Want to invest in Cambodia in compliance with regulations? In recent years, Cambodia has formulated and revised a series of laws and regulations, including the Investment Law and the Commercial Enterprise Law. It has clearly designated the Cambodia Development Council as the investment authority, standardized major legal forms, simplified investment procedures, and shortened the approval process, providing investors with a clearer and more transparent investment legal system, thereby attracting more foreign investment.

Overview of Cambodia's investment project approval and regulatory agencies

1. Competent authority: Role and responsibilities of the Council for the Development of Cambodia

The Cambodia Development Council is a one-stop service agency responsible for comprehensive reconstruction, development and investment supervision. The agency is composed of the Cambodian Reconstruction and Development Committee and the Cambodian Investment Committee, and aims to evaluate and make decisions on various reconstruction, development work and investment project activities. In addition, the Cambodia Development Council is also responsible for approving qualified investment project applications submitted by investors and issuing the final registration certificate.

However, investment projects need to be submitted to the Cabinet Office for approval under certain conditions:

1. Projects with an investment amount exceeding US$50 million
2. Projects involving politically sensitive issues
3. Mineral and natural resource exploration and development projects
4. Projects that may have adverse effects on the environment
5. Infrastructure projects, including BOT, BOOT, BOO and BLT models
6. Long-term development strategy projects

II. Relevant Laws: Legal Protection and Preferential Policies for Foreign Investment in Cambodia

The Cambodian government sees foreign direct investment as a key driver of economic development. Although Cambodia does not have a special foreign investment law, it basically treats foreign and domestic investment equally. The Investment Law and its Amendment Law and other relevant legal provisions provide protection for foreign investment and relatively preferential tax and land leasing policies. In addition, foreign investors can also enjoy the preferential treatment granted to Cambodia by 28 countries and regions including the United States, Europe, and Japan.

On October 21, 2021, the Cambodian government announced that the new investment law had been signed by the king and officially came into effect. The new investment law will provide safeguards to encourage investment and achieve industrial diversification.

III. Institutional Guarantee: Stability and Guarantee Measures of Cambodia’s Investment Environment

The Cambodian government provides certain investment protections for investors, including the following:

1. Treat foreign and domestic investors equally, ensuring that all investors, regardless of nationality and race, are equal before the law
2. The Cambodian government does not implement nationalization policies that harm investors' property and protects the property security of investors.
3. The Cambodian government does not regulate the prices of products and services for approved investment projects, increasing investment autonomy.
4. Cambodia does not implement foreign exchange controls and allows investors to purchase foreign exchange from the banking system and transfer it abroad to settle their financial debts related to investment activities.

IV. Preferential policies: Tax and policy advantages that Cambodian investors can enjoy

Qualified investment projects approved by the Council for the Development of Cambodia can enjoy a series of investment incentives, including the following:

1. Exemption of import tariffs on production equipment, building materials, spare parts and raw materials for investment and production enterprises, thus reducing investment costs
2. After investing, enterprises can enjoy a tax-free period of 3-8 years (up to 9 years in special economic zones). After the tax-free period, they will pay a profit tax of 9% in accordance with the tax law, thus reducing the tax burden.
3. When profits are reinvested, they are exempt from profit tax; dividends are not taxed, which encourages reinvestment and profit distribution.
4. When products are exported, they are exempt from export taxes to encourage the development of international trade

5. Industries that Cambodia encourages investment in

Cambodia's industry incentive policies are mainly aimed at agriculture and tourism:

1. Agriculture: In accordance with the Investment Law, the Cambodian government provides support and preferential treatment to projects such as planting, animal husbandry and aquaculture, mainly including large-scale rice, cash crops and vegetable planting projects, as well as large-scale animal husbandry, poultry farming and freshwater and seawater aquaculture projects.
2. Tourism: Cambodia's provinces and cities have made the tourism industry one of their top priorities, positioning it as a "priority development area", "pillar industry" and "featured industry" to accelerate development.

In addition, Article 12 of the Investment Law stipulates that the key areas of investment encouraged by the Cambodian government include: innovation and high-tech industries; job creation; export-oriented; tourism; agro-industry and processing; infrastructure and energy; provincial and rural development; environmental protection; investment in special development zones established in accordance with the law. Investment incentives include exemption from all or part of tariffs and taxes.

VI. Investment Restrictions

The Implementation Rules of the Amendment to the Investment Law (issued on September 27, 2005) list the investment activities that are prohibited for Cambodian and foreign entities, including the production and processing of neurological and narcotic substances; the production of toxic chemicals, pesticides, insecticides and other products using chemical substances that are prohibited by international rules or the World Health Organization and affect public health and the environment; the use of foreign imported waste materials to process electricity; forest development business prohibited by the Forest Law; and other investment activities prohibited by law. In addition, the rules also list "investment activities that do not enjoy investment incentives" and "specific investment activities that can enjoy exemption from customs duties but not exemption from profit tax."

The Investment Law regulates land ownership and use:

1. The land used for investment activities must be owned by a Cambodian natural person or a legal person in which a Cambodian natural person or legal person directly holds more than 51% of the shares.
2. Investors are allowed to use the land through concessions, indefinite long-term leases, and renewable short-term leases. Investors have the right to own the real estate and personal property on the land and use it as collateral.

Summarize:

Cambodia's investment environment offers many advantages, especially in terms of encouraged industries and preferential policies. Government support for areas such as agriculture and tourism helps investors succeed in these industries. However, investors also need to understand Cambodia's investment restrictions, especially in terms of prohibited investment activities and land use. When making investment decisions, a full understanding of Cambodia's investment regulations and policies will help investors succeed in the Cambodian market.