Doing Business in Cambodia

HOW TO REGISTER A COMPANY

Registering a business in Cambodia requires entrepreneurs to go through various ministries/institutions, mainly the Ministry of Commerce (MoC), General Department of Taxation (GDT), and the Ministry of Labour and Vocational Training (MLVT).

However, the New Business Registration via online portal (also known as single portal) provides an easier method of submitting applications to MoC, GDT and MLVT for registration of business in Cambodia. Unlike the old procedure which requires going repeatedly to physical offices of different ministries, the new business registration only requires entrepreneurs to compile all documents needed, submit and pay for the fees online—all within 8 working days to release the licenses or permits.

Depending on your business entity, the requirements may differ from one to the other. 

Each form of business varies in documentation and eligibility requirements. It is worth noting that the more complex the business structure is, the more requirements and time-consuming it is to register a business in Cambodia.

Through the new business registration procedure, applicants must prepare scanned copies of the required documents to be attached (in pdf format or in .jpeg format for photos) and to be submitted through the online portal.

1. For Company

Meanwhile, all forms of business entity are required to submit the following requirements for tax registration:

• Proof of paid property tax or property information of the enterprise
• QIP document (if applicable)
• Bank account information (must be provided in digital form within 15 working days after tax registration. Failure to do so would result in the revoke of the given certificates from GDT)

However, in some cases, your application may get returned for resubmission or may get rejected due to insufficient and/or illegible documents.

The returned application will indicate the requirement/s that you need to correct or complete. Resubmission of the application  will not require applicants to pay for the second time. The review period will also restart from the date of resubmission.

Meanwhile, a rejected application will not be subject for refund. Before applying for a new application and paying for the fees, you must ensure that you know the reason for your rejected application to guarantee an approval.

For explanation surrounding your rejected application, please contact the Ministry/Institution that rejects your application via this hotline number 081 888 296.

Although all taxpayers are subject to the same annual and monthly tax obligations, each taxpayer is obliged to pay at different tax rates: 

Note: If you’re a small taxpayer and grow into a medium taxpayer, the tax office will eventually advise you to change from small to medium taxpayer. 

To ensure that the tax return is properly monitored and followed, a business must practice accounting and bookkeeping. Small taxpayers can use simplified accounting through excel sheets. Medium and large taxpayers require a more complex task which must comply to the Cambodian Accounting Standards. 

Once a business has completed its tax registration, all taxpayers must return the following monthly and annual taxes.

1. ANNUAL TAXES 

Each taxable year, the company’s profit and revenue is subject to taxation through either the tax on income or the minimum tax on every 31st of March, whichever tax is greater.  

• Tax on Income (TOI) 

The Tax on Income rate depends on what type of taxpayer you are. 

Profits are calculated by a company’s revenue minus deductible expenses. Expenses can be deducted if they are paid for or incurred in a tax year to carry on the business. Non-deductible expenses are those used for personal needs, entertainment and amusement, donations for charity, or anything that does not benefit the business. 

2. MONTHLY TAXES 

• Prepayment of Income Tax (PIT) 

Every month, a taxpayer must make a prepayment of 1% of its monthly revenue, also referred to as turnover. PIT is essential in calculating the annual tax on income; whereas if the tax on income exceeds the prepayments made over the past year, an additional tax payment will be due, but if the prepayments exceed the tax on income, the minimum tax is applied with no additional payments required.  

• Withholding Tax (WHT) 

Taxpayers carrying on a business in Cambodia must withhold certain amounts from payments made to resident and non-resident taxpayers. The amounts withheld are remitted to the GDT.  

Although withholding tax applies at all businesses, the tax rates depend on the type of payments and the residency of the recipient. 

For payments made to a Cambodian resident, the rates are as follows: 

For payments made to non-residents, the rates apply: 

• Tax on Salary (TOS) 

Residents – Monthly salary tax rates vary between 0% and 20% based upon the level of personal salary as shown in the table below. For resident employees, the tax to be paid is determined on the monthly taxable salary and must be withheld at these progressive rates: 

Note: Exchange/Conversion rate of USD to KHR is at $1 USD = 4,000 KHR 

Non-Residents – For non-residents, the tax to be paid is at a flat rate of 20% which constitutes a final tax. 

• Value Added Tax (VAT) 

VAT is applicable to the supply of goods and services used for production, trading and consumption in Cambodia (including goods imported into Cambodia). 

The standard rate for activities not specifically detailed as VAT-exempt is 10%. Goods exported from Cambodia are subject to a zero-rate, and certain business activities are also considered exempt. 

Under the Cambodian Labour Law, the employers must be aware of the following: 

1. Hiring Employees 

In hiring employees, the company must present a written employment contract (in English or Khmer) to the employee which should state: 

• Employer and Employee full names 
• Starting date 
• Work location 
• Compensation 
• Job Title 
• Job Responsibilities 
• Terms on working during holiday/s 
• Annual leave (vacation and sick leaves, and absences) 
• Termination Provisions 
• Other benefits 

Other information can be indicated in the contract if they do not violate the legal requirements of the labour law.  

2. Hiring a Foreigner 

The Cambodian Labour law does not allow companies to hire a greater number of non-Cambodian employees; thereby allowing companies to hire only 10% of non-Cambodian national employees. 

In hiring a non-Cambodian employee, the employer must require the employee to submit the following: 

• Valid Passport 
• Cambodian Visa 
• Residence Permit 
• Health Certificate 
• Work Permit (processed and annually renewed by the employer through the Ministry of Labor and Vocational Training or MLVT) 

2. Working Hours and Conditions 

Cambodia requires employers to adhere to health and safety requirements in line with the International Labour Organization or ILO’s Promotional Framework for Occupational Safety and Health Convention (No. 187) 2006. Adherence to these standards is monitored by the Ministry of Labor. 

• 8 Hour Working Day
• Working day must not exceed 10 Hours (including overtime)
• No more than 48 hours per week
• Minimum of 1 Day-Off per week
• Employees who work overtime are entitled to 150% of regular salary
• Employees who work overtime at night or weekly rest days are entitled to 200% of regular salary.

All garment factories must agree to be monitored by ILO’s ‘Better Factories Cambodia’ programme in order to obtain an export license.  

4. Paying Employees 

Salaries must be paid directly to employees, whether in cash, check, or bank transfer. Employees must be paid on the agreed date of salary payment, as indicated in the employment contract.  

The most common term of salary payment is given twice a month, 50% every second week (usually 15th) and 50% every last week (usually 30th) of the month. Employees working on a commission basis should be paid every three months, at most. 

Each paycheck is to be deducted with a salary tax, which then must be paid directly to the General Department of Taxation. Every paycheck, an employee must receive a pay stub which indicates the pay rate, tax deducted, overtime payment, used leave, remaining unused leave, and any bonuses or deductions.  

5. Public Cambodian Holidays 

An annual paid leave of 18 days applies to full-time employees, plus one additional day for every three continuous years of employment. A new employee only has the right to a paid leave after working for one year in a company. Any untaken leave must be paid-out at the end of the contract. 

Every year, a list of paid holidays is indicated in a Prakas from the Ministry of Labour. As stated in Prakas, when a holiday falls on Sunday, the holiday takes place on the following Monday. When a business must operate even on a public holiday, affected employees are entitled to double pay. 

6. Paid Leave 

• Sick Leave is a leave of absence for the purpose of illness or other health reasons. 

Provided the employee presented a doctor’s certification confirming the illness, employers must pay: 

• Special Leave is a leave of absence for the purpose of family matters or personal reasons. 
• Maternity Leave is a 90-day leave of absence that is only applicable for female employees that have served the company for one continuous year. 

7. Terminating Employment 

All employment contracts are subject to end either through employee’s resignation, termination, retirement, or death. Nevertheless, whether through resignation or termination, the procedures and payouts will depend on the contract signed by both parties. 

Ten Categories of Occupations and Professions Prohibited for Foreigners 

1. Drivers of all kinds of vehicles as business such as two- and three-wheeled vehicles, tuktuk, four-wheeled motorcycles, van or truck.
2. Sellers/vendors in public locations with all kinds of vehicles.
3. Masseuse in public locations.
4. Barbers, hairdressers and beautician 
5. Shoes sewer and polisher 
6. Tailor 
7. Street mechanic/Tire repairer 
8. Khmer souvenirs craftsman/Producer of Khmer Souvenir 
9. Instruments, statue artisan/Producer of Khmer Instruments, monk’s alms bowls or Buddhist statue 
10. Goldsmith and Jeweler/processor of precious stone 

As you’re already aware of the business structures and registration procedures, you may find it really daunting to incorporate a business in Cambodia. Foreigners often struggle with the process especially when communicating with local authorities on Cambodian laws.  

We assist all clients from finding the best real estate to helping them with every paperwork needed even after property purchase. As an expat-owned business itself, we have years of experience on setting up a business in Cambodia so we understand your needs way more than anyone else.