A booming economy and an entrepreneurial spirit have led to an explosion of small businesses in Cambodia, especially in Phnom Penh. The country has undergone rapid modernization in recent years, attracted by the growing tourism and manufacturing industries. This has led to many opportunities for aspiring entrepreneurs, who have taken advantage of the situation to build the businesses of their dreams, despite the constraints of the country’s developing infrastructure.
The World Bank also reports Cambodia has the easiest business registration process in the world. However, while opening a business is relatively easy in the Kingdom, operating a business in Cambodia is more challenging. This is especially true for foreign investors who need to navigate a world of special government regulations, which are often different from those of their home countries. In this guide, we’ll take a look at what it takes to start a business in Cambodia.
The attractive reasons behind the prosperity of the economy in Cambodia remain on the frontline for foreign investors to consider. Cambodia is special in particular grounds for business to collaborate and cooperate as contributing to many positive outcomes to gain more revenue and profit for which companies that invest in the Kingdom.
Undeniably, Cambodia provides many great opportunities for an investor in various terms. As one of the developing countries, Cambodia needs more gaps to fill for the huge demand from people and the country and international needs.
This article will elaborate further regarding the specialties of Cambodia in terms of the economic corner, including strategic location, the advantage of labor forces, and potential economic factors.
1. Strategic Locations
Located in Southeast Asia and gained enough potential requirements, Cambodia had a great opportunity to join one of the best regional organizations in the world, the so-called ASEAN. ASEAN community contribute much effort to economic factor in its national members, including the opportunity to connect smoothly to the outside world. By connecting to the globe, each nation receives numerous occasions to cooperate with superpower countries and international business companies. The visible instance about benefits of Cambodia from ASEAN is ASEAN Free Trade Area (AFTA) was created to lowering of the intra-regional tariff. In the case of Cambodia, there are 66 Cambodian products that have a lowering tariff to 0-5 percent.
Therefore, investors who contempt and intend to have their products export to particularly ASEAN nations, should consider setting up here in Cambodia. However, not only for consumers in ASEAN, the international market also provides many opportunities for ASEAN nations as well.
2. Advantage of Labor Forces
Talking about the labor force in Cambodia, we should put this into the advantages category. Labor here in the Kingdom is quite low costs for investors to spend. Additionally, many potential youths are finding a proper job for themselves. Most students who graduated from University remain unemployed because the job market in Cambodia is still tight for them. Some people, even, migrate to bordered countries to find a job opportunities. So, needing workforce and labor, Cambodia offers a good place for investors to contempt.
3. Potential Economic Factor
Cambodia has been considered as a developing country to be able to strengthen economic factor to rapidly grown in the recent decade. There are many sectors, including real estate, agriculture, tourism, and garments, that have provided huge benefits for Cambodia to enhance the economic sector to grow unexpectedly. Therefore, for this economic resilience, investors have been granted an opportunity to invest to gain much revenue and profit.
Due to these specialties, Cambodia is great for the business adventure of the investor to give and to gain. Strategic locations, benefits of the labor force, and potential economic factors are needed to consider in case business owners want to invest in Cambodia, since all of these are advantages for investors.
The economy of Cambodia distributes mainly from three factors including tourism, garment industrial, agriculture, and real estate. In the ASEAN community, Cambodia is increased by 7.5 percent in 2018 and is considered to be one of the rapid economic growth in the recent decade. However, this number has slowed down to almost 2.3 percent in 2020 due to the Covid-19 pandemic which led to a decrease in each main factor differently.
No matter what happens to the Cambodian economy, these three factors remain crucial for Cambodia in the post-pandemic period. And this article will detail these three factors elaborately regarding how these factors contribute and enhance the Cambodian economy regardless of Covid-19 impacts.
1. Tourism Factor in Cambodia
Talking about the most crucial factors, we need to put tourism first to discuss. According to New Straits Times reports that Cambodia’s tourism sector contributes to 12.1 percent of the country’s gross domestic product growth and employs up to 630,000 people. In 2018, according to news reports, the number of foreign tourists reached 6.2 million reinforced by a huge rise in Chinese tourists. A large number of tourists are attracted to the Siem Reap province in order to visit the historical site of Angkor Wat temple, however, a growing number of foreigners are also visiting the beaches in the southern town of Sihanoukville which led to gain annual revenue from this sector was estimated to $4 billion.
2. Garment Industrial in Cambodia
In the garment industry in Cambodia, approximately $5.7billion in clothing and shoes were exported last year, responsible for almost 95 percent of all Cambodia exports. With a population of 15 million in Cambodia, the garment industry employs around 500,000 people, mostly women. However, the industrial owners are mostly not Cambodian, but Chinese, Taiwanese, Malaysian, Korean, and other nations. According to this, foreign investors can gain this opportunity to invest their money in this factor in Cambodia in the way to gain more revenue and profit. Along with low labor cost, strategic locations, many labor forces available, and many other advantages.
3. Agriculture Factor in Cambodia
The agriculture factor remains a crucial element of the Cambodian economy which provide Cambodia almost US$5.47 billion or 22% of GDP in 2018. According to the National Institute of Statistics have shown that subsectors from 2013 to 2018, like crop cultivators, the average annual growth rate was 1.18%, fisheries grew at a rate of 1.73%, however, the livestock sector set out to only 0.50% raise. The sector expects to confront climate challenges since climate change is getting worse. However, a will, there a way to overcome such issues, especially, during this modern age. Anyway, there is a possible way for an investor to think about agriculture factors in Cambodia. Cambodia needs to modernize regarding agriculture factor rather than just only depend on the traditional method to harvest.
4. Real Estate Sector in Cambodia
Industrial estates are another excellent investment currently. This past year, there was a shortage of supply in the market for warehouses and factories. Around the area along National Road No 4, the rental price for a warehouse is approximately US$2 to US$2.5 per square metre, while within industrial zones such as PPSEZ, the rental price can be approximately US$3 to 3.5 per square metre. However, the investor will gain more incentives. Dangkor, Prek Pnov, and Sen Sok districts will be the potential areas as the industrial zones are moving there.
It has been another great year for real estate development sector in Cambodia due to increasing demand from both local and international investors in 2019. According to the Ministry of Land Management, Urban Planning and Construction (MLMUPC), a total of US$9.3 billion worth of investments came into the kingdom, spread across 4,446 approved investment projects, which represented 55% growth over 2018. What about 2020? Early 2020 has not been going that well because of factors such as the shutdown of online gambling in Sihanoukville, the Coronavirus outbreak, the China economic slowdown, the uncertainty over the EBA withdrawal, the trade war between China and the united states, widespread protectionism, and geopolitical issues around the world, among others. Given these factors, the Ministry of Economy and Finance has recently lowered the forecast of GDP growth in 2020 from 6.5% to around 6.1%. Last few weeks, the World Bank also predicted on Cambodia’s economic growth to slow to 2.5% in 2020 because of COVID-19.
Similarly, many local experts also project that the true estate and construction sector in the kingdom would also experience hook slowdown this year.
Nevertheless, according to analysts, Cambodia is still among the best places in the Southeast Asia region to invest in real estate, despite the projections of a slowdown. The most apparent example distributed by CBRE Cambodia is that land prices in Ho Chi Minh City, as of the fourth quarter of 2019, cost up to US$30,000 per square metre in the central dis usuallytrict, in comparison to only US$6,000 per square metre in Daun Penh.
GDP growth rate projected at 6.8% in 2019
Population estimated to reach 16.3m in 2019
The construction sector grew by 18.1% in 2018
Total volume of international tourists increased by 11.5% in 2018
Land: Investing in land remains the best type of investment above all if one is qualified to receive property ownership because the capital gain from land is very high. When investing in the right property, the capital gain can increase by up to 50% or 100%. For 2020, property prices in Phnom Penh will see a slight drop, but expenditure continues to represent high potential depending on the area.
Condo: For foreigners who are not eligible for buying land, landholding companies can be among the remedies. Nevertheless, co-owned space investment such as office spaces, strata offices, or condominiums is the more suitable types for foreigners. According to Mr Sorn Seap, investing in low and mid-end types of condos will be the best choices at this moment. There is more demand for these types than others; thus, they are simpler to sell. However, some high-end condo projects are exceptional.
Apartment: If one is interested in investing in an apartment kind of property, Chamkarmon district such as Boeung Keng Kang and the Russian market areas should be the ideal locations. Chamkarmon district is the business dis usuallytrict centre, where there are a lot of company workers, both local and foreigners living there; thus, a rental apartment remains a good business to invest in. Moreover, apartment investment projects have lately started to move to Touk Kork as well, since several office projects are also moving there. One of the reasons is that the land supply in Boeung Keng Kang is definitely very limited and expensive.
Borey: Investments in the Borey segment are actually moving to the southern part of Phnom Penh, Dangkor district along National Road No2, specifically. Prek Pnov district has also been attracting a lot of big Borey projects. For Prek Pnov district, investing in low-end Boreys is recommended, due to the high demand for low-end Boreys driven by industrial development in the area. The cost of Boreys in that area range from US$35,000 to US$100,000.
These four factors are the important factors that help Cambodia to grow from year to year. This article just shows generally how each factor contributes to economic growth in Cambodia that investors can take this information to consider before deciding to invest.
Cambodia is such an opportunistic country to seek better business ideas and successfully implement them to gain more revenue and profit. As we know that Cambodian economy is one of the rapid economic growth among nations in the ASEAN community, therefore the foreseen chance to collect huge profit is in it.
Specifically, this article will bring you to know even more about business opportunities in Cambodia in order to understand business’ circumstances here in the Kingdom.
- Real Estate
There are various and different ways to gain profit from investing in real estate in Cambodia. As we can see Phnom Penh is one of the most crowded cities in Cambodia, so there are many residents or foreigners who need proper shelter to live during vacations or working in Cambodia. One of the best methods to inventing in this situation is to buy a good price and location in Phnom Penh and sell it to customers at a profitable price. This practice provides us much of profit and it will gain even more in case we have a lot of connections with many people in the real estate sector.
By doing this, it also helps foreigners or Cambodians, who need better shelters, ease to find a proper house as they wish. Being an agent in this area will provide us more money and connections if we are smart enough to attract more customers.
Transportation in Cambodia still at a low level compared to neighboring countries, such as Thailand and Vietnam. In Cambodia, taxis or buses remain at a low standard and receive a lot of complaints regarding customer service, driving situations, and so on so far. Therefore, this is an opportunity for you to invest in this sector by eliminating or reduce the badness from the current company competitively. It’s better to learn from their mistakes and apply them beautifully to our company. This business opportunity cannot be skipped, otherwise, you would lose this big chance.
- Food and Drink Franchises
Simple to say youth Cambodian love to try new things from other countries, so buying a franchise from other countries to sell in Cambodia is also consider a business opportunity as well. As you can see there are numerous international food businesses open successfully in Cambodia, including Starbucks, Burger King, Circle K, The Pizza Company, Domino, Koi, and among others successful franchise. However, this point also needs to critically think about market competition as well, due to a lot of business out there already successful, we need to be better.
The Kingdom of Cambodia remains in consideration by many major economic drives as well as start-up business owners whether to start a business in Cambodia or neighboring countries. Among ASEAN nation-states, Cambodia is one of the newest ASEAN members, but in the past years, the economic sector has grown unexpectedly, including tourism, agriculture, and garments industrial. Along with that, there are many positive reasons for business owners to invest or start a business in Cambodia. The following indications will provide clear information for investors positive clues to contemplate over the decisions to run a business in Cambodia.
1. Cambodia is a market opportunity
In a developing country, like Cambodia, provide business owner a lot of opportunities to conduct and start-up business. As we can see, many products in Cambodia are imported from neighboring countries, especially Vietnam and Thailand. It is crucial to study business ideas from bordering countries and start-ups in Cambodia because the demand will be high for local consumers in the sense that the price will be lower than foreign products.
2. Low Labor Cost
Cambodia’s labor cost is less than its neighboring countries and with this advantage, the business, which starts-up in Cambodia will have the opportunity to recruit plenty of people to work with a low labor cost in order to earn more profit and revenue.
3. The Growth of Economy
According to World Bank, economic growth in Cambodia remains strong because it reaches 7.1 percent in 2019. However, the Cambodian economy projected to negative growth of -2 percent, the worst decrease in the recent history of Cambodia. In this case, we still trust the growth on the post-pandemic since not only Cambodia, but the world economy has been struggled and led to declining as well.
4. Government Stimulus
In March 2019, the Cambodian government announced a program of economic reform which introduced the strategy of several key money-saving initiatives for private business, including reducing shipping costs, port service fees, and electricity, and along with that a reform of railway operation management as well.
5. Dollar Economy
The dollar in Cambodia flows quite smoothly, and there is almost 80 to 82 percent of the business is using the dollar to facilitate the process of their economy. In this factor, it will be easier for foreigners to avoid currency conversion.
6. Youthful Workforces
There is a high number of youths in Cambodia who seeking the proper workplace. Having said that youth is a potential factor in the certain economy, including industrial, manufacturer, and relevant field. However, educational youth also graduate with unemployment status remains a bit high as well. Hence, the company can recruit more youth to work even easier.
Even though Cambodia is still on the list of developing countries, however, the potential of economic growth still goes on from badness to better. These are potential factors that worth considering starting up a business in Cambodia. In case we look at Cambodia as a whole, we will avoid starting, but if we break factors into pieces, the advantages are more than disadvantages.
Starting a business in Cambodia consider as the right choice for a businessman to earn more profits and revenue due to many advantages, however, to which business to start remains miserable.
Talking about the Cambodian economy, a market opportunity is rated in high number, made business people more convenience to choose which is best and suitable for the current situation in Cambodia.
There are numerous market opportunities out there that will make it hard to choose which one to start since the gap of those opportunities remains tight.
However, in this article, I will derive simple information for you in each business opportunity to make you clearly understand to which you would like before you decide to start a business in Cambodia.
1. Real Estate
Most people in Cambodia nowadays undoubtedly focus on investment in real estate since the sector provides a high chance of profit. The issue of choosing the right house to live in poses a threat of owning debt to most locals and foreigners in Cambodia.
Generally speaking, to which location has the potential for development, the chance of increasing the price of those properties will be high. The same case has happened to the properties in Cambodia and this case has made people buy a secondhand house or seeking a house that remains at a low price.
In Cambodia, people often buy a house, located in a good place with a low price and they can sell it to other owners at a high price, so they can earn easy profit for themselves. In addition to this, it’s not the only house that on the trending list, but also lands.
2. Investing in Agriculture
Most Cambodian people still practice the traditional method of producing products from agriculture, including using animals, like the ox, rather than tractors, led to a lack of supply and spend much amount of time as well.
Therefore, the investor should think about the possibility of huge profits to invest in the agriculture sector in various ways in Cambodia.
3. Beverage and Fast-Food Franchises
The franchise sector remains in small amounts in Cambodia which give investor or business owner big opportunity to invest their money into it.
There are only several most profitable franchisees out there in the world that make it possible to open in Cambodia, including 7-Eleven, Dunkin’, Planet Fitness, Taco Bell, and many more.
Just to notice, people in Cambodia love to spend their money on new things and trending things, so there will be worth thinking about those high probabilities of huge profit.
4. Transportation sectors
Cambodia is a developing country and most people don’t have their vehicle that brings them to long-distance, so invest in transportation is worth consideration for the investor.
In Cambodia, most taxi drivers, buses, and other private transportations remain in low standard to treat their customers. There are numerous complaints from customers to certain transportation service, including put people overcapacity, losing stuff, running slow, and so on so far.
However, there are also good transportation companies out there in Cambodia, but only a few companies that receive fewer complaints. So, it can indicate that the competition regarding this sector is low, but the profitable opportunity is high.
These four sectors are the opportunities for investors and business owners to decide which best and suitable for Cambodian society at present. The need for good business is to treat customers as their customers.
The way to register a business in Cambodia is simply straightforward, you just need to follow the guideline of the Ministry of Commerce through the legal procedure. Registration for business now, you can conduct through the online system, which makes it easy to do. However, the Moc gives you only 15 days to complete the application, otherwise, your documents will be eliminated from the system and you need to restart all over.
Before you decide to conduct registration, you must consider the type of business to run. There are several kinds of business out there in Cambodia, including sole proprietorship, private limited company, public limited company, a foreign company, or partnerships.
All of which require registration differently, so it’s worth understanding the procedure. In this article, you will understand the process of registration for each of those.
A. Sole Proprietorship (sole trader)
The type of enterprise, that business entity owned and run by only one person without legal distinction between owner and business.
Step 2: Filling general information, address and contacts information, and owner information.
B. Private Limited Company/ Public Limited Company/Foreign Company
All type of business is different from each other:
- Public Limited Company refers to a company that opens publicly sell shares on the stock market.
- Private Limited Company refers to companies that do not sell shares on the stock market and it limited the shareholders to the only maximum of 50 people.
Step 2: Filling general information, address and contacts information, director information, and share and shareholders information.
It’s a kind of business that is owned and operated by several individuals.
Step 2: Filling general information, address and contacts information, partner information, and manager information.
According to this process, registration is quite simple for entrepreneurs and business people to register. I hope this information will help people who would like to run a business understand this simple procedure.
In Cambodia, there are no restrictions on a company being 100 percent foreign-owned as long as no land is involved. To start a business in Cambodia, you’ll need a valid visa, a work permit, and a Cambodian bank account with a minimum balance of US$1,300 (despite the fact that the law only requires US$1,000 in capital).
The Ministry of Commerce unveiled an online business registration system in December 2015 as part of an effort to simplify bureaucratic procedures. The aim of this online registration system is to make the process of registering a company in Cambodia more transparent and effective, attracting more investors in the process.
It is now possible to obtain a company in Cambodia online via the Ministry of Commerce Business Registration website. If you don’t finish your application within 15 days of starting it, it will be deleted from the system. However, as long as you have all of the necessary documentation and follow these simple steps, registering your business online is relatively simple:
- Create a user account on the website
- Reserve a company name in both English and Khmer, and pay a service fee for this
- Register your company and pay another service fee for this
- Print your certificate of incorporation
It’s best to know your company’s single share worth and the name of your company in both English and Khmer before you begin to speed up the operation. One of the most significant roadblocks for many foreigners appears to be choosing a suitable Khmer name for their company, as the Ministry of Commerce appears to have rejected certain Khmer names because they did not have the same meaning as the English name.
- You should have the following documents ready to submit to your online application:
- Proof of identification, such as a valid passport
- A medical certificate showing you are in good health
- Proof of your company’s location, such as a utility bill or a rental agreement
- A letter, signed by a director of the company, that declares you have no criminal record, as well as a police report from your home country identifying you as having no history of criminal activity
- A list of staff, which states the number of male and female employees, and local and foreign staff
- Your company’s memorandum and articles of association
The cost of registering a company in Cambodia is approximately US$430. Only three banks in Cambodia are authorized to process registration fees: ACLEDA Bank, FTB Bank, and Canadia Bank. To pay the service fees, you’ll need to open an account with one of these banks. However, only ACLEDA Bank account holders will be able to pay the fees directly online. If you have an account with FTB or Canadia, you will need to complete payment in a branch. You can obtain a number of documents after registering your business with the MOC, including a business license, a certificate of incorporation, and Articles of Association.
You must then register your business with the General Department of Taxation (GDT) within 15 calendar days of registering, in order to receive a tax patent and a VAT certificate. After that, you’ll need to go to the Ministry of Labour and Vocational Training (MLVT), which will register your business under the Labour Law and issue work permits and job cards to foreign staff. You must also register the business with the National Social Security Fund if it has more than eight employees.
Working in Cambodia, required foreign nationals to complete all requirement which stated in the Cambodian labor law. The Cambodian Department of Immigration ensures an official work permit and employment card to be obtained by foreign workers who intend to eligible to work in Cambodia. This article is for those who would like to know how to apply for a work permit, employment card, and how to apply for a long-term extension to “Business Visa” (E-Visa).
Business Visa (E-visa)
There are three months available for E-visa without a permit work, longer than that, foreign workers must apply for a permit period.
Generally speaking, foreigners entered the Kingdom require to purchase one-month E-type visas, priced at $35. However, currently, the cost of EB for one month is $50, three months is $80, six months is $160, and one year is $290 when purchasing through agents.
However, new visitors to Cambodia are allowed to apply for the first six months, and a one-year E-visa without a work permit in order to allow them to seek jobs in Cambodia.
Obtaining a work permit
According to Cambodian labor law, all foreign national workers who come to work in the Kingdom must have a work permit. On 4th September 2017, the new rules come into enforce that work permits must be applied when foreign nationals apply for six-month and one-year E-visa extensions.
In addition, Foreign workers must also follow the conditions below in order to legally work in Cambodia:
- Have a legal job offer from an employer
- Legally enter Cambodia
- Have a valid passport
- Have residency permit
- Have no contagious disease
Work permit applications: Required a work permit and employment card is the responsibility of the employer to assist foreign national workers. However, it is also possible for you in case you would like to do it on your own through online applications.
Online Application for work permit applications:
- Online application work permit link
- Work permit renewal period: Between January and March each year, the official is a period for renewal of a work permit. The advised processing period for a Cambodian Work Permit is 15-20 working days after all supporting documents are submitted and the payment is completed.
- The fees for the Cambodian work permit are approximate:
- $200 for Work Permit
- $80 for a one-year penalty if you have never processed a work permit.
- $35 for over quota per foreign staff (for companies).
Looking around the capital city of Cambodia, we could see many global brands and international franchises pop up alongside the road. These include Carl’s Jr, Cold Stone, Creamy, Domino’s Pizza, Burger King, Krispy Kreme, Levi’s. Pandora, Starbucks, and others. These franchises seem to be going smoothly and getting notice from customers even more from year to year.
Cambodia is a rapid economic growth with a rate of 7.7% between 1995 and 2018, according to World Bank Overview. Therefore, it is simply easy to understand the needs of people to satisfy their needs. If international brands or franchises entered Cambodia, people will be more conveniences to buy which products or foods they want rather than waiting until going abroad to buy them.
The investors and businessmen are supposed to consider franchises business in Cambodia. But before starting, this article will explain to you even clearer about franchises entity in Cambodia.
Regulation: Franchise law in Cambodia has not been enacted comprehensively, therefore, franchising business is mainly governed by laws of general application that implicate franchises process. There is no clear duration for the enactment of the law of franchise.
In Cambodia, franchises business primarily governed by the Civil Code, the Law Concerning Marks, Trade Names and Acts of Unfair Competition (Trademark Law), the Notification on the Recordal of License Contracts, dated March 12, 2015 (Franchise Contract Notification).
*For franchise agreements prepared in a foreign jurisdiction, they should carefully localize the provisions to ensure they are enforceable in Cambodia, including dispute resolution clauses, intellectual property provisions, guarantee provisions, non-compete obligations, real estate provisions, and tax-related clauses.
Disclosure and Misrepresentation: Cambodian law does not require pre-contract disclosure, so a franchise agreement must accurate and correct. However, under the Civil Code, if a party enters a contract based on another party’s misrepresentation, that party is entitled to rescind the contract and seek damages from the party that made the misrepresentation. Plus, if the guarantor was not fully informed of all material information about the guaranteed obligation at the time the guarantee was signed, the personal guarantee will be invalid.
Competition Law: Even though there is not competition law in Cambodia, foreign companies commonly insert non-competition provisions in their franchises business agreements to limit franchises from any activities that compete with them.
Choice of law and dispute resolution: Cambodian laws do not restrict the applying of foreign country’s law, but the local courts in Cambodia may be unwilling to apply foreign law to dispute before them at all. Franchisors should aware that particular issues, like advertisement, approval requirements, real estate, and others, can possibly be governed by only Cambodian law.
All of these are things that investors need to clearly understand before starting the process set up franchises in Cambodia. The procedure is not complicated to follow and notice. However, all factors need to carefully follow on the right path to avoid any further issues happening.
The power of attracting foreign companies to invest in a country as a mean to push the economic sector forward indirectly. There are many good side effects to which countries that can encourage foreign investment to invest thoroughly.
In various ways, foreign investments provide huge benefits for one country and people in a country, but along with a dark side that someone might say. One might indicate that foreign investment will reduce local productions in the way that competition will be high to deal with. Local companies will be lost demand since they cannot compete with the international standard of foreign companies. However, the economy is confronted with competition as always, one good side is that competition leads to diversification.
Apart from the dark side, the possibility of good impacts on the economy in the country is big that we cannot throw away this opportunity at all. Job opportunities are increased, the economy will jump high, improve human resources, increase on export, product’s price will be low, and so on so far. This article will detail each benefit of foreign investment.
1. Increase Job Opportunity
The more investment the more opportunities will be opened for people in the country, even rural, or urban areas. As we can see in Phnom Penh right now, there are many job applications for individuals who intend to find a job to their financial support for family and themselves. A construction worker is one of many examples that we can take into account as an example. Due to development in the Cambodian capital, through foreign investment, many buildings have been constructed which provide various jobs for construction workers or students who study related majors.
Also, the white-collar workers are satisfied with numerous opportunities that have been waiting for themselves almost everywhere. Considering new foreign companies that just set up in Cambodia. Those require potential workers who fit into jobs in their company.
2. Enhance Economic Growth
The visible benefits that contribute to economic growth from foreign investment in one country are tax revenue for the government and reduction unskilled workers to receive a job. Foreign investment in a certain country requires paying tax to the government. By doing this, tax revenue will be taken by the government to contribute to development. One more thing, some foreign investment, including factories, or industrial sectors, will contribute to helping unskilled workers to receive a proper job which led to a decrease unemployment rate in certain countries.
3. Improve Human Resources
When some companies entered a certain country, the demand for new skills will be increased which lead people eager to learn a new skill in order to be suitable for a job competition. For instance, we can see the Chinese language has been interested in many Cambodian people nowadays. The reason behind this progress is that currently there is much Chinese investment in Cambodia, so learning Chinese is a must for people who would like to have a high salary job in the Kingdom.
According to these factors, we can indicate that foreign investment acquires huge benefits for a country in various sectors. In the sector of job market opportunity, economy, and human resource are enhanced regarding foreign investment. Therefore, in the era of globalization, foreign investment is a need for countries to attract as much as possible.
The closure of business in Cambodia requires more effort than opening one, however, business owners must operate completely to avoid further implications. You couldn’t just shut down a company unofficially because further risks remain high to destroy you. Without the closure of a business properly, you still must confront a legal entity that you must completely clear before leaving.
The Council for Development of Cambodia had warmed business owners to legally and formally close the business no matter what. However, business owners cannot escape from a legal entity, even a ghost company, since the Ministry of Commerce always make annually declaration to ensure all business owners are cleared their duties.
Therefore, “there’s a will there’s a way”.
The following steps will guide you to closure a business in a proper way according to Chapter L of the Law on Commercial Enterprises:
Step 1: Proposing a director or shareholders to readily dissolve or liquidate the company.
Step 2: When the proposal of the intent to dissolve is passed by a two-thirds majority vote, the company require to address a Certificate of Intent to Dissolve by sending it to the Director of the Company. From that time on, the company must completely cease all procedures of the company.
Step 3: The company must send notice of intent to dissolve to creditors, immediately and publish a statement for two weeks in a newspaper.
Step 4: It then must collect its property, distribution to shareholders, and anything important to liquidate the business. In addition, the MoC will issue the certificate of dissolution, which meant that the process and obligations are still ongoing, including the official audit performed by the Department of Taxation, somehow costly.
The procedure for the dissolution of business in Cambodia requires much time and money, but you must complete all requirements, in case you would like to avoid the worst implications for yourself and your future business.
In Cambodia, there is a legal act for foreign nationals to buy property, but under certain restrictions that are required by laws. The numbers of foreigners enter to Cambodia has been raised from year to year. Most of them decide to come to Cambodia to run their own business and others came to Cambodia for a living. There are various purposes for them to live in Cambodia. Among those, maybe they would like to experience Khmer culture or the diversity of Cambodia that attracts them.
Most foreign nationals prefer to live in a rural area or somewhere near an ocean or mountains because it makes them feel fresh and comfortable rather than an urban area. Since the raising number of foreigners to Cambodia, the topic of owning property has posed a doubt to get a proper answer.
Can a foreigner own or buy property in Cambodia? What is the restriction for a foreigner to buy property in Cambodia? These questions are among other significate questions to ask before other nations enter Cambodia to live or doing business. Of course, this article will answer these foremost questions in order to clear doubts of foreigners who intend to come to Cambodia.
Foreigners to own Property in Cambodia
Legally, foreigners can own property in Cambodia with certain restrictions by the government. Before we dig deeper into the specific answer, we should understand a term about “what is a strata title?”
Particularly, Private ownership on Co-owned (strata) is a building that allows foreigners to legally own property in Cambodia as a form of property title. This Co-owned building or strata is defined as a building where several owners settle comprise exclusive space for ownership of each co-owner (private unit) and others are commonly used for co-owners as well (common areas).
According to Cambodian law, foreign nationals can own property, but only own properties on the first floor or higher (not the ground floor at all), which up to seventy percent of one building. However, this law only applies to a strata title.
There is another alternative method in which foreigners can own 49% of private property, with or without a structure at all. Foreigners can partner up with Cambodia legal entity or Cambodian citizen that held 51 percent of that property’s share. In this case, foreign nationals can buy which properties they need for themselves. However, this method poses a high risk for both parties.
The Requirement and Cautious
Buying properties in Cambodia, foreign nationals require to have a current valid passport and visa. It should be noticed that the first crucial thing to do is to make title research in order to know the status of the properties we intended to buy. The title will indicate clearly whose property it is and by doing this, foreigners can avoid any dispute regarding certain things, including the fake title. However, it’s better to have an agent to guide you as a foreigner to do the process.
The guideline issues (Prakas 270) on TA (Tax Audit) that intends to organize the tax audit process to enhance transparency in tax payments and collections in order to promote a business environment to be fair and competitive in Cambodia, was announced by the Ministry of Economy and Finance on March 13th, 2021 last year. In addition, the interest rate for the underpayment of taxes be decreased from 2% to 1.5% from the announcement date, but the underpayment penalty rate still conducts the same.
According to the Law on Tax (LoT), there are three types of Tax Audit including Desk Tax Audit, Limited Tax Audit, and Comprehensive Tax Audit. However, a more vigorous basis on how each sort of tax audit is conducted has been set out in the Prakas on Tax Audit. Therefore, this article will explain the different types of these three Tax audits for which one must accountable.
1. Desk Audit (DA)
According to the Ministry of Economy and Finance, Desk Audit (DA) considers as “a review and judgment of tax returns that are irregular or inconsistent to ensure the correctness of the declaration of taxpayers”. A Desk Audit (DA) can now only be conducted within a period of 12 months after the submission of the tax return and to be completed by Tax authorities within three months.
2. Limited Tax Audit (LA)
A LA is categorized into “On-site audit” and the term refers to “a visit to conduct an audit at the business location of the enterprise that is subject to an audit to examine the actual business status, accounting records, supporting documents and other documents” according to the Ministry of Economy and Finance. Specifically, a Limited Tax Audit (LA) is a short-term and immediate audit sort as special tax including some goods and service, public lighting tax, value-added tax (VAT). This tax can be carried out for the current tax year and the immediately preceding tax year (N-1) only and additionally this task will be completed by a Tax authority within three months.
3. Comprehensive audit
This kind of audit also the family of “On-site audit”. A CA is strictly the re-examination of all types of tax obligations including Tax on Income (ToI). This process is to verify and to ensure the correctness of account records and financial reports under the law and fulfill the tax obligation in accordance with the law and regulations on taxation. Normally, this audit carries out three years back, but in case there are obvious pieces of evidence regarding tax evasion or else, it will extend to five tax years backward, due to the MEF.
These three Tax Audits are worth-seeking for business owners who intend to run a business in Cambodia. However, it’s better to seek experts regarding these terms in order to clearly understanding since this article provides only a brief explanation for fundamental understanding.
At the same time, the online sales market in Cambodia is gaining momentum, making the shipping or delivery market and the mobile payment market are growing.
Currently, the light freight market in Phnom Penh is highly competitive between local and Chinese companies. By the time this article was published, the competition had reduced the shipping cost to 2,500 riel per package provided by Chinese company Best Express, while another Chinese company, Cambodian Express (CE), was presenting the competition form. Well done by offering a package price of $ 0.80 covering all 14 districts and free delivery to the place, even if there is a package and free of charge (COD) free of Zone. In addition, Chinese companies J&T and ZTO are also showing good competition.
Above is some information about the freight market in Phnom Penh, now we come back to our main topic. As the market becomes more competitive and you want to compete with less capital, so does your competitiveness. Here are the key points for starting this business.
With an initial investment of $ 500, you can start on your own with your own motorcycle, but we encourage you to start as a group, as you will not be able to afford the freight alone and you will not be able to afford it rather than hiring staff which cost a lot of money.
1. Form up team
In the process of providing delivery services, there should be at least three managers: the accountant, the person who collects the goods from the customer and the person who delivers to the destination. It requires that you have a clear inventory management with your clients and shipping agents, and it would be better if technology and accounting professionals join your team.
2. Organize shipping operations
How will you start and end the service? For example, first collect the goods from the customer (issue a bill to the customer), then bring them to your warehouse, then divide the goods that have a destination on the same street or nearby areas for each carrier (out A bill for the carrier) At the end of the evening, the shipping agent must pay the bill and finally pay the bill with the customer by transferring the money through the ABA bank account, where the data is recorded and computerized.
Starting with less capital, you may not be able to build websites and apps and open branches like many of the big companies, but your goal is to have them when you can manage and develop them well.
You will need a hood and a jacket with your logo on it. If you buy in Cambodia, the fabric tank costs about $ 35 for a large 62L, while the price of the jacket depends on the type of fabric you choose. But if you order from Taobao website from China yourself, you can pay about $ 220 for 5 containers and 5 shirts with pre-printed logo and including shipping to Cambodia through Loda or ZTO. It can cost as much as $ 20 to print a bill, depending on how many heads you need. So you have $ 240 left over after spending on those items.
3. Business model
Pricing will affect your income. You can not choose the price competition with them, but you can choose to compete on convenience and confidence.
For example, you offer a package of 4,000 Riel in 10 Khans in Phnom Penh and 8,000 Riel for 4 Khans far away. Because you have less capital, you can not pay the staff salaries, so you can use the method of dividing the percentage to the carrier. For example, for the service of 4,000 Riel, you distribute 3,000 Riel to the carrier and the remaining 1,000 Riel to cover the expenses in the transaction.
The big companies mentioned above charge $ 0.80 / package without Zone because they have many branches to distribute the goods to the final destination, but for those with the same location to transport to different destinations in the city is not Can not cover the cost of gasoline and transport speed like them. In fact, they charge $ 0.80 to transport from Chbar Ampov to Khan Kambol, which you can not do like them.
If you do not have a friend who sells goods online to be your first customer, you will have a hard time when the shipping agent has no goods to transport, which makes them unprofitable. So you need to think about this before you start because you will be stressed if you rely on spending money on Facebook to get customers because of both price and confidence, you can not grab customers online with big companies Many of those branches.
If you start with two shipping agents and you can attract your friends who are online sellers or business owners who need regular shipping, let’s say you get at least 20 packages a day, consider that A good start. Then try to maintain a good service profile, focusing on providing convenience to customers.
You can no longer continue to use Ms. Word and Excel to record data and settle transactions with customers and shipping agents. You need to try to create a clear and fast management system and branch expansion, which depends on raising additional capital and revenue from shipping services.
It is not easy to jump into the online shipping market, especially starting from such a small, it requires a lot of patience and high intelligence to be able to stand in this stressful market.
Launching an online shipping service with less capital, the key is based on having an automated customer, that is, an online seller who has a relationship with you. If you know them better and can persuade them to become your customers, even if they are not successful, you can stay afloat and learn a lot from investing this small amount of money.
Having your own piece of land in Cambodia is an appealing idea. Land in Cambodia is almost always a good investment for the future, whether it is for your own beachside paradise on Cambodia’s coastline or for commercial or residential construction interests in Phnom Penh, Siem Reap, or Sihanoukville. There is currently an abundance of land for sale in Cambodia, with “for sale” signs scattered across the countryside and visible from many of the country’s national roads. Land for sale in Phnom Penh, Siem Reap, and throughout the provinces are available. Beach land for sale in Sihanoukville and riverfront land for sale in Kampot are both attractive choices for foreign investment. Farmland for sale in Cambodia is another popular and often affordable investment choice. Unfortunately, foreigners are currently not allowed to legally own land in Cambodia as individuals. However, all is not lost because there are ways to legally acquire ownership under the existing legal system, which we will show you how to do.
1. Becoming a Cambodian Citizen and Buying Land in Cambodia
Citizenship is no longer as simple as it once was; you must either pay a hefty fee or make a substantial contribution to the country’s growth. If you are in a position to consider this choice, it provides a high level of protection because once the citizenship process is completed, land can be purchased in your name.
2. Purchasing land in Cambodia through the formation of a Land Holding Company (LHC)
Due to the initial cost of setting up an LHC, this choice is better reserved for what would be considered high-value plots of land. You will also be subject to benefit taxes, and a 51 percent share of the LHC must be held in the name of a local partner, making this choice more appropriate for investors with substantial corporate backing.
3. Renting Land in Cambodia
If you want to build a residential or commercial property with a high rental return on investment, long-term renting or leasing land is a great choice. The advantage of this option is that once your project starts to produce enough revenue, it can be used as a stepping stone to establishing an LHC as described above.
The Ministry of Economy and Finance (“MEF”) released Prakas 270 on Tax Audits (“Prakas 270”) on March 13, 2019, in an effort to streamline the tax audit process as part of the government’s large-scale economic reforms, increase transparency in tax payments and collections, and encourage a fair and competitive market climate. The following are some specific tax audit concerns of which readers should be aware.
1. Retention of supporting documents
All registered taxpayers in Cambodia are required by law to keep supporting documentation for their accounting records and tax returns for a period of ten years. Taxpayers that are unable to find required records from previous years may be subject to additional tax penalties and reassessments that are excessive. The GDT would not recognize as legitimate reasons for this failure, such as a lack of trained staff to identify appropriate supporting documents, a lack of a proper filing system for accounting records and supporting documents, or a lack of information transfer between former and current accounting personnel.
2. The following are the variations between monthly and annual tax returns
Multiple figures input in monthly tax returns with those input in annual TOI returns, such as taxable turnover (B0), wage cost (B20), and so on, are often compared by tax auditors. Taxpayers also neglect to produce or retain records of such reconciliations.
3. Permanent establishment
Most taxpayers, including multinational corporations, fail to understand the complexities of permanent establishment issues and, as a result, fail to seek the appropriate professional advice regarding their commercial arrangements. As a result, an overseas affiliate may be considered to have a business presence in Cambodia, producing Cambodian-sourced profits subject to Cambodian taxation.
4. Transfer pricing documentation
Some taxpayers seem to be taking a “wait-and-see” approach to the recently enacted transfer pricing regulations. Taxpayers who engaged in related party transactions but did not prepare the transfer pricing documents needed by Prakas 986 for the 2018 tax year are likely to be targeted for tax audits, as this would suggest a high risk of tax non-compliance.
In Cambodia, what currency is used? This is a fascinating question. They use two currencies, the US Dollar and the Cambodian Riel, which are interchangeable! Does it seem to be difficult? We’re here to assist you.
The Riel is the Cambodian currency; it is the country’s official currency, and it is used to price goods in places like supermarkets. The Riel was first released in 1953 and was officially abolished in 1975 when the Khmer Rouge took control of the region.
Related: Related: Can foreigners work in Cambodia?
This is something that no other “socialist” nation has accomplished. During this time, money was printed, and the Khmer Rouge also printed their own notes in 1993 to be used in the large swaths of eastern Cambodia still under Pol Pot’s influence. Money was agreed to be restored as the second Riel when the Vietnamese liberated the region, and it has remained in the same format until now. The question of do they use usd in Cambodia?
This is where things get interesting; Cambodia currently has a dual currency structure; with the US dollar and the Riel both being accepted as Cambodian currencies.
Additionally, if you pay in dollars, you will almost certainly obtain some change in Cambodian currency. Consider the scenario where anything costs $1.75 and you give $5. You will get $2 in change and 5000 Riel in Cambodian currency. For example, 4000 Riel equals $1 and 1000 Riel equals 25 cents! There are 500 and even 100 Riel notes for smaller denominations.
Besides all of this, tipping also the thing that tourists need to understand. Tipping is not customarily anticipated in Cambodia, but in any third-world country, tips can go a long way for those with limited resources. Tipping is not expected in some of the more upscale hotels and restaurants because a ten percent service fee is applied to the bill.
A dollar is usually considered a decent tip for cleaners, moto drivers (only on long trips or full-day rentals), and taxi drivers.
Cambodia is home to Angkor Wat, the world’s most visited tourist attraction. There is, however, more to Cambodia than Angkor Wat; there is more to do and see. Prasat Thom, a seven-tiered pyramid structure, is located north of Siem Reap, deep in the forests of Koh Ker. Preah Vihear Temple, located on the cliffs on the Cambodia-Thailand border, is another outstanding Khmer masterpiece.
Aside from historical relics, the unique cityscape of Phnom Penh, incredible floating villages on Tonle Sap Lake, and stunning nature in the remote countryside are all worthwhile explorations. If you like the beach, there are several beaches and islands to choose from. You may be wondering how long you will stay in Cambodia on a tourist visa with so many beautiful scenic spots to visit.
Related: Can foreigners work in Cambodia?
On a tourist visa, how long will you stay in Cambodia? A tourist visa usually allows you to remain in Cambodia for a maximum of 30 days, with the option to extend your stay. Also, keep in mind that a tourist visa is only valid for one entry. Visitors from ASEAN countries, including Brunei, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam, do not need a visa to enter Cambodia for a stay of 14 to 30 days.
You have three options for obtaining a Cambodia visa for travel. Most travelers may get it on the spot or apply ahead of time online. Some tourists must apply for a visa in advance at their home country’s Cambodian embassy.
- Fill out an application for a Cambodia E-Visa for Tourism: Visitors who are eligible for a Cambodia tourist visa on arrival can also apply in advance online at Evisa.Gov.kh. For tourism purposes, it provides for a single entry and a maximum stay of 30 days. In addition, an online visa application costs $36.
- Obtain a Tourist Visa for Cambodia Upon Arrival: Visas are available at the international airports in Phnom Penh, Siem Reap, and Sihanoukville for the majority of tourists to Cambodia. Visas are available at International Checkpoint Borders for overland travel from Thailand, Vietnam, and Laos. You don’t need to do something ahead of time to apply for a tourist visa at the Cambodian airport. Fill out an immigration card on the plane. To wait for your visa application, arrive with your immigration card, a passport that is valid for at least six months, and cash in US dollars.
- Visit the Embassy of Cambodia to obtain a tourist visa for Cambodia: Afghanistan, Algeria, Arab Saudi, Bangladesh, Iran, Iraq, Pakistan, Sri Lanka, Sudan, and Nigeria are among the nationalities that must apply for a visa in advance at the Royal Embassy of the Kingdom of Cambodia in their home country. The tourist visa costs $30 dollars and can be obtained at the nearest Cambodian embassy. It’s worth noting that Nigerian people can apply for an e-visa online with a minimum of 20 working days’ notice. It is all up to you.
It is possible to prolong your stay in Cambodia on a tourist visa. And your tourist visa can only be extended once for an additional 30 days for a fee of $30 to $50 dollars.
Import and export taxes in Cambodia. How to calculate tax in Cambodia
As a businessman, you need to know the import and export and learn to charge taxes yourself, because all imports and exports are taxed, so do not find it difficult. Here’re how to calculate taxes:
Taxes and duties on imported and exported goods are calculated using the following methods:
For general merchandise
Calculation of tax, tax must be calculated in order, first, import tax, special tax (if any) and value added tax
Import duty = Customs duty x Import tax rate
Special tax = (customs duty + import tax) x Special tax rate
VAT = (customs duty + import tax) x 10% (for general goods not subject to special tax)
Or = (customs duty + import tax + special tax) x 10% (for general merchandise)
Total tax and duty = import tax + value added tax (for general goods not subject to special tax)
Or = import tax + special tax + value added tax (for general goods subject to special tax)
Example: Company A imports 20 cases of beer with a customs value of 4 million riels. What is the total amount of taxes and duties to be paid?
A: The import of beer is subject to import tax at the rate of 35%, special tax 25% and value added tax 10%. The calculation of taxes and duties is as follows:
Import tax = 4,000,000 x 35% = 1,400,000 Riels
Special tax = (4,000,000 + 1,400,000) x 25% = 1,350,000 Riel
Value Added Tax = (4,000,000 + 1,400,000 + 1,350,000) x 10% = 675,000 Riel
Therefore, the total amount of taxes and duties to be paid = 1,400,000 + 1,350,000 + 675,000 = 3,425,000 riels.