Investing In...
INVESTING INCAMBODIA Ronald Almera, grant thornton
“When opening and operating a business in Cambodia, familiarising yourself with the relevant ministries is a must. Registering, licensing and gaining work permits for staff is an essential step in starting any business in Cambodia. As always, a thorough study of the Cambodian market is necessary before embarking on a more long-term investment position in the country.” Ronald Almera, Grant Thornton.
G Q
rant Thornton Cambodia is an independent member within Grant Thornton International and a wholly foreign-owned company. Grant Thornton’s presence in Cambodia first started in 2004. A recent
reorganization incorporated the expertise of Grant Thornton Vietnam and Grant Thornton Malaysia to expand the service lines to meet the increasing demand for quality audit and advisory services of local business and international investors in Cambodia. The firm maintains a full service office in Phnom Penh and offers a broad range of services including audit, outsourced accounting, tax and advisory.
What makes Cambodia an attractive investment/business destination?
As one of the developing countries in the region, international aid remains a vital component in overcoming the challenges faced in Cambodia’s development. Private sector investment will become increasingly important for the country as the private sector assumes its position as the main engine for economic growth. In recent years, the country has seen consistent growth fuelled mainly by the garment and agriculture industries. It is in these industries where investors are mostly attracted to given the low wages.
A programme of reform is being undertaken by the government in order to create a conducive environment for private sector investment. In 1994, the Law on Investment of the Kingdom of Cambodia was passed with the aim of streamlining the foreign investment regime and providing generous and competitive concessions for direct private sector investment. The Law on Investment also created the Council for the Development of Cambodia (CDC), a one-stop service Organisation for investment in Cambodia. The CDC, through the executive arm of the Cambodian Investment Board (CIB), is now responsible for the processing of applications for investment projects and is required to give a decision within 45 days of
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submission. As such, the government is fully committed to the speeding-up of new investment-project approvals by making the CDC a truly effective and well-disposed one- stop service. (Source: http://www.embassyofcambodia.
org.nz/investment.htm)
Q
What policies currently exist in Cambodia that benefit business
and investment?
In order to attract Foreign Direct Investment, the government has strengthened the country’s
legal
framework, bolstered its institutions and liberalised the relevant regulations, in ways that are conducive to private sector investment and business activities in Cambodia. The 1994 Law on Investment provides similar treatment to foreign and domestic investors alike, with the exception of the issue of land ownership, as set forth in Cambodia’s constitution. Even in this area, the regulations are generous, with foreign investors able to lease land for a period of up to 70 years, with the possibility of renewal thereafter.
The government provides investors with a guarantee neither to nationalise foreign-owned assets, nor to establish price controls on goods produced and services rendered by investors, and to grant them the right to freely repatriate capital, interest and other financial obligations.
Investors can set up 100% foreign-owned investment projects and employ skilled workers from overseas, in cases where these workers cannot be found in the domestic labour force.
In addition, the Law on Investment and its related Sub- Decree grant generous incentives to investors, especially those concerned in investment projects geared towards exports.
Attention is also accorded to private investment in Build- Operate-Transfer (BOT) projects, and private investment in infrastructure, including public utilities such as electricity, water supply and telecommunications. (Source:
http://www.embassyofcambodia.org.nz/investment.htm)
Q
How does Cambodia’s tax system fit into the business / investment
equation?
The country relies on its taxing system to fund government projects and agencies which inures to the benefit of the citizenry. A newly established company, branch or representative office is required to register with the Tax Department’s local tax branch office within 15 days of registration at the Ministry of Commerce in order to receive a taxpayer’s identification number and to register to pay Value-Added Tax (VAT).
The accounting periods begin from 1 January to 31 December of each year. Following registration at the Ministry of Economy and Finance, a company is liable to pay VAT, Prepayment of Profit Tax, Salary and Fringe Benefit Tax and Withholding Tax each month, usually payable by the 15th of the following month. Payments must be accompanied by a signed declaration, together with a list of all invoices either issued or received by the company during the tax period.
Smaller business entities such as sole proprietorships and general partnerships are usually deemed to fall into the “estimated tax regime” and instead pay tax to the local commune.
Full details of tax liabilities for businesses operating in Cambodia can be found on the website of the General Department of Taxation at
www.tax.gov.kh.
Ronald Almera Tel: +855 23 966 520
Email:
Ronald.Almera@
kh.gt.com Web:
www.gt.com.kh
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