Cambodia Property Investment Guide 2015
Property tenure/ownership Cambodia adopted a freehold system of land tenure under the 2001 Land Law. Private ownership of land is permissible for certain types of land. Under prior laws, ownership was permitted for residential property only, and agricultural land was reserved for state ownership, with limited possession status only being granted to private citizens. Currently, three main types of land tenure exist: Freehold: fee simple, unrestricted Leasehold: long-term leaseholds (15-50 years) create in rem rights. Long-term leases exist up to 50 years and are renewable once for another 50 years Concessions: conditional leases granted by the government over state private land. Concessions are used for specific development purposes, with the land subject to specific conditions of use, primarily for agricultural projects, island development and mineral exploitation Major legislation The Constitution, promulgated on September 21, 1993, as amended The Land Law, promulgated on August 30, 2001, sets out the rights of tenure and the different classifications of land (State Public, State Private, Private, Monastery, Indigenous Land) Law on Natural Protected Areas, promulgated on February 15, 2008 Law on Finance for year 2010, introducing Property Tax Law on Investment of the Kingdom of Cambodia 1994 (as amended in 2003) Sub-decree No. 111 on the Implementation of the Amendment to Law on Investment of the Kingdom of Cambodia, dated September 27, 2005 Law on Expropriation, promulgated on February 26, 2010 Sub-decree No. 126 on the Management and Use of Coowned Buildings, dated August 12, 2009 Sub-decree No. 146 on Economic Land Concession, dated December 27, 2005, as amended on September 15, 2008 Prakas No. 493 of the Ministry of Economy and Finance on Collection of Property Tax, dated July 19, 2010 Prakas No. 371 on Taxable Rate on Immovable Properties, dated May 5, 2011 Prakas No. 1222 on Real Estate Development Business Management, dated December 15, 2009 Law on Providing Foreigners With Ownership Rights in Private Units of Co-owned Buildings, dated May 27, 2010 Sub-decree No. 82 on Determination of Proportion and Method of Calculation of Private Unites to Be Owned by Foreigners within a Co-owned Building, dated July 29, 2010 Civil Code, effective on December 8, 2007, enforceable on December 21, 2011 Law on the Implementation of the Civil Code, effective on May 31, 2011, enforceable on December 21, 2011 Sub-decree No. 86 on Construction Permit, dated December 19, 1997 Royal Decree on Transitional Principles and Provisions for the Transfer of Public Properties of the State and of Public Entities, dated August 3, 2006 Sub-decree on Rules and Procedure for Transfer of Public Properties of the State and of Public Entities, dated November 27, 2006 Inter-ministerial Prakas No. 59 on Registration of Immovable Property based on the Civil Code, dated June 3, 2011 Sub-decree No. 39 on Management of Borey, dated March 10, 2011 2013 Law on Financial Management, dated December 26, 2012 Operation requirements for foreign corporations Companies are registered at the Ministry of Commerce (MOC) and the Council for the Development of Cambodia (CDC) for Investment Companies (entitled to investment benefits) There are three forms of commercial enterprises: Limited company (MOC) Branch office (MOC) Representative office (MOC) Registration/licensing requirements Registration is a straightforward process at the MOC (and CDC, in the case of investment companies), although it is time-consuming and document-intensive compared to other jurisdictions. Most enterprises can begin operations upon the issuance of the approval letter from the MOC. Certain sectors require a specific operating license issued by the relevant ministry (e.g., mining, telecommunications, hotels and restaurants, banking, real estate and securities).
Foreign employment requirements Month-long business visas are available on arrival, with the right to extend on a yearly basis. Workers register at the Ministry of Labor for employment permits, renewable annually. There are no limitations on the number of renewals. Companies are entitled to hire foreigners to cover up to 10 percent of its workforce. Exemptions (for over 10 percent of the workforce) are available upon request to the Ministry. Foreign investment incentives The CDC grants investment incentives to qualified investment projects (QIP) in the form of profit tax holidays (of up to nine years) and exemption on import duty for production equipment, raw materials and inputs to manufacturing. Rather than a tax holiday, a QIP may elect to take accelerated depreciation on manufacturing assets. The Sub-decree No. 111 provides the Negative List, which restricts certain activities from eligibility for some or all investment incentives available to companies approved as a QIP. On an annual basis, the CDC requires all QIPs to apply for a Certificate of Compliance to enable the QIP to continue receiving the incentives granted. Restrictions on foreign property ownership Ownership of land is restricted to Cambodian citizens. Cambodian citizens include individuals and legal entities in which 51 percent or more of the shares are held by Cambodian citizens. Foreigners may acquire leasehold and concessions. In addition, since the implementation of the Law on the Provision of Ownership Rights over Co-owned Buildings to Foreigners in 2010, foreigners may acquire apartments in registered co-owned buildings above the ground floor to a maximum of 70 percent of any one apartment building, provided that the building has applied for and obtained strata title, which generally only applies to new construction. Foreign exchange controls There are no restrictions on the remittance or repatriation of capital or profits into or out of Cambodia, so long as the transfers are conducted through registered financial institutions. The Amended Law on Investment guarantees the rights of foreign investors to remit foreign currencies abroad for the following: Payment of imports and repayment of principal and interest on foreign loans Payment of royalties and management fees Remittance of profits Repatriation of invested capital on dissolution of investment projects Whereas the Riel (KHR) is the official currency, most transactions are conducted and denominated in the US dollar. Remittances are subject only to the applicable withholding taxes. Taxes on possession and operation of real estate Property tax is levied on immoveable property in Cambodia in the following manner: Except for unused land, property tax of approximately 0.1 percent is levied on 80 percent of properties valued at over KHR 100 million (equivalent to approximately USD 25,000). The tax is levied annually. An unused land tax of 2 percent is levied on all unused properties. It is calculated on the market price per square metre, as assessed by the Committee for the Valuation of Unused Land. This tax may be paid annually (by September 30) or will be levied at the time of transfer (with back taxes assessed since last payment). For leased properties, a withholding tax of 10 percent is levied on the rental amount. Taxes on acquisition and transfer of real estate A transfer tax of 4 percent is levied on all hard title property transfers (transfer of title). It is important to note that currently, a vast majority of private properties are registered only with the local authorities (commonly referred to as soft title, and technically constitutes a weak possession status only). Transfers of such properties (at the local level) do not attract a transfer tax. Only properties for which national level title deeds (commonly referred to as hard title ) have been issued attract a 4 percent transfer tax. Typically, the General Department of Taxation will assess the value of properties based on its determined ranges, for the purpose of assessing transfer tax (and not rely on the price stated in the sale contract). A regulation imposing a Capital Gains Tax of 20 percent has been drafted, but is yet to be implemented. For the time being, all profits realised by a company (including capital gains on the sale of real estate) are taxed at the prevailing profit tax rates. A VAT of 10 percent is applied on sales of buildings. Resident enterprises are taxed on all profits derived from both inside and outside of Cambodia. Non-resident enterprises are taxed on Cambodian-sourced income. A resident enterprise is one that has a place of management and carries on business in Cambodia. Taxable income is the net profit realised from all business operations, including capital gains realised from the sale of real property during or at the cessation of business. 3 Asia Pacific Property Investment Guide 2015
The current corporate profit tax rate is 20 percent. However, certain industries, such as oil and gas production, as well as mining enterprises, are taxed at a higher rate of 30 percent. There is a 0 percent tax rate applied on the profit of CDC approved projects for the duration of the approved tax holiday (up to nine years). Companies are subject to a monthly prepayment of tax on profit, self-assessed at 1 percent of the monthly turnover, inclusive of all taxes except VAT. A withholding tax on dividends is levied at 14 percent; however, this is only applied to non-resident shareholders. Other forms of withholding tax are as follows: Payments made to a resident entity Payment for services to a physical person: 15 percent Royalty payments for intangible assets and interests in minerals, oil and natural gas: 15 percent Interest payments to a physical person or enterprise, except for interest paid to a domestic bank or savings institution: 15 percent Rental on moveable or immovable properties: 10 percent Interest payments on a fixed deposit made by a domestic bank or savings institution to a resident taxpayer: 6 percent Interest payments on a savings account made by a domestic bank or savings institution to a resident taxpayer: 4 percent Payments made to a non-resident Interest: 14 percent Royalties, rent: 14 percent Management or technical services: 14 percent Dividends: 14 percent Personal taxation Individual residents are liable to income tax/tax on salary on Cambodian and foreign source income. Non-residents are subject to income tax on Cambodian source income only. Residents are taxed on salary after certain deductions are made for child relief. Salary taxes are levied on a graduated scale, ranging from 5 percent to 20 percent, with 20 percent being levied at the KHR 12,500,000 (approximately USD 3,100) upward. Annual income (in KHR) Up to 500,000 (approximately USD 124) From 500,001 1,250,000 (approximately USD 124 300) From 1,250,001 8,500,000 (approximately USD 300 2,100) From 8,500,001 12,500,000 (approximately USD 2,100 3,100) Over 12,500,000 (approximately USD 3,100) Rate 0% 5% 10% 15% 20% Tax treaties: Avoidance of double taxation Cambodia has not, as yet, entered into any tax treaties with other countries. However, foreign tax credits are available (subject to certain conditions) to resident taxpayers with regard to any foreign taxes paid.
CAMBODIA JLL 26/F Saigon Trade Center 37 Ton Duc Thang Street, District 1 Ho Chi Minh City tel +84 8 3910 3968 www.joneslanglasalle.com.vn Sciaroni & Associates Bretton G. Sciaroni Partner info@sa-asia.com Daniel Noonan Legal Advisor info@sa-asia.com No. 24, Street 462, Sangkat Tonle Bassac, Phnom Penh, Cambodia tel +855 23 210225 fax +855 23 213089 www.sa-asia.com 5 Asia Pacific Property Investment Guide 2015
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