, namely:

  • Exemption from VAT for the purchase of production inputs manufactured locally for the implementation of the QIP.
  • Deduction of 150% of the tax base for the following activities:
    • Research, development and innovation;
    • Human resource development through the provision of vocational and skills training to Cambodian workers/employees;
    • Construction of accommodation, food courts or canteens where reasonably priced food is sold, crèches and other facilities for workers/employees;
    • Upgrading machinery to serve the production line; and
    • Provision of social assistance to Cambodian workers/employees, such as comfortable transport to get from their homes to factories, accommodation, food courts or canteens where food is sold at reasonable prices, crèches and other facilities.
  • Income tax exemption for the expansion of a QIP.

To finish, Section 28 stipulates that investments in areas that contribute to national economic development may benefit from special incentives provided for in the Financial Management Act.

Further reading

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