The World Bank ranked Cambodia 171st out of 183 economies in terms of how simple it is to open a new firm. The number of procedures that would-be business owners must complete in Cambodia is extensive, and it typically takes 85 days to register a business—much longer than in its neighbors. It’s difficult and expensive to register a business in Cambodia, and if you’re from one of the several nations that forbid their people from accepting bribes overseas and prosecute them for doing so, you’re facing some difficult decisions.
Starting a business requires quite a bit of “tea money,” also known as palm greasing. There are fees for each stage of the procedure, many of which are not strictly legal. For instance, once your business is properly registered, you must continue to pay your taxes to comply with Cambodian legislation. You must pay an unofficial $20 “facilitation fee” at the tax office each month to pay your taxes.
There are no simple solutions, but rest assured that things are gradually improving. Despite all of this, the Cambodian government is very pro-business and, in contrast to some of their neighbors, permits 100 percent foreign-owned businesses.
Many companies operate undetected by the authorities, and others decide to take over from already established companies that have filed the necessary documentation. Hiring a local fixer to help you navigate the procedure is worthwhile if you do decide to launch your firm.
Benefits of starting a business in Cambodia
A wide range of advantages is available to foreign businesspeople that are interested in setting up shop in Cambodia. The main justifications for international investors thinking about conducting business in Cambodia are listed below.
Fast-growing economy
With an average growth rate of 8% between 1998 and 2018, Cambodia was one of the fastest-growing economies worldwide. By 2020, Cambodia hopes to acquire an upper middle-income level after achieving lower middle-income status in 2015. Foreign investors have several options due to the economy’s expansion.
With a 6.9% GDP growth rate, the International Monetary Fund (IMF) projects that Cambodia will have the third-fastest expanding economy in ASEAN in 2021 and the fastest-growing economy in Southeast Asia by 2025.
Foreign investment
Cambodia permits foreign investors who establish businesses there to own 100% of those businesses. Limited liability firms in Cambodia may be entirely owned by foreign investors, and there are no restrictions on commerce or the nationality of the directors or shareholders.
Foreigners cannot, however, own land. A corporation must be registered in Cambodia, conduct business there, and have at least 51% of its shares owned by a citizen of Cambodia to be able to acquire land. A foreigner’s ownership cannot surpass 49%.
Low corporate tax rates
One of Southeast Asia’s lowest corporate tax rates is found in Cambodia. Small taxpayers are liable to rates ranging from 0% to 20%, whereas the typical corporate income tax rate for medium and large taxpayers is 20%.
Qualified investment projects
Tax breaks or special tax depreciation are available to foreign businesses that have registered as qualified investment projects (QIPs).
Foreign investors are qualified for a three-year tax holiday that begins on the day they get the Final Registration Certificate to be free from paying taxes. The QIP is eligible for an additional three-year priority period following the three-year tax break.
The first year after the purchase or the first year the materials are employed, the QIP is entitled to a 40% special tax depreciation of the production materials.
Free trade agreements
Cambodia is in talks with South Korea and just concluded its first bilateral free trade pact with China. Additionally, Cambodia joined the Regional Comprehensive Economic Partnership (RCEP) along with nine other ASEAN members, including Australia, China, Japan, South Korea, and New Zealand (Brunei, Indonesia, Laos, Myanmar, Philippines, Singapore, Thailand, and Vietnam).
The RCEP aims to lower tariffs on manufactured and agricultural items as well as create new regulations governing intellectual property, temporary migrant workers, and investment. The RCEP will provide Cambodia with new commercial prospects and give it almost free access to a combined market.
