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| LAW ON INVESTMENT OF THE KINGDOM OF CAMBODIA |
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| Saturday,December 02,2006 Posted: 16:11 BJT(0811 GMT) E/C Office |
Chapter I
GENERAL PROVISIONS
Article 1: This Law governs all investment projects made by investors who are Cambodian citizens and/or foreigners within the Kingdom of Cambodia.
Article 2: Investor can be either a natural person or a legal entity.
Chapter II
THE COUNCIL FOR THE DEVELOPMENT OF CAMBODIA
Article 3: The Council for the Development of Cambodia is the sole and One-Stop Service organization responsible for the rehabilitation, development and the oversight of investment activities.
The Council for the Development of Cambodia is the Royal Government's “Etat-Major” responsible for the evaluation and the decision making on all rehabilitation, development and investment project activities
Article 4: The Council for the Development of Cambodia comprises the following two operational Boards:
1. The Cambodian Rehabilitation and Development Board, and
2. The Cambodian Investment Board
Article 5: The organization and functioning of the Council for the Development of Cambodia shall be specified by Sub-Decree.
Chapter III
INVESTMENT PROCEDURES
Article 6: Investors have to submit investment applications to the Council for the Development of Cambodia for review and decision.
Article 7: The Council for the Development of Cambodia shall provide a response as to its decision to all investors/applicants within a period of a maximum of forty-five (45) days following the date of submission of the complete investment application.
Any government officials who without proper justification refuse to review and respond to investors application past the above mentioned period of time shall be punished by law.
Chapter IV
INVESTMENT GUARANTEES
Article 8: Investors shall be treated in a non-discriminatory manner as set by law, except for ownership of land as set forth in the Constitution of the Kingdom of Cambodia.
Article 9: The Royal Government shall not undertake nationalization policy, which shall adversely affect private properties of investors in the Kingdom of Cambodia.
Article 10: The Royal Government shall not impose price control on the products or services of investors who have received prior approval from the Government.
Article 11: In accordance with the relevant laws and regulations issued and published to the public by the National Bank of Cambodia, the Royal Government shall permit investors with investments in Cambodia to purchase foreign currencies through the banking system and to remit abroad these currencies for the discharge of financial obligations incurred in connection with their investments. This concerns the following payments:
1. Payment for imports and repayment of principal and interest on international loans;
2. Payment of royalties and management fees;
3. Remittance of profits; and
4. Repatriation of invested capital in compliance with Chapter 8.
Chapter V
INVESTMENT INCENTIVES
Article 12: The Royal Government shall make available incentives to encourage investments in such important fields as:
1. Pioneer and/or high technology industries,
2. Job creation,
3. Export-oriented,
4. Tourism industry,
5. Agro-industry and processing industry,
6. Physical infrastructure and energy,
7. Provincial and rural development,
8. Environmental protection, and
9. Investments in Special Promotion Zone (SPZ) as shall be created by law.
Article 13: Incentives and privileges shall include the exemption, in whole or in part, of custom duties and taxes.
Article 14: Incentives and privileges shall consist of the followings:
1. A corporate tax rate of 9% except tax rate on the exploration and exploitation of natural resources, timber, oil, mines, gold, and precious stones which shall be set in separate laws.
2. A corporate tax exemption of up to 8 years depending on the characteristics of the project and the priority of the government which shall be mentioned in a Sub-Decree. Corporate tax exemption shall take effect beginning from the year the project derives its first profit. A 5-year loss-carried forward shall be allowed. In the event profits are reinvested in the country, such profits shall be exempted from all corporate tax.
3. Non-taxation on the distribution of dividends or profits or proceeds of investments, whether transferred abroad or distributed in the country.
4. 100% import duties exemption on construction materials, means of production, equipments, intermediate goods, raw materials and spare parts used by:
a. An export-oriented project with a minimum of 80% of the production set apart for export,
b. Located in a designated Special Promotion Zone (SPZ) listed in a development priority list issued by the Council;
c. Tourism industry;
d. Labor-intensive industry, processing industry, agro-industry; and
e. Physical Infrastructure and energy industry.
These 100% exemption of duties and taxes mentioned above shall be in effect according to the terms of the agreement or specification document of the investment projects which will produce goods for export in minimum of 80% of overall productivities as stipulated in the above point (4)a and for the investment projects which located in Special Promotion Zone ( SPZ ) as in (4)b.
Beside the kinds of investment projects in the above points (4)a and (4)b the 100% exemption of duties and taxes shall only be authorized for the construction enterprises, factories, building and the first year of production operation.
5. 100% exemption of export tax, if any;
6. the permission to bring into the Kingdom of Cambodia foreign nationals who are:
• Management personnel and experts
• Technical personnel
• Skilled workers
Spouses and dependents of the above persons as authorized by the Council for Development of Cambodia and in compliance with the immigration and labor laws.
Article 15: The approval and incentives granted by the Council for Development of Cambodia shall not be transferred or assigned to any third parties.
Chapter VI
LAND OWNERSHIP AND USE
Article 16: In accordance with the Constitution and relevant laws and regulations pertaining to the ownership and use of land:
1. Ownership of land for the purpose of carrying on promoted investment activities shall be vested only in natural persons holding Cambodian citizenship or in legal entities in which more than 51% of the equity capital are directly owned by natural persons or legal entities holding Cambodian citizenship.
2. Use of land shall be permitted to investors, including long-term leases of up to a period of 70 years, renewable upon request. Upon such use may include the right of ownership of real and personal property situated on the land as may be permitted by law.
Chapter VII
EMPLOYMENT PRACTICES
Article 17: Investors in the Kingdom of Cambodia shall be free to hire Cambodian nationals and foreign nationals of their choosing in compliance with the labor and immigration laws.
Article 18: The investors shall be allowed to hire foreign employees listed in Article 14 (6) provided that:
1. The qualification and expertise are not available In the Kingdom of Cambodia among the Cambodian populace. In the event of such hiring, appropriate documentation including photocopies of the employee’s passport, certificate and/or degree and a curriculum vitae shall be submitted to the Council,
2. Investors shall have the obligation to provide adequate and consistent training to Cambodian staff,
3. Promotion of Cambodian staff to senior positions will be made over time.
Article 19: Foreign employees shall be allowed to remit abroad their wages and salaries earned in the Kingdom, after payment of appropriate tax, in foreign currencies obtained through the banking system.
Chapter VIII
DISPUTES AND DISSOLUTION
Article 20: Any dispute relating to a promoted investment established in the Kingdom by a Cambodian or a foreign national concerning its rights and obligations set forth in the Law shall be settled amicably as far as possible through consultation between the parties in dispute.
Should the parties failed to reach an amicable settlement within two month from the date of the first written request to enter such consultations, the dispute shall be brought by either party for:
• Conciliation before the Council which shall provide its opinion, or
• Refer the matter to the court of the Kingdom of Cambodia, or
• Refer to any international rules to settle the disputes as agreed by both parties.
Article 21: In the event a promoted company intends to end its activity in the Kingdom of Cambodia, it shall inform the Council through either a registered letter or a hand delivered letter stating the reasons of such a decision, and signed by the investor or his attorney-in fact.
Article 22: In the event of a proposal for a dissolution of a company without judicial procedures, the investor shall provide proofs to the Council that the company has properly settled its potential creditors, complainants and claims from the Ministry of Economy and Finance before the investor is allowed to officially dissolve his company or enterprise according to the applicable commercial law.
Article 23: Once the investor is allowed to officially dissolve his company or enterprise either within the judicial procedures or not, the investor can transfer the remaining proceeds of its assets overseas or use them in the Kingdom of Cambodia. However, in the event that the dissolving company had used machineries and equipment that were imported duty free for less than five years, the company shall have the obligations to pay the duties applicable to those machineries and equipment.
Chapter IX
FINAL PROVISIONS
Article 24: Investments authorized under the previous “Law on Investment” of the State of Cambodia and its Sub-Decrees shall be subject to the same benefits and obligations as stated under this Law. This law is not retroactive.
Article 25: In the case where the promoted company violates or fails to comply with the conditions stipulated by the Council, the Council shall have the power to withdraw the privileges and incentives granted to him, in whole or in part.
Article 26: This Law shall be promulgated immediately.
PART A:
LIST OF INVESTMENT sectors to which incentives shall apply：
1. Crop Production
1.1 Paddy farming greater than 1,000 ha.
1.2 All types of cash crops greater than 500 ha.
1.3 Vegetables greater than 50 ha.
2. Livestock Production
2.1 Livestock more than 1,000 heads
2.2 Dairy farming more than 100 heads
2.3 Poultry & eggs for 10,000 heads
3. Fisheries
3.1 Hatcheries more than 2 ha.
3.2 Shrimp farming and other aqua-culture production greater than 10 ha.
4. Manufacture and Processing of Food & Related Products
• Investment Capital Greater Than 500,000 USD
4.1 Beverages
4.2 Fats & oils
4.3 Sugar confectionery
4.4 Meat products
4.5 Dairy products
4.6 Preserved fruits and vegetables
4.7 Grain mill products
4.8 Bakery products
4.9 Animal feed products
5. Manufacture of Textile Mill Products
• Investment Capital Greater Than 1,000,000 USD
5.1 Weaving mill cotton, wool and man-made material
5.2 Narrow fabric mills
5.3 Floor covering mills
5.4 Knitting mills
6. Manufacture of Apparel and Other Textiles
• Investment Capital Greater Than 500,000 USD
7. Manufacture of Furniture & Fixtures
• Investment Capital Greater Than 500,000 USD
7.1 Household furniture
7.2 Office furniture
7.3 Building partitions and fixtures
8. Manufacture of Paper & Allied Products
• Investment Capital Greater Than 1,000,000 USD
8.1 Tree plantations for paper and pulp mills
8.2 Paper production
8.3 Paperboard mills
8.4 Paperboard containers
9. Manufacture of Chemicals & Allied Products
• Investment Capital Greater Than 500,000 USD
9.1 All types of chemicals including agricultural chemicals
9.2 Plastics and other synthetics
9.3 Drugs
9.4 Cleaning products
9.5 Paint & allied products
10. Manufacture of Rubber & Miscellaneous Plastics
• Investment Capital Greater Than 500,000 USD
11. Manufacture of Leather & Other Products
• Investment Capital Greater Than 500,000 USD
12. Manufacture of Fabricated Metal Products
• Investment Capital Greater Than 500,000 USD
13. Manufacture of Electrical and Electronic Equipment
• Investment Capital Greater Than 500,000 USD
14. Manufacture of Transportation Equipment
14.1 Automobiles and spare parts
14.2 Aircraft and spare parts
14.3 Constructions and means of water transports
14.4 Equipments and means of rail transports
14.5 Bicycles and motorcycles
15. Highway & Bridge Construction
16. Exploitation of minerals, ore, coal, oil and natural gas
17. Production of machineries and industrial equipment
• Investment Capital Greater Than 1,000,000 USD
18. Production of consumption goods
19. Hotel construction
• Three stars classification or higher
20. Medical complex of International standards, Educational facilities of International standards, Vocational training centers
21. Physical infrastructure facilities to support the tourism and cultural sectors
22. Production and exploitation activities to protect the environment.
Part B:
LIST OF INVESTMENT SECTORS TO WHICH INCENTIVES SHALL NOT APPLY：
1. All Types of Trading Activities
2. All Forms of Transportation Services
3. Duty-free Shops
4. Restaurant, Karaoke, Bars and Massage Parlors; outside the premises of international standard hotels
5. Shopping Mail
6. News and Media-related Activities (Radio, TV, Newspapers)
7. Retail and Wholesale
8. Professional Services
SECOND SCHEDULE
A. Types of Investment Subject to Customs Duty Exemptions
1. Investment in Export-oriented projects with a minimum of 80% of production designated for export;
2. Projects located in a Special Promotion Zone;
3. Tourism industry projects;
4. Projects in labor intensive industries, processing industries and agro-industries; and
5. Physical infrastructure and energy projects.
In the case of projects within (3), (4) and (5) above, the exemption from customs duties shall relate only to the construction of buildings and factories and the first year of operation.
B. Types of Goods Subject to Customs Duty Exemptions
1. Construction materials for the project;
2. Machinery used directly in the production process;
3. Other equipment used directly in the project other than administrative equipment, transportation and distribution equipment;
4. Spare parts for the machinery and equipment referred to in (2) and (3);
5. Raw materials and intermediate goods used directly in the production process.
6. Packaging equipment.
C. Types of Export Goods entitled to 100% Export Tax Exemptions
• Finished products
SCHEDULE 3
CRITERIA MATRIX FOR INCENTIVES
To each criteria corresponds a scale of values which values can be an amount, a number or a percentage.
To each value corresponds a coefficient. The total of the coefficients is used for determining where it is located in the tax holiday scale in order to obtain the corresponding number of tax holiday years.
Often the value which is taken into account does not correspond exactly to those stated in the scale. In this case the calculation is made by an interpolation method by taking the nearest figure. If the figure is close to the upper figure of the bracket the next following bracket is applied with the corresponding number of tax holidays years.
ECONOMIC CRITERIA:
Location: In order to promote disadvantaged areas, Cambodia is divided into 4 zones:
Zone 1: Phnom Penh, Kandal, Siem Reap and Sihanoukville
Zone 2: Kampong Cham, Kampong Chhnang, Kampong Speu, Kampot, Prey Veng, Svay Rieng and Takeo
Zone 3: Battambang, Kampong Thom and Pursat
Zone 4: Banteay Mean Chey, Kratie, Koh Kong, Mundul Kiri, Preah Vihear, Ratanak Kiri and Steung Treng
A province located in a higher figure zone is considered as more disadvantaged than one located in a smaller figure zone.
Investment Amount: Shows the cost of investment (in million USD) capitalized as fixed assets such as land improvement, construction, fittings and fixtures, machinery and equipment, furniture, and office equipment.
Head Count/Employment: This criterion is expressed as the number of Cambodians employed at full production.
Export: This criterion is expressed in percentage by the ratio of Production exported/Total Production (in term of quantity or volume).
Value Added: This is determined as being the value of production less intermediate consumption. Intermediate consumption includes all outside purchases of goods and services used by the Investment Enterprise for its current professional activities: raw materials, semi-finished goods, finished goods, supplies, utilities, telephone and telegraph, rentals (land, building and equipment lease) transportation, advertising and promotion, sales commissions, various fees and all other outside services, etc.)
Use of Local Resources: This criterion is expressed in percentage by the ratio of Purchase of local resources / Total purchases.
Training & Human Resources Development: It is expressed by the ratio of man/days of training for Cambodian staff divided by the number of days of training. Man/days of management level staff members are accounted by a factor of two.
SOCIAL CRITERIA:
Employment of women: in percentage of manpower
Employment of disabled: in percentage of manpower
CRITERIA MATRIX FOR INCENTIVE
TOURISM/HOTEL INDUSTRY
H11 STANDARD *** **** *****
Coefficient 20 60 100
H12 ROOMS 100 150 200 250 300 350 400 450 500 >500
Coefficient 10 20 30 40 50 60 70 80 90 100
H13 INVESTMENT AMOUNT 5 10 15 20 25 30 35 40 45 >50
Coefficient 10 20 30 40 50 60 70 80 90 100
H14 EMPLOYMENT 200 300 400 500 600 700 800 900 1000 >1200
Coefficient 10 20 30 40 50 60 70 80 90 100
H15 TRAINING & HRG 90 120 150 180 210 240 270 300 330 360
Coefficient 10 20 30 40 50 60 70 80 90 100
H16 LOCATION ZONE1 ZONE2 ZONE3 ZONE4
Coefficient 10 30 60 100
H17 EMPLOYMENT OF WOMEN(%) 0 to 40 41 to 70 71 to100
Coefficient 0 50 100
H17 EMPLOYMENT OF HANDICAPPED(%) 5 to 10 11 to 20
Coefficient 50 100
TOTAL COEFFICIENTS
INCENTIVES
SCALE 70-100 101-200 201-300 301-400 401-500 501-600 601-700 701-800
TAX HOLYDAY (No. of Years) 1 2 3 4 5 6 7 8
TAX HOLYDAY YEARS
CRITERIA MATRIX FOR INCENTIVE
FOOD PROCESSING INDUSTRY
FP1 INVESTMENT AMOUNT <2 5 10 15 20 25 30 35 40 50+
Coefficient 5 10 20 30 40 50 60 70 80 100
FP2 HEAD COUNT/EMPLOYMENT 100+ 200 300 400 500 600 700 800 900 1000
Coefficient 10 20 30 40 50 60 70 80 90 100
FP3 EXPORT(%) 10 20 30 40 50 60 70 80 90 100
Coefficient 30 40 50 60 70 80 90 100 100 100
FP4 VALUE ADDED(%) 5 10 15 20 25 30 35 40 45 50
Coefficient 0 10 20 40 50 60 70 80 90 100
FP5 USE OF LOCAL RESOURCE(%) 10 20 30 40 50 60 70 80 90 100
Coefficient 0 10 20 30 40 50 60 70 80 100
FP6 TRAINING & HRG 15 30 45 60 75 90 105 120 150 180
Coefficient 10 20 30 40 50 60 70 80 90 100
FP7 LOCATION ZONE1 ZONE2 ZONE3 ZONE4
Coefficient 10 30 60 100
FP8 EMPLOYMENT OF WOMEN(%) <30 30 to 70 71 to100
Coefficient 0 50 100
FP9 EMPLOYMENT OF DISABLED (%) 5 to 10 11 to 20
Coefficient 50 100
TOTAL COEFFICIENTS
INCENTIVES
SCALE 110-200 201-300 301-400 401-500 501-550 551-600 601-650 651-700
TAX HOLYDAY (No. of Years) 1 2 3 4 5 6 7 8
TAX HOLYDAY YEARS
CRITERIA MATRIX FOR INCENTIVE
MANUFACTURING INDUSTRY
MI1 INVESTMENT AMOUNT <2 5 10 15 20 25 30 35 40 50+
Coefficient 10 20 30 40 50 60 70 80 90 100
MI2 HEAD COUNT/EMPLOYMENT 100 200 300 400 500 600 700 800 1000 1500+
Coefficient 5 10 20 30 40 50 60 70 80 100
MI3 EXPORT(%) 10 20 30 40 50 60 70 80 90 100
Coefficient 10 20 30 40 50 60 70 80 90 100
MI4 VALUE ADDED(%) 5 10 15 20 25 30 35 40 45 50
Coefficient 0 5 10 15 20 30 45 60 80 100
MI5 USE OF LOCAL RESOURCE(%) 10 20 30 40 50 60 70 80 90 100
Coefficient 5 10 20 30 40 60 70 80 90 100
MI6 TRAINING & HRG 30 60 90 120 150 180 210 240 270 300
Coefficient 10 20 30 40 50 60 70 80 90 100
MI7 LOCATION ZONE1 ZONE2 ZONE3 ZONE4
Coefficient 10 30 60 100
MI8 EMPLOYMENT OF WOMEN(%) 0 to 40 41 to 70 71 to100
Coefficient 0 50 100
MI9 EMPLOYMENT OF DISABLED (%) 5 to 10 11 to 20
Coefficient 50 100
TOTAL COEFFICIENTS
INCENTIVES
SCALE 100-200 201-300 301-400 401-500 501-600 601-700 701-800 801-900
TAX HOLYDAY (No. of Years) 1 2 3 4 5 6 7 8
TAX HOLYDAY YEARS
CRITERIA MATRIX FOR INCENTIVE
AGRICULTURE/CROPS
AG1 INVESTMENT AMOUNT <2 5 10 15 20 25 30 35 40 50+
Coefficient 5 10 20 30 40 50 60 70 80 100
AG2 HEAD COUNT/EMPLOYMENT 100 200 300 400 500 1000 1500 2000 2500 2500+
Coefficient 10 15 20 25 30 60 70 80 90 100
AG3 EXPORT(%) 10 20 30 40 50 60 70 80 90 100
Coefficient 30 40 50 60 70 80 90 100 100 100
AG4 TRAINING & HRG 30 60 90 120 150 180 210 240 270 300
Coefficient 10 20 30 40 50 60 70 80 90 100
AG5 LOCATION ZONE1 ZONE2 ZONE3 ZONE4
Coefficient 10 30 60 100
AG6 EMPLOYMENT OF WOMEN(%) 0 to 40 41 to 70 71 to100
Coefficient 0 50 100
H17 EMPLOYMENT OF DISABLED (%) 5 to 10 11 to 20
Coefficient 50 100
TOTAL COEFFICIENTS
INCENTIVES
SCALE 95-200 201-300 301-400 401-500 501-550 551-600 601-650 651-700
TAX HOLYDAY (No. of Years) 1 2 3 4 5 6 7 8
TAX HOLYDAY YEARS
SUB-DECREE
ON
THE AMENDMENT OF THE SUB-DECREE ON THE IMPLEMENTATION
OF THE LAW ON INVESTMENT OF THE KINGDOM OF CAMBODIA
No. 88 ANKR.BK DATED DECEMBER 29, 1997
Article 1: Article 23 (Obligations of investment enterprises) of the Sub-decree No. 88 ANKR.BK on the implementation of the Law on Investment of the Kingdom of Cambodia, shall be amended as follows:
Para 23.3(a): Other information requirements: The investment enterprises
shall provide on a quarterly basis to the Council, the Tax Department and the customs Department, the following:
Para 23.3(b): A detailed list of effectively imported goods serving the production and a detailed list of exported products of the investment project.
Article 2: Part A and Part B of the first schedule of the Sub-decree No. 88 ANKR.BK dated December 29, 1997 on the implementation of the Law on Investment of the Kingdom of Cambodia shall be amended as follows:
- Part A of the first schedule (list of investment sectors to which incentives shall apply) shall be amended on:
• Point 6 (Manufacture of apparel and other textiles): The investment capital shall be amended to greater than US$ 1,000,000. (One million US dollars)
• Point 7 (Manufacture of furniture and fixtures): The investment capital shall be amended to greater than US$ 1,000,000. (One million US dollars)
• Point 9 (Manufacture of chemicals & allied products): The investment capital shall be amended to greater than US$ 1,000,000. (One million US dollars)
• Point 12 (Manufacture of fabricated metal products): The investment capital shall be amended to greater than US$ 1,000,000. (One million US dollars)
• Point 15 (Highway & Bridge Construction): Shall be amended and extended to “Construction of physical infrastructure, including electricity production and clean water production”
• Point 16 (Exploitation of minerals, ore, coal, oil and natural gas): Shall be removed from the Sub-decree.
• Point 17 (Production of machineries and industrial equipment): The investment capital shall be amended to greater than US$ 1,000,000. (One million US dollars)
• Point 18 (Production of consumption goods): Shall be removed from the Sub-decree.
- Part B of the first schedule (List of investment sectors to which incentives shall not apply) shall be amended to include two new points:
• Point 9: “Telecommunication services”
• Point 10: “Exploitation of natural resources, except oil and natural gas exploration”.
Article 3: Part A and Part B of the second schedule of the Sub-decree No. 88 ANKR.BK dated December 29, 1997 on the implementation of the Law on Investment of the Kingdom of Cambodia shall be amended as follows:
- Part A: After the last paragraph, a sentence shall be added: The types of Investment mentioned in Point 1 to Point 5 shall not include exploitation of natural resources except oil and natural gas exploration.
- Part B: Point 5 shall be amended as follows: Raw materials and intermediate goods used directly in the production process except all kinds of fuel, lubricants and other petroleum products.
Article 4: Any previous provision contrary to this Sub-decree shall be considered null and void.
Article 5: The Minister in charge of the Office of the Council of Ministers, the Minister of Economy and Finance, the Council for the Development of Cambodia and all concerned ministries and institutions shall implement this Sub-decree from the date of its signature.
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