The Ministry of Economy and Finance has introduced a tax package aimed at enabling low- and medium-income people in Cambodia to purchase borey homes through postponing the implementation of phased tax payments for licensed developers until the end of 2024. In addition to the postponement of capital gains tax to the same year (2024).
Devised by the Economic and Financial Policy Committee, this new package has underlying aims of fostering inclusive growth, sustaining jobs, and improving people’s livelihoods. It also aims to stabilize both the construction sector and the borey real estate subsector.
The Kingdom has enjoyed positive outlooks with regards to its post-pandemic recovery. In the real estate market, boreys have become one of the most popular property types in the market due to their secure and convenient location and design and amenities included inside each gated community. However, despite these strengths there remains the risk of a slower-than-expected process, plus other global issues such as rising tensions between Russia and Ukraine, disruptions in the global supply chain, and delays in developing countries tightening their monetary policies.
The new tax package is a response to this situation, further safeguarding the welfare of people in Cambodia with regards to housing amid such uncertain conditions.
According to Ky Sereyvath, economics researcher at the Royal Academy of Cambodia, these measures were introduced to support the real estate and construction sectors. These were among the hardest hit by the global economic crises, and it was essential to maintain their sustainability through these measures.
Essentially, the measures are intended to prevent the borey development projects from collapsing due to underselling and thus inability to pay taxes. When this happens, Ky said, “It hurts the people who purchased homes there. [The government] wants to support people who purchase homes and prop up the real estate market.”
Under the new measures, the period of tax payments for developers paying less than $1M is increased from 12 to 18 months. For those paying more than that, it has increased from 24 to 36 months. In line with this, the Ministry emphasizes the need for development companies to be meticulous and accurate in keeping accounting records.
Moreover, the government has postponed the implementation of capital gains tax in real estate until the end of 2024. This is not the first time the postponement of capital gains has been utilized in propping up the real estate. Additionally, those transferring ownership of all types of borey housing worth $70,000 and under will also continue enjoying stamp duty exemption until the end of 2024.
All these were outlined in a press release from April 17, which also encouraged banks and financial institutions to revamp their credit according to the outlined extensions and exemptions, saying that “the institutions and developers should do so in compliance with a December 2017 prakas on Credit Risk Grading and Impairment.”
The Ministry’s Economic and Financial Policy Committee has already committed to set up working mechanisms geared towards regularly monitoring and assessing the real estate sector, eventually giving way to more concrete policy measures in addition to the current ones in place.