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© Sciaroni & Associates 2017

This booklet has been prepared by Sciaroni & Associates. It contains answers to frequently asked questions with regard to investing in Cambodia. The guide has been checked for accuracy, but there may be errors and omissions. Cambodia is still developing and laws can change rapidly. Sciaroni & Associates cannot be responsible for the accuracy of the information contained in this booklet. The information provided is not to be substituted for professional legal advice.

Sciaroni & Associates is a leading legal and investment advisory firm serving Southeast Asia since 1993. Based in Cambodia with offices in Laos and Myanmar, we provide skilled counsel, knowledgeable business insights and experienced guidance to many of the world’s leading companies, governments, economic think tanks and global development investment funds to help maximize the value of our clients’ investments.

Our clients and others investigating business and investment opportunities in Cambodia have asked many questions over the years.

We have assembled a number of them here, together with our answers.

We are sure you have more questions. If so, feel free to email them to us and one of our lawyers will revert with the response.

Updates and expanded responses will be included in our next edition.

Doing Business in Cambodia

2017

A guide for investors and answers to the most frequently asked questions about doing business in Cambodia.

SCIARONI & ASSOCIATES No. 24, Street 462, Phnom Penh, Cambodia OFFICE: +855 23 210 225 FAX: +855 23 213 089 [email protected] www.sa-asia.com

Table of Contents

Chapter 1 Registering a Company............................................. 1

Chapter 2 Investment Law ....................................................... 7

Chapter 3 Ownership of Land & Property ................................. 9

Chapter 4 Import and Export .................................................. 17

Chapter 5 Dissolution and Liquidation .................................... 19

Chapter 6 Banking & Finance ................................................. 21

Chapter 7 Labor and Employment .......................................... 29

Chapter 8 Dispute Resolution ................................................. 39

Chapter 9 Taxes ..................................................................... 41

Chapter 10 Intellectual Property ............................................ 49

Chapter 11 Anti-Corruption Law ............................................. 53

Chapter 12 Impact of Civil Code ............................................. 55

Chapter 13 NGO ..................................................................... 59

Chapter 14 Tourism ................................................................ 61

Useful Contacts ...................................................................... 63

Government...................................................................... 63

Embassies and Consulates ................................................ 65

Business and Trade Associations ...................................... 68

Firm Profile

Southeast Asia’s diverse and rapidly developing economies offer unique business opportunities for investors with an interest in long-term growth. Investors need informed, accurate advice from experienced local counsel to make sound business decisions and ensure success.

Since 1993, Sciaroni & Associates, a leading legal and professional services firm based in Cambodia with offices in Myanmar and Laos, has been providing expert advice and business insights to many of the world’s leading companies, governments, intergovernmental organizations, economic think tanks, global development investment funds and international non-governmental organizations.

This long-standing presence in Southeast Asia has enabled Sciaroni &Associates partners and associates to acquire considerable knowledge of the workings of the governments in the region. Today, the firm uses its expertise to offer a wide variety of commercial and investment services critical to doing business in the countries where we operate. From lending, property sales and purchases, and commercial and company creation, to project financing, securities, and capital markets, the firm provides personalized service underpinned by experience.

According to Chambers, Sciaroni & Associates offers “unbeatable client-service – personalized, proactive and spot-on advice every time. Bretton G. Sciaroni does not simply quote the law, but offers guidance on the business decisions we can make stress-free.”

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Chapter 1 Registering a Company

Registering a company in Cambodia is relatively straightforward. Cambodia has liberalized its business environment since becoming a member of the World Trade Organization (“WTO”) and passing the Law on Commercial Enterprises (“LCE”) in 2005.

1. What types of business entities can be formed in Cambodia? What is the most common vehicle used by investors?

One of the first steps that any investor will take is to select the right structure for their investment. The 2005 Law on Commercial Enterprises (“LCE”) lists the principal forms of legal entities. The most common type of business entity is the Limited Liability Company (“LLC”). The law also allows for the establishment of branches and representative offices, sole proprietorships and partnerships.

2. How does an investor set up a Private Limited Company? What are the minimum capital requirements? What are the shareholders’ liabilities?

The first step is to reserve the proposed company name with the Ministry of Commerce (“MOC”). Once an acceptable company name has been reserved, an online application is completed and submitted to the MOC. Once this step is completed, the investor will receive the following corporate records:

• original of the company Articles of Association (in Khmer with a copy in English if filed),

• Commercial Registration Certificate, and

• MOC Registration Authorization Letter.

The LCE requires a minimum capital investment of KHR 4,000,000 (equivalent to USD 1,000 at the current exchange rate).

The liability of each shareholder is limited to the value of their capital contribution.

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Registering a Company

3. Can a company be 100% foreign-owned? Is a foreign enterprise required to have a Cambodian partner?

A limited company can be 100% foreign owned and a Cambodian partner is not a legal requirement unless the company will own title to land in Cambodia – in which case a minimum local shareholding of 51% is required. Both single shareholder and multiple shareholder companies are permissible.

4. What government approvals, permits and licenses are required? Which ministries or other government institutions are in charge of granting licenses and approvals?

All companies must have a Commercial Registration Certificate (also known as a Certificate of Incorporation or Business Certificate) from the MOC; a Patent Tax Certificate and a VAT certificate from the GDT of the Ministry of Economy and Finance (“MEF”); and an office registration letter from the local authority. Depending on the type of business activity, the company may also require specific license(s) from the relevant Ministry in addition to the commercial registration certificate issued by the MOC, tourism, mining, handicrafts, factories, energy, water supply, banking, construction, land or water transportation and agro-industry, forestry and fisheries are examples of business sectors where licensing is required.

5. Can these licenses and permits be assigned?

Generally speaking, no. A limited company cannot assign government approvals to a third party.

6. How long does it take to register an LLC? Is there a One-Stop-Shop system to make the process easier?

The entire company and tax registration process generally takes around two to three months. The general outline of the procedure is:

(1) Preparation and compilation of the application pack (generally two to three weeks).

(2) Processing of the application pack by the MOC (four to six (weeks).

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(3) Once the MOC approval is granted the company must register with the General Department of Taxation (“GDT”) and then the Ministry of Labor and Vocational Training (“MoLVT”). Tax registration takes an additional six weeks to complete but the company is established as a legal entity upon its registration with the MOC. A Company that has been granted a Qualified Investment Project (“QIP”) must first register with the Council for the Development of Cambodia (“CDC”) before registering at MOC, the GDT and MoLVT. The process for setting up an ordinary limited company requires registration only with the MOC then the GDT and MoLVT.

7. When is registration required? Are there any penalties for failure to register?

A company engaging in a commercial activity must be listed on the Commercial Register of the MOC. Registration with the GDT is required within fifteen working days of commercial registration with the MOC.

Failure to register with the GDT can give rise to fines of up to KHR 10,000,000 (equivalent to USD 2,500) and criminal liability carrying a possible penalty of imprisonment of up to one year. The GDT can, of its own accord, register companies that fail to register on their own and determine the effective dates of those registrations. As a result, companies that have not registered with the GDT could be required to pay back taxes plus penalties and interest.

The GDT is required to send a reminder letter to a taxpayer at least fifteen days before proceeding with any recovery measure, which can include a lien on the property of the taxpayer or confiscation of such property and can request that other authorities nullify various permits and licenses. Such action could result in cancellation of the business license or de-registration of the company from the Commercial Register.

Note that as of 1 November 2014, a director of each company registered in Cambodia will need to provide proof of residence in Cambodia.

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Registering a Company

8. What kind of information must an investor disclose and report in applying to register a company and an investment project? Does this information become available to the public and competitors?

For the purposes of establishing a company, the MOC does not require financial or project information. However, for an investor seeking to obtain investment incentives by registering with the Council for the Development of Cambodia (“CDC”), the investor must disclose to the CDC information concerning corporate structure, investment plans, sub-projects, and development schedules. Information about the corporate structure is considered public, but most other information is kept confidential.

9. Are share certificates issued? What is required to transfer shares?

Although the Law on Commercial Enterprises mentions share certificates, issuance of such is not common in Cambodia. Neither the MOC, nor in the case of investment companies, the CDC, maintain a register of share certificates. As such, the document proving the shareholding status is the company’s latest Memoranda & Articles of Association, as approved by and filed with the MOC. Share certificates are considered internal instruments within the company, which are not filed with or endorsed by any government authority.

Share transfer is therefore effected by way of an amendment to the shareholding stated in the Memoranda & Articles of Association, and will be completed once the relevant authorities (MOC and CDC) have approved and accepted to register the new Memoranda & Articles of Association reflecting the post-transfer shareholdings.

10. Is a company required to carry insurance? If so, what kinds of risks are insured?

Insurance law in Cambodia is still under development. The current law basically addresses liability risks and medical risks, but not business risks. Risks fall into two categories under the law:

• risks against property or benefits in relation to the property; and

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• risks against life, health and physical injury.

Certain companies, in particular those using motor vehicles or engaged in construction, are required to carry liability insurance.

11. Does Cambodia have Special Economic Zones (“SEZs”)? Are there any special rules to follow?

Aware of the success of SEZs in attracting investment, increasing exports and creating jobs in other countries, the government has instituted a system for establishing and regulating these separate, fenced customs territories.

The CDC is the government office that approves and regulates SEZs. The SEZs in operation are located in Phnom Penh, Sihanoukville, Kampot, Kandal, Poipet, Koh Kong, Banteay Meanchey and Svay Reing.

All legal business activities are allowed in SEZs. There are no special restrictions on the type of business activities that may be conducted within an SEZ. Businesses locating in an SEZ that are approved as Qualified Investment Projects (“QIPs”) are eligible for all QIP benefits and incentives. In addition QIPs located in SEZs are also entitled to VAT exemption for imports (this does not apply to QIPs located outside of SEZs).

SEZ customs regulations generally allow a free flow of materials and products into and out of the SEZ, although goods that move into the country for retail are subject to standard import duties. SEZs offer investors One-Stop-Shop services and other benefits.

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Chapter 2 Investment Law

Cambodia has adopted a liberal foreign direct investment policy which enables foreign investors to do business in Cambodia with few restrictions. The government offers guarantees, incentives, and simplified procedures for foreign investors through the Investment law and related laws and regulations. Many foreign companies find that there are significant advantages to being in Cambodia, including its abundant natural resources, geographic location in the center of the ASEAN region, and inexpensive and motivated labor force. Industries that have thrived in Cambodia are the agriculture, food processing, tourism, mining, and labor intensive industries such as manufacturing and service industries.

12. Where do you start when you want to invest in Cambodia?

For many investors, the place to start is the Council for the Development of Cambodia (“CDC”). Established by the 1994 Law on Investment, the CDC is the one-stop decision-making body for private and public sector investment. It is chaired by the Prime Minister and composed of senior ministers from various government agencies. The Cambodian Investment Board (“CIB”) is the CDC’s operational arm for private sector investment. The CIB reviews investment applications and grants concessions to investors and investment projects meeting the requirements laid out in the Investment Law.

13. What incentives and other benefits does the country offer investors? Are there other benefits?

The types of investment incentives that may be available for qualified investment projects (“QIPs”) include:

• profit-tax exemptions for specified periods of up to nine (9) years OR special depreciation rights;

• import duty exemptions for production equipment, construction materials and production imports for exported products; and

• equal treatment of investors regardless of nationality, including no price fixing, no nationalizations , and free purchase and remittance

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Investment Law

of foreign currencies. Remittances may include royalties, management fees, profits and repatriation of capital abroad.

14. Are companies free to make contracts and other agreements with other companies?

Companies may contract freely, subject only to restrictions on illegal or immoral activities or those that threaten public order.

15. Are there any foreign exchange restrictions? Are investors free to take profits out of the country?

There are no foreign exchange restrictions on the transfer of funds into or out of Cambodia through banks. Subject to tax on profits and withholding taxes on dividends, interest, royalties, rent, other income on property, and compensation for management or technical services, investors can freely repatriate the proceeds from their investments. In the event of liquidation, an investor is free to transfer the proceeds (assets).

16. Are there any protections for foreign investors?

The law states that foreign investors cannot be discriminated against and are equal in the eyes of the law to Cambodian businesses with the sole exception being ownership of land.

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Chapter 3 Ownership of Land & Property

Cambodia enacted its current Land Law in 2001, establishing a national immoveable property registration system. Under this system, registration of title on the national register is conclusive evidence of ownership, and all transfers of land must be registered in order for ownership to pass. The system is similar to the Torrens titling system used in Australia, being a title by registration system rather than a recordation system, such as is used in the United States and Japan. There is no need to trace the title history in order to prove valid ownership.

17. What are the categories of land rights?

Private ownership of land is permissible for all types of land. At present, three main types of land tenure exist:

▪ Freehold: This may be referred to as fee simple, and is an unrestricted title ownership over land;

▪ Leasehold: A long term leasehold of a term of 15 years or greater creates “in rem” (a right in the property) rights. The new Civil Code provides for a maximum lease period, for all leases entered into after 21 December 2011, of fifty years, with a right of renewal for a further fifty year period. The terms of leases entered into prior to 21 December 2011 are protected, save that any terms above ninety-nine years will be reduced to fifty year years; and

▪ Concessions: A concession is a form of Conditional lease, granted by the Government, over state private land. Concessions are used for specific development purposes with the land subject to specific conditions of use. Concessions are used primarily for agricultural projects, island development and mineral exploitation. The Royal Government of Cambodia temporarily suspended the grant of new land concessions on 7 May 2012.

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Ownership of Land & Property

18. Are there any laws restricting the ownership of any interest in land by foreign persons or entities?

There is a general prohibition on foreign ownership of land. This prohibition is in the Constitution and the Land Law. There are no exceptions.

The following options are available to foreigners who wish to obtain rights over land in Cambodia:

▪ Strata Title: Foreigners may acquire title to apartments registered as qualifying condominiums which are not on the ground floor and so long as the title represents 70% or less of the total value of the property.

▪ Short or Long-term Lease: There are no restrictions on foreigners taking leases (whether short or long-term) of private or State private land.

▪ Land Concession: Foreigners have been permitted to take concessions of state private land (subject to the approval, on a case by case basis, of the Royal Government of Cambodia). However, the Royal Government of Cambodia temporarily suspended the grant of new land concessions on 7 May 2012.

▪ Citizenship: It is possible for foreigners to acquire Cambodian citizenship (and with it the right to purchase land) under the Law on Nationality. Note that it is a time consuming process.

▪ Cambodian Landholding Company: A Cambodian company can maintain Cambodian nationality and satisfy the requirements for owning land in Cambodia as long as a majority of its shares -51% or more of its shares are held by Cambodian nationals. The foreign shareholder(s) in the company can achieve some degree of control over the company by implementing various protective measures.

▪ Khmer (Cambodian) Nominee: Some foreign persons may elect to register the title deed directly in the name of a trusted Cambodian individual person to act as nominee. This option must be exercised with caution, however, as risks may arise with in the event of the

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death or disappearance of the Khmer nominee, or where there is a breakdown in the relationship between the parties.

19. What instruments evidence ownership of real property?

Because private ownership was not possible before the enactment of the Land Law, the national land registration process was started only after 2001. In effect, many properties remain unregistered. Such unregistered land is usually held under documents such as an application for land occupation, a letter of transfer acknowledged by local authorities, or even a simple and private sale-purchase agreement. There are two documents evidencing land ownership in Cambodia – “soft title” and “hard title”.

20. What is a “soft title”?

A soft title is a document evidencing land ownership but which is not registered with the national-level cadastral. A soft title is registered or issued by the local level authorities.

When land is under a soft title, there is a risk that there could be competing claims to the title since it is not confirmed and recorded at the national level registry. In addition, other problems associated with a soft title may arise, which can lead to disputes, including duplicate soft title documents issued to different applicants, issuance of a soft title document against the existence of a hard title certificate, issuance of a duplicate soft title while the property has been encumbered, or issuance of a soft title over State-owned land or public property such as a road.

21. What is a “hard title”?

“Hard title” refers to three different types of land title certificates which are registered with the national Cadastral: Certificate of Land Use and Occupation Rights (known to many people as a “Chicken Feather Title” due to a feather mark on the title documents), Certificate of Immovable Property Possession, and Certificate of Immovable Property Ownership. Of these three, the first two are registered sporadically (for a specific land plot requested by the owners to be issued with title) and indicates possessory status; whereas the Certificate of Immovable Property Ownership is registered systematically in relation to the adjoining parcels, and is the strongest form of title document.

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A Certificate of Immovable Property Ownership indicates the holder has all the possible ownership rights and interests in the property. The Certificate of Land Use and Occupation Rights and Certificate of Immovable Property Possession remain theoretically contestable, but in fact these are also registered with the national-level cadastral registry, and there is rarely a dispute with respect to ownership of land that has been issued with one of these forms of title.

22. Can a “soft title” be registered?

There are two ways that a “soft title” may be registered at the national level and thereby converted into a “hard title” in Cambodia:

• Systematic Registration: being a Government-initiated process conducted on a rolling village-by village basis (i.e. soft titles or sporadic titles are registered systematically in relation to adjoining land parcels); and

• Sporadic Registration: being a type of registration conducted on a specific plot of land, on a case by case basis. This form of registration takes account of the slow rollout of the systematic registration process, and allows the holders of “soft titles” and “chicken feather titles” to obtain greater certainty regarding the legal status of their land.

Note that a sporadically registered title may be converted to a full ownership title once the systematic registration is conducted.

23. How reliable is the register?

The register is conclusive evidence of transfer and ownership of immoveable property. However, there are still many land transactions which go unregistered. The law favors registered rights, but the registration system is fairly new and it is probable that courts would still recognize an unregistered right so long as the subject land is not yet registered.

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24. Is the register public? What is the process for dealing with queries arising on a registration? Are the land and buildings registers held in paper or electronic form?

The register is public. However, in order to search the registry it is usually necessary to provide a copy of the title deed for the subject land in order to confirm its registration/ legal status.

All queries go to the Cadastral office for nationally registered land. For unregistered land the queries are made to the commune and district land offices. Registers are kept in both paper and electronic format. Slowly, the system is becoming all-electronic, with paper print outs being made available.

25. Is there a combined land and buildings registry?

There is only one registry and all buildings/ structures are registered under the land upon which they are located.

26. Who may register a property transfer? How long does the registration process take?

Both parties to a transaction must thumb-print (in person before Cadastral officials) on any dealing instrument to be registered with the Cadastral. The transfer registration can take three to six weeks for the transfer process to be completed, depending on the location of the property.

In the case of companies, the local authorities will require a resolution and power of attorney from all shareholders granting power to a person authorized to thumb-print on behalf of the company – this authorized person is usually required to be a Cambodian citizen per customary practice. In the case of a married person, the spouse also needs to place his or her thumb-print on a spousal declaration if the property is to be transferred to a husband or wife, , and for an unmarried person, a “declaration of single status” needs to be issued by the local authority and accompany the transfer documents.

Transfers of “soft” titles (which are only registered with local authorities) can be effected very quickly, often within one to two days. Both parties will be required to thumb-print the soft title transfer documentation before the relevant local authorities.

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27. Do taxes, assessments, duties, rates or other charges have to be paid prior to acceptance for registration of a document?

For transfer applications, a 4% transfer tax of the Government-assessed value of the land has to be paid as well as any unused land tax (charged on all unused portions of land over a standard size residential block).Any unpaid annual property tax must also be paid before the authorities will issue the updated title deed. At law, the transfer tax is for the account of the buyer, but in practice it is commonly paid by the seller (who often uses the deposit monies received from the buyer for this purpose).

Transfer tax is often not collected in respect of the transfer of soft titles prior to 2 February 2016.

28. Is all land surveyed?

No. As a result, a common problem is overlapping boundaries. Previously, there was no technically reliable way of demarcating boundaries and overlaps can be substantial in respect of soft titles. Currently, surveys are conducted on all land registered at the national Cadastre. Official computerized maps are available of all areas already subject to the government systematic registration program.

29. What are typical leasing arrangements?

Usually leases are negotiated on a case by case basis in accordance with the format required by the lessor. There is currently no common/standard lease arrangement. Leases of between fifteen to fifty years (a long-term, lease) form a right “in rem” and burden any incoming buyer of the property and may be registered on the hard Title Deed. In addition, a Long-Term Lease Certificate will be issued confirming the leasehold. The document takes the same form as a Title Deed and is designed to allow leases to be used as collateral for loans.

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30. What is the current taxation system in Cambodia with regard to property? What unpaid taxes, if any, may become an encumbrance on the title to property?

There is an annual property tax of 0.1% of 80% of the “Immovable Property Value”, to be determined by the “Immovable Property Assessment Committee”. The taxable amount shall be the Immovable Property Value times 80% minus KHR 100,000,000 (equivalent to USD 25,000 ).

At this time the only taxes which become an encumbrance on a title are unused land taxes (only applicable on undeveloped properties) and the above mentioned property tax.

At the current time property taxes are being introduced on a phased basis, and accordingly not all regions are yet subject to property tax.

31. Is there a condominium law? Can the condominium title be registered as real property?

Yes, the Law on Providing Foreigners with Ownership Rights in Co-Owned Buildings (promulgated 24 May 2010) permits foreigners to own certain qualifying condominiums provided that:

• the subject building has been approved for “strata” titles;

• the subject condominium is located above the ground floor;

• foreign ownership does not exceed 70% of the total floor space of the building; and

• there is a property management agreement in place amongst the co-owners.

It is predominately newly constructed apartment buildings that are approved for “strata” titles. It is technically possible to convert the title of an older, existing building into strata titles, but to our knowledge, this has not yet been done.

A separate title is issued for each qualifying condominium unit.

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32. What law and practices are there allowing the state to take property for public use?

The Royal Government of Cambodia may expropriate private land if it considers it to be in the public/national interest. The Law of Expropriation provides for compensation to be paid to affected landowners.

33. Are there standard loan and mortgage contracts typically used in Cambodia?

There is no “typical” mortgage agreement. These differ according to the lender. The mortgage instrument (now called a hypothec) to be registered with the Cadastral authorities is, however, a standard government form in Khmer.

Under the Civil Code, security over immoveable property may be taken by way of a hypothec. In practice, it is common that lending institutions demand the possession of title deeds from mortgagees before extending loans. This restricts the owners of the mortgaged properties from entering into additional mortgage agreements with other creditors.

34. What legal process would the Lender be required to follow when a debtor has defaulted on a mortgage?

The lender can file a civil lawsuit to the court in the case of default of payment by the mortgagor. The only remedy is to ask the court to sell the mortgaged property by auction or tender and claim repayment of the debt from the proceeds of a sale.

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Chapter 4 Import and Export

Customs procedures have been simplified and automated through Automated System for Customs Data (“ASYCUDA”) which was implemented in 2008 in Cambodia. The measures were implemented under the 2007 Law on Customs and various regulations to reduce customs clearance delay and costs and facilitate faster and more reliable international trade between Cambodia and other countries. Recently, there has been a concerted effort to curtail all illegal goods being imported into the country and there has been an increase in the duty fees.

35. Is Cambodia a party to regional and bilateral free trade agreements?

Cambodia has been a member of the Association of Southeast Asian Nations (“ASEAN”) since 1999. Membership in the association allows access to the ASEAN Free Trade Area and it has several bilateral free trade agreements with neighboring countries. In 2015 Cambodia was economically integrated into the ASEAN Economic Community (“AEC”). The AEC envisages: (a) a single market and production base; (b) a highly competitive economic region; (c) a region of equitable economic development; and (d) a region fully integrated into the global economy. In 2004, Cambodia was admitted to the World Trade Organization (“WTO”), which expanded trading opportunities between Cambodia and the rest of the world.

36. Is a license required for import or export?

Yes. Certain items may need to be licensed and an importer and exporter would be required to have licenses/permits from the Ministry of Commerce (“MOC”) and the General Department of Taxation (“GDT”) and in certain circumstances, product-specific documents must be obtained from the relevant ministries.

37. Are there restrictions for import or export?

The government may prohibit or restrict the import or export of certain goods that could affect national security; public order and standards of decency and

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Import and Export

morality; health; national treasures of artistic, historic or archaeological value, or natural resources and waste.

If your business is an import and export business you will need a patent tax certificate stating such as the business objective of the company.

38. What duties and tariffs and VAT are required for import and export?

Goods entering or leaving the national customs territory are subject to duties and taxes as specified in the Customs Tariff, which is updated annually. Cambodia is a signatory to the ASEAN Trade in Goods Agreement (“ATIGA”). Under the ATIGA, the duty on import of goods from ASEAN nations into Cambodia is now lowered to not more than 5%. Personal shipments may be subject to duty. The customs territory of the Kingdom of Cambodia includes the land and water, airspace and offshore islands, everything including the Special Economic Zones.

The taxable price of imported goods includes the cost, insurance and freight (CIF) at the border check points of Cambodia. If exported goods are subject to tax then it is FOB (free on board) on the price at the border check points of Cambodia.

The VAT applied to imported goods used or consumed in Cambodia and for services rendered in Cambodia is levied at the current rate of 10%. The VAT is 0% for goods exported or services rendered outside of Cambodia.

39. How are goods cleared through Customs?

Goods are cleared at the border or at internal border check points including airports, seaports and dry ports and in the border areas. Most goods are imported or exported through Phnom Penh International Airport or Sihanoukville seaport, the only deep seaport in Cambodia. The Phnom Penh dry port on the Mekong has been increasingly busier and is now located outside of the city.

Procedures for import and export through the various border check points have been regularized by the HS (Harmonized System). The import or export of goods can be done by the legal representative of the company, or by a broker licensed by the Department of Customs and Excise.

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Chapter 5 Dissolution and Liquidation

A company cannot be dissolved without government intervention. A company ceases to exist on the date shown in a certificate of dissolution issued by the Ministry of Commerce (“MOC”). The courts can initiate and supervise the liquidation process if the Ministry or another interested party under the law so requests. Companies engaging in banking and insurance business are subject to separate special procedures.

40. What are the tax consequences of dissolving a company?

Dissolving a company requires obtaining a certificate of tax clearance from the GDT of the MOC and Finance. Before issuing the certificate, the GDT will audit the company’s tax records to determine whether taxes are owed.

41. What procedures and costs are involved in dissolution? How long does it take?

In the first instance, an application is submitted to close the company at the GDT with a view to obtaining a “Tax Clearance Certificate” (which can thereafter be submitted to the MOC for the purposes of the dissolution application). A preliminary audit will be conducted by the appointed auditor notwithstanding whether the company has complied with all tax filing requirements. In rare cases a comprehensive audit will also be required. Note that this can be a lengthy process that can take six months or more before a Tax Clearance Certificate is issued.

Once a Tax Clearance Certificate has been obtained, an application for dissolving the company in the commercial register must be filed at the MOC. Once this application has been processed, the MOC will issue a “Certificate of Closing”. Typically, it takes one to two months from the submission of the application to the MOC to when the Certificate of Closing is issued.

42. What is the legal ground for opening insolvency proceedings against a person or business entity?

A petition to open insolvency proceedings can be filed if the debtor fails to pay any debt or debts totaling KHR 5,000,000 (equivalent to USD 1,250). In

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Dissolution and Liquidation

general, a petition to open insolvency proceedings can be filed by a company director, partner or manager, one or more creditors, the MOC or the public prosecutor.

43. Are there provisions governing order of priority in the payments of debts in case of liquidation? Is reorganization of a business allowed under Cambodian law?

Companies seeking to liquidate must pay debts according to the following priority:

i. employee wages, administrator’s remuneration and fees, administrative courts fees;

ii. secured claims up to a certain value;

iii. state taxes whose notice is not filed; and

iv. all other admissible unsecured claims.

Reorganizing a debtor’s business is subject to the judgment of the court and the company’s creditors.

44. Is it routine to carry out a bankruptcy search of an individual or a company?

The Law on Insolvency has been enacted but there is not yet an operational mechanism to perform a bankruptcy search in Cambodia and it is not currently possible to undertake a reliable and expeditious bankruptcy search through the Cambodian courts.

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Chapter 6 Banking & Finance

The National Bank of Cambodia (“NBC”) has the exclusive responsibility for the licensing and supervision of banks and financial institutions. The principal financial institutions include Commercial Banks, Specialized Banks and Micro-Finance Institutions (“MFIs”). The NBC also licenses and/or regulates Rural Credit Operators, Informal Money Lenders, Financial Leasing Companies, Money Changers, Third Party Processors, and the business of importing and exporting precious metals and stones.

Regulated banking operations include: (i) credit operations to the public for valuable consideration, including leasing, guarantees and commitments under signature; (ii) the collection of non-earmarked deposits from the public; and (iii) the provision of means of payment to customers and the processing of said means of payment in national currency or foreign exchange. Any entity carrying out even one of these three types of activities shall be considered de facto to be engaged in banking and must be licensed by the NBC.

Commercial banks may engage in all banking operations.

Specialized banks are defined as licensed financial institutions that engage in any one of the three banking operations. To date, specialized banks may not accept non-earmarked deposits from the public.

MFIs may engage in banking operations as permitted by their license and may obtain a microfinance deposit taking license from the NBC.

Banks may outsource, subject to approval of the NBC, certain of their services to third party processors. Third party processor licenses may permit the service of money remittance by mobile phone or other means.

45. May a bank be foreign-owned?

Yes. There is no restriction on the nationality of any shareholder of any bank and no requirement that any shareholder be Cambodian. Banks owned by foreign nationals are permitted to be incorporated as independent entities or be established as a branch of a foreign entity. A foreign held bank may also open a representative office, however such offices are not entitled to carry out banking operations and may only provide certain support to other local or foreign entities.

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Banking & Finance

In addition to the shareholders, there are no restrictions on the nationality of any director of a bank or other financial institution.

46. Can money be freely and reliably transferred into and out of the country?

The Foreign Exchange Law of 1997 (“FOREX Law”) allows unrestricted transfer of funds to or from Cambodia, provided that the transfers are made through an “authorized intermediary,” i.e. a bank that is permanently established in Cambodia. However, Cambodian financial institutions are subject to the provisions of Anti-Money Laundering laws and banking regulations which require compliance monitoring and reporting to the NBC (see section 13 below). In addition, the FOREX Law does contain provisions enabling the NBC to impose restrictions on transfers in times of economic or financial crisis.

47. What is required to establish a bank or financial institution? What licenses and other government approvals are required?

Generally, an application for the relevant license must be made to the NBC by the locally established entity. If the NBC finds the applicant to be qualified, the NBC will issue an “in principle” approval. This “in principle” approval will state the conditions the applicant must comply with in order to be granted a license. Only when the conditions are complied with will the NBC issue the operating license.

Prior to issuing a banking license, the NBC examines the qualifications of the applicant, including its shareholders’ qualifications, management board, capital and financial position, and the adequacy of its human, technical, and financial resources.

The NBC considers the applicant’s “influential shareholders”. An influential shareholder is one who directly or indirectly holds at least 20% of the share capital or voting rights of the applicant. Influential shareholders may be ordered by the NBC to inject capital if the bank does not meet applicable solvency requirements.

A commercial bank, established as a branch of a foreign bank with an “investment grade” rating issued by an international rating agency, has a minimum registered capital requirement of KHR 200,000,000,000 (equivalent

23


to USD 50,000,000). The minimum registered capital requirement for a branch of a foreign bank that does not have an “investment grade” rating shall be KHR 300,000,000,000 (equivalent to USD 75,000,000).

A commercial bank, incorporated as a domestic company or subsidiary of a foreign bank, has a minimum registered capital requirement of KHR 300,000,000,000 (equivalent to USD 75,000,000).

A specialized bank, incorporated as a domestic company, has a minimum registered capital requirement of KHR 60,000,000,000 (equivalent to USD 15.000.000).

A Microfinance Institution (MFI) has a minimum registered capital requirement of KHR 6,000,000,000 (equivalent to USD 1,500.000).

An MFI that is also licensed to take deposits has a minimum registered capital requirement of KHR 120,000,000,000 (equivalent to USD 30,000,000).

“Investment grade” refers to the rating issued by at least one of the international rating agencies including Moody’s Investor Services, Standard & Poor’s, Fitch or any international rating agencies recognized by the NBC. The “investment grade” shall be equal to or not lower than: Baa3 of Moody’s Investor Services, BBB- of Standard & Poor’s, and BBB- of Fitch. The confirmation of rating shall be valid for one year from the date reported to the NBC.

48. What is required to transfer shares in a bank or financial institution?

As a practical matter, the prior approval of the NBC is required for any change in shareholding to become effective. Upon the approval of the NBC of any share transfer, the Articles of Incorporation must be amended (as registered at the MOC) which indicate the new shareholding structure. Upon registration at the MOC, the new shareholding structure will be in effect.

49. May a bank or financial institution hold shares in other companies?

A financial institution can hold shares in other companies, but there are limits regarding the amount of funds it may use. Such limits depend on the type of

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Banking & Finance

industry which the relevant business is engaged it. In addition, certain types of equity participation require prior approval from the NBC.

50. Are loans which are provided to a bank or financial institution subject to approval, filing or notification? Who (lender or borrower) will be required to obtain such approval, filing or notification, if any?

No prior approval is required for banks or financial institutions to receive a loan, however such loan generally must be registered with the GDT in order to avoid possible negative treatment of the funds by the GDT. In January 2014, the GDT issued instructions regarding the registration of loans. Loans not registered by a borrower enterprise within thirty days of the loan transaction may subject the lent amount to being treated as income and taxed at the income tax rate of 20%.

In addition to the registration of loans at the GDT, all sources of banks’ funds, including loans received from lending institutions, must be included in monthly reports to the NBC.

51. Are there restrictions on the interest rate of loans provided by and/or received by a bank/financial institution?

The Civil Code provides that, any agreed upon interest rate may not exceed the legal maximum, which is 18% per annum according to a regulation published by the Ministry of Justice of the Kingdom of Cambodia (we note that there is an exception for MFIs). If the agreed interest rate exceeds the maximum interest rate, the borrower will be only obligated to pay the maximum interest rate. Customers must be provided with clear information with respect to interest rates, charges, and changes thereto. The NBC has issued regulations to increase the transparency of the terms and condition of credit facilities offered to customers.

52. Are there foreign exchange restrictions on the enforcement of a loan? Can a loan be disbursed and reimbursed in U.S. dollars?

While parties are free to denominate loans in the currency of their choosing, Cambodian Riels (“KHR”) are the official tender in Cambodia and must be accepted, if tendered.

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53. Is a loan agreement between a foreign lender and a Cambodian borrower subject to any tax in Cambodia?

There is tax on the interest paid by a borrower in respect of a loan between an offshore lender and a Cambodian borrower. The borrower, as a resident taxpayer, is required to withhold 14% of the interest to be paid to the offshore lender.

54. How can the repayment of a loan be secured? Can a security interest be registered?

Cambodian law provides a lender with a comprehensive scheme of secured financing. Repayment of a loan may be secured by immoveable or moveable property. Moveable property generally includes intangible property such as contractual rights, accounts receivable, and insurance proceeds, etc.

A security interest over immoveable property may be taken by way of hypothec or pledge. Generally speaking hypothecs are better security devices than pledges. The Civil Code recognizes two types of hypothecs: hypothecs and revolving hypothecs. Both types permit a security interest over land and things attached to the land. Hypothecs may also be taken over perpetual leases (i.e., a lease with a term of fifteen years or longer and usufructs). Hypothecs may be perfected by registering the security interest with the relevant Cadastral Administration office of the Ministry of Land, Urban Planning and Construction.

Security interests over moveable property (including intangible property) may be taken under either the Secured Transactions Law or the Civil Code. Generally, a security interest under the Secured Transactions Law provides more security to a lender because the Secured Transactions Law permits a secured party to take possession of and sell collateral without obtaining a court order where the security provider agrees to the same, and, where a court proceeding is initiated, provides for an expedited proceeding. In addition, in many circumstances, taking security under the Secured Transactions Law is less burdensome than under the Civil Code.

Depending on the nature of the collateral, a security interest in moveable property may be perfected by registration at the Secured Transaction Filling Office or by possession, or both.

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Banking & Finance

55. How is a security document enforced when the borrower of a loan is in default?

Where a borrower defaults, the secured party may possess the secured property where the secured party has agreed to the same. However, where taking possession has not been agreed to by the borrower, or it is otherwise impracticable to take possession without the assistance of an officer of the law, enforcing a security interest would require initiating legal proceedings in the Cambodian Courts.

Offshore arbitration are required to be recognized and enforced by Cambodian Courts. Cambodia is a signatory to the New York Convention of 1958. Cambodia has a law specifically implementing the New York Convention of 1958.

Offshore judicial decisions are not enforceable in Cambodia. Cambodia’s Civil Procedure Code requires a guarantee of reciprocity between Cambodia and the foreign country in which the court is based. At present, we are not aware of any treaty or similar agreement dealing with reciprocity.

In addition to rights given to secured parties under the Secured Transactions Law and the Civil Code, the Law on Insolvency that recognizes the (perfected) priority rights of secured creditors and may grant rights to the secured party where a company is insolvent or a party to proceedings related to insolvency.

56. Does the Cambodian Banking System comply with FATCA

FATCA is the United States’ Foreign Account Tax Compliance Act.

Cambodia, on 14 September 2015, signed an intergovernmental agreement between the Government of the United States of America and the Royal Government of Cambodia to implement FATCA. Cambodia agreed to share information related to bank accounts and taxation with the United States Government for the purposes of enforcing FATCA. The agreement to implement FATCA can be found on the website of the U.S. Treasury at the following web address:

https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Agreement-Cambodia-9-14-2015.pdf

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57. Does Cambodia have legal provisions dealing with Anti-Money Laundering?

Yes. Cambodia has a legal framework for the prevention of money laundering and financing of terrorism. Key laws include:

• Law on Anti-Money Laundering and Combating the Financing of Terrorism (2007) (“AML/CTF Law”)

• Sub-Decree on Financial Intelligence Unit Establishment (2008)

• Sub-Decree on the Establishment of National Coordination Committee on Anti-Money Laundering and Combating the Financing of Terrorism (2012)

• Sub-Decree on Freezing of Property of Designated Terrorist and Organizations (2014)

• Prakas on Anti-Money Laundering and Combating the Financing of Terrorism (2008)

• Prakas on Anti-Money Laundering and Combating the Financing of Terrorism Relating to All Reporting Entities not Regulated by the National Bank of Cambodia (2010)

In 2013, the Cambodian government issued a five year plan (2013 to 2017) aimed at implementing AML/CTF Law prevention effectively and bringing Cambodia into compliance with international standards.

Under the Criminal Code, the crime of “Money laundering” is the “false justification of the origin of the direct or indirect proceeds of a felony or misdemeanor”“and includes “assistance in investing, concealing or converting the direct or indirect proceeds of a felony or misdemeanor.”

Under AML/CTF Law, money laundering is the conversion or transfer of property, knowing that such property is the proceeds of an offence, for the purpose of concealing or disguising the illicit origin of the property or of helping any person who is involved in the commission of the offence to evade the legal consequences of his or her action.

AML/CTF Laws place obligations to take steps to prevent money laundering and the financing of terrorism on Cambodian financial institutions and other businesses or persons engaged in certain business activities. Businesses and

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Banking & Finance

persons subject to such AML/CTF prevention regulations include the following entities (not exclusively):

• Banks;

• Micro-finance institutions;

• Leasing companies;

• Fund and investment management companies;

• Real estate agents;

• Money remittance services;

• Casinos;

• Lawyers, notaries and accountants when engaged in managing client money or assets, buying or selling real estate, and conducting other activities enumerated in the AML/CTF Law;

• NGOs engaged in fund raising or business activity;

• Insurance companies

• Securities brokers;

• Other institutions designated by the Cambodian Financial Intelligence Unit, the government body responsible for AML/CTF prevention.

Entities which are subject to Cambodian AML/CTF Laws and regulations are required to, among other thing, establish and implement anti-money laundering policies, train their employees and partners on AML/CTF prevention, report suspected money laundering and suspicious transactions, and conduct due diligence on their customers and their customers source of funds.

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Chapter 7 Labor and Employment

The 1997 Labor Law adopted in 1997, and once amended in 2007, regulates employment and such matters as benefits and obligations in employment contracts. The law limits the proportion of foreign employees on a payroll but for the most part Cambodian and foreign employees are covered equally. Foreign employees however require visas and work permits.

Supplemented to the Labor Law are the Civil Code (passed in 2007 and implemented in 2011), the Law on Social Security Schemes for Persons Defined by the Provisions of the Labor Law (2002) (“Social Security Law”), Trade Union law, conventions of the International Labor Organization ratified by Cambodia and other labor-related regulations issued by the Cambodian government Including: royal decrees, sub-decrees, parkas, decisions, circulars, and notice.

58. What is the initial legal requirement for operating a business under labor regulations?

Upon commercially registration as a legal entity, enterprise/establishment required to make an Opening Enterprise Declaration at Ministry of Labor and Vocational Training (“MoLVT”). For those enterprise/establishment in Phnom Penh, the declaration shall be made at Phnom Penh Department of Labor and Vocational Training (“PPDLVT”); except those company listed in the annex attached to Prakas No. 341 dated 10 August 2016 and sectors listed below shall register at MoLVT:

• Garment and Footwear serving for export

• Industry

• Company responsible for sending worker to work abroad

• Non-Governmental Organization

• Construction Company

• Hotels

• Banks

• Aviation

• Maritime

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Labor and Employment

59. The Package of Opening Enterprise Declaration mentioned above shall include the following request:

• Opening Enterprise Declaration

• Staff Declaration

• E-Payroll

• Enterprise book

• Internal Work Rule (for Enterprise/establishment employ more then 7 employees)

• Shop Steward Election Recognition (for Enterprise/establishment employ more than 7 employees)

60. Must investors hire nationals? Is there a minimum number or percentage of nationals? A maximum number of foreign employees?

The law requires employers to give priority to hiring Cambodians and there is no limitation or restriction with respect to hiring Cambodian nationals. However, a permitted quota for foreign employees within a hiring entity is limited to a standard rate of 10% (ten percent) of the total number of Cambodian employees. Among that standard quota of 10% for foreign employees, 3% (three percent) may be office staff, 6% (six percent) may be specialized employees, and 1% (one percent) may be non-specialized employees. But this is not absolute, and an employer who demonstrates that they need employees with special skills or qualifications not readily available can apply to the MoLVT to increase the number of foreigners on staff.

61. Are foreign employees required to have licenses or work permits? How hard is it to get entry permits or visas for them? How long are they allowed to stay and work in Cambodia?

Foreigners need to have a valid visa, a work permit, an employment card, and a residency permit to work lawfully in Cambodia. Work permits and employment cards, obtained at the MoLVT, are valid for one year and can be renewed annually. It is also not difficult to obtain visas, and investors and foreign staff may apply for business visas. The initial business visa is valid only

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for a short period of time but can subsequently be renewed for up to one year at a time.

To the extent that there are no local resources available, employers must request advance approval (i.e. quota) from the MoLVT and Vocational Training to hire foreign workers. A request to employ foreign manpower for the coming year must include the numbers of local and foreign employees, the reasons for hiring foreigners and must be submitted to the Ministry from September until the end of November each year.

From 1 September 2016 onward, Quota and Work Permit requests for foreign workers must be made via the Online Labor Centralized Management System (Prakas No. 352 dated 17 August 2016), which is managed by E-Solutions (Cambodia) Co., Ltd.

A written employment contract of each foreigner must be in a fixed duration of not more than 2 years and registered with the MoLVT (for those who work in Phnom Penh) or at the relevant provincial Department of Labor and Vocational Training (for those who work in a province.)

The procedures for initial and extension applications for work permits and employment cards vary according to different categories of foreigners: (i) foreigners whose entry visa has a limited period of stay; (ii) Vietnamese or Laotians working in the Cambodia-Laos-Vietnam Triangle Development Zone along the border of certain Cambodian provinces; and (iii) foreigners whose permanent stay in Cambodia is permitted.

62. Applications and payments for extended work permits and employment cards must be made before the end of March each year through Online Labor Centralized Management System available at www.fwcms.mlvt.gov.kh. Is adequate labor available, both skilled and unskilled? Are investors legally required to train employees?

Cambodia has a sizable young labor sector consisting of skilled and unskilled workers. Many Cambodians, particularly the young, are studying English, Japanese, Korean, Chinese and other foreign languages, and more and more are computer literate and able to use the Internet.

http://www.fwcms.mlvt.gov.kh/

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A company that employs more than 60 (sixty) employees is required to have a certain number of apprentices (apprentices are a type of employees who contracted with an employer to be professionally trained by working under the supervision and instruction of the company). The duration of apprenticeship contract cannot exceed two years.

63. What types of employment contracts and agreements exist in law? Which are the most beneficial to foreign investors?

The Labor Law defines two types of employment contracts - the specific duration and the unspecified duration. A specific duration contract must be in writing, specifying the starting and finishing dates, and has a maximum term of two (2) years. The two types of labor contract have different rules pertaining to termination, benefits and obligations.

A specific duration contract has a unique characteristic – unless the employer gives appropriate advance and written notice to the employee of the contract expiration and non-renewal prior to the expiry date, the contract is automatically renewed upon expiration for a length of time equal to its initial duration, or deemed as an unspecified duration contract if the total length of the contract exceeds two years. It cannot be terminated prior to the end of its term, except due to gross misconduct, act of god (or force majeure), or written agreement in the presence of a Labor Inspector.

An unspecified duration contract does not have to be in writing, but making it in writing and setting out clear terms and conditions of employment will be useful. An unspecified duration contract will continue until it is terminated by either or both parties according to the legal procedures.

Each of the two (2) types has its own advantages depending on the circumstance and the needs of the hiring entity. A fixed duration contract is usually fit for a short term project, whereas an undetermined duration contract would be more appropriate for long-term employment.

A well-executed labor contract will help minimize the risks of misunderstanding.

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64. What benefits is an employer required to provide employees?

A number of benefits are required by law, but some requirements are not well-defined and employers meet them in various ways. For example, the Labor Law requires employers to provide primary health care. Some employers offer group health insurance, some self-insure, some have trained medical care providers on staff.

Other requirements: a maximum of 48-hour (6 days) work week, with annual leave of 18 (eighteen) days, days off for public holidays and days off for special events such as weddings, child delivery and illness of a child or parent (deductible from available annual leave or subject to make-up work with certain conditions.).

Cambodian law requires employers to establish clean working environments and maintain standards of hygiene and sanitation for employees. Moreover, if there are 100 (one hundred) female workers or more, a number of benefits including, nursing room and day care center are mandated by the Labor Law.

Additionally, other employment related benefits include:

• Weekly time off: Maximum working hours are eight (8) hours per day or forty-eight (48) hours per week, and the weekly break should be at least one full day, which should principally be a Sunday. As per common practice among most companies (other than those in the manufacturing industry), both Saturday and Sunday are granted as weekly days off.

• Public holidays: Paid public holidays for workers/employees of all enterprises are determined by the MoLVT yearly through its Prakas (ministerial edict). There is also a sub-decree issued annually by the Royal Government specifying public holidays for both government officials and private sector employees within the year. In addition, there may be other incidental holidays which need to be granted such as leave for national elections or important national ceremonies. Under the Labor Law, if a public holiday falls on Sunday, workers will have the following working day as a compensatory day off.

• Annual leave: In addition to paid public holidays, each employee is entitled to one-and-a half (1.5) days of annual leave per month of

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continuous service (thus, eighteen (18) days per year). Employees can take annual leave after one full year of service, although in practice a lot of companies allow staff to take accrued annual leave since the first year of employment for administrative convenience.

Annual leave increases one (1) day for every three (3) years of service. Unused annual leave can be carried forward to the next year, on the condition that the deferment cannot exceed three (3) consecutive years and only leave days held at the end of a year that are in excess of twelve (12) leave days are carried forward into the next year.

• Sick leave: Whereas the Labor law allows employees to take sick leave, it fails to determine the duration for paid sick leave. The Ministry in charge of Labor does not issue any regulation or official guidance dealing with this matter either. However, according to standard internal regulations approved by the MoLVT, recommended duration and payments for sick leave are as follows:

▪ 100% of wage for the first month; ▪ 60% of wage of the second month; ▪ 40% of wage for the third month; and ▪ Unpaid leave for the fourth until the sixth months.

• Infirmary: it is the obligation that the employer shall provide an infirmary or medical clinic if there are 50 employees up at an enterprise. This infirmary shall be equipped with sufficient materials for emergency medical care. The infirmary also be provided at other branches or workplaces if they are more than 5 kilometers from the main enterprise and have 50 or more employees. The number of medical staff for an infirmary is set out in Joint Prakas No. 330 dated 06 December 2000 and vary depends on number of employees at the enterprise. Below is the summary table:

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Number of Employee

Number of Nurses

(Permanent)

Number of Doctor

Minimum Service of Physician for full

time hour

50 – 300 01 01 2 hours

301 – 600 01 01 2 hours

601 – 900 02 01 3 hours

901 – 1400 02 01 4 hours

1401 – 2000 02 01 6 hours

2001 Employee up 03 01 8 hours

• Special leave: Employees can take up to seven (7) days of special leave per year for personal marriage, paternity, child’s marriage, and illness or death of spouse, child or parent. Special leave can be deducted from available annual leave days or subject to make-up work with certain conditions.

• Maternity leave and breast feeding break: A female employee is entitled to ninety (90) days of maternity leave, and, provided that she has been working for at least one year, she is compensated with half pay during this leave. For one year from the date of child delivery, mothers are entitled to one hour per day during working hours to breast-feed their children.

• Termination benefits: Employee entitlements from termination of employment vary according to the type of contract, which may include notice, severance, and damages. In addition, employees enjoy the following benefits:

▪ If any annual leave days remain unused at the time of termination, payment in lieu thereof must be paid to the employee.

▪ At the termination, employees can request for a certificate of employment, which cannot contain any harmful statement’s.

▪ Wages and indemnity of any kind must be paid within forty-eight (48) hours following the date of termination of work.

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65. Is there a minimum wage?

A minimum wage is currently only set for Garment and Footwear Industry after consultation with Labor Advisory committee (LAC), a tripartite body comprised of Representative from MoLVT, Employer and Employee. The minimum wage was established with the adoption of the Cambodian Labor Law in 1997 and Article 107 gives authority to the MoLVT to determine the minimum wage after receiving recommendations from the Labor Advisory Committee, a tripartite body consisting of representatives from the MoLVT, employer associations and trade unions.

The current monthly minimum wage for regular workers is USD 153 and USD 148 for probationary workers (effective from 01 January 2017). There are no minimum wages determined for other sectors, but the above rate has also been generally adopted as a voluntary standard in the manufacturing industry.

66. Is there a social security requirement that employers must contribute to?

Employers hiring at least eight employees are required to register their organization together with their employees and pay contribution to the National Social Security Fund (“NSSF”). The Social Security Law mentions occupational risk , pension, and other schemes; however, at present only the occupational risk scheme has been implemented for all private sector under the scope of labor law; while, Health Care Insurance, at this mean time, was implemented in selected region only (Phnom Penh, Kandal, Kompong Speu) and apply to only Garment and Footwear Industry while the rest of other province and other sector will be implement through supplemental notice. The current contribution rate for occupational risk insurance is 0.8% of the monthly average wage and The contribution rate for Health Care Insurance is 2.6% of monthly average wage (1.3% of contribution shared by employer and another 1.3% shared by employee).

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67. What rules must be followed in hiring or firing employees? What obligations, if any, does an employer have to a dismissed employee?

The Labor Law forbids discrimination in hiring, paying, promoting, granting social benefits, assigning, training, disciplining and firing employees, including for race, color, sex, belief, religion, birth, social origin, political opinion, trade union membership or activities (but not professional qualifications). It is also prohibited to terminate an employee due to his or her participation in a strike. Employers cannot hire people to work off debts or require a payment or bond as a condition of hiring. Probationary periods are permitted and vary for different jobs.

The law has several specific provisions covering termination. Rules applicable to termination vary according to type of employment contract (i.e. whether it is a contract of specified or unspecified duration). An employer must have a valid reason, based on “requirements of the operation of the enterprise, establishment or group,” “the worker’s attitude or behavior,” serious misconduct or on an event of force majeure (or act of God).

An employer who intends to dismiss employees for reason of a mass–layoff must follow a set of special procedures.Termination of certain categories of employees is subject to some restrictions and prohibitions. An employer is prohibited from terminating women during their maternity leave regardless of whether or not advance notice is given. The dismissal of certain employees relating to workers’ representation roles, including that of a shop steward or a candidate for shop steward, a former shop steward (for a period of three months following the end of his or term), unelected candidates for shop stewards (during three months following the proclamation of the election results), union leaders, and other certain unionists can take place only after authorization is granted from the Labor Inspector.

A terminated employee is entitled to benefits under the law, including payment for untaken annual leave and severance pay under some circumstances. Termination payouts are different for specified and unspecified duration contracts.

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68. Are companies required to recognize and allow unions? Are there mandatory collective bargaining agreements?

Pursuant to Article 36 of Cambodian Constitution “Khmer citizens of either sex shall have the right to form and to be members of unions”. It is a legal right of workers to establish a Professional Organization (Professional organizations of employees are called “workers’ unions”; Professional organizations of employers are called “employers’ associations”).

All workers and employers have, without any distinction whatsoever, the rights to form a union or an employer association of their own choice for exclusive purposes of studying, research, training, promotion of interests, and protecting individual and collective rights as well as moral and material interests of their members (Article 5 of Trade Union Law dated 17 May 2016 and Article 266 of Labor Law). In order to obtain legal status and recognition, either type of professional organization must register itself with the MoLVT (Article 268).

Moreover, an employer having eight or more employees is required to elect shop stewards, who serve as worker representatives within the organization (Article 283). The results of the election must be filed to the MoLVT within 8 days. The number of shop steward varies in proportion to the total number of workers as below:

• from 8 to 50 workers: one shop steward and one assistant shop steward;

• from 51 to 100 workers: two shop stewards and two assistant shop stewards;

• more than 100 workers: one extra shop steward and one extra assistant shop steward for each group of one hundred workers.

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Chapter 8 Dispute Resolution

The Constitution provides that the courts are independent. The courts consist of municipal and provincial courts of the first instance, an Appellate Court, and a Supreme Court.

69. Can a foreign investor file a lawsuit in Cambodia courts?

A foreign investor can file a lawsuit in a Cambodian court.

70. Do the courts recognize decisions of foreign courts?

The Civil Procedure Code allows for this although it would require a bilateral agreement with the foreign country and currently only Vietnam has concluded such a bilateral agreement with Cambodia.

71. Are commercial cases heard by the same courts that hear other civil and criminal matters?

The courts currently are not separated. A commercial dispute would be heard in the court of the first instance or municipal court, which also tries criminal cases.

72. Are there records of previous decisions of the court and are they binding?

Precedent plays little role in the decisions of the courts in Cambodia. As s a civil law country, judgments and reasoning in one case would only be instructive or guiding for a judge hearing similar cases.

73. What alternative ways are there to resolve disputes? Does Cambodia have a viable arbitration system?

Cambodia passed the Law on Commercial Arbitration in 2006. The law is modeled after the UNCITRAL. Under the law, the National Commercial Arbitration Center (“NCAC”) has been established to arbitrate commercial

40

Dispute Resolution

disputes. Foreign investors are free to choose the law governing arbitration, to use international arbitrators, and to arbitrate outside of Cambodia.

74. Does the country follow international agreements on recognition of foreign arbitral awards?

Cambodia is a signatory to the 1958 United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and has adopted the 2001 Law on the Approval and Implementation of the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards. Cambodian courts have upheld a l number of foreign arbitral awards.

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Chapter 9 Taxes

Foreign investors in Cambodia shall comply with tax obligations and pay taxes on income earned in the country, including profits. Cambodian residents including foreigners present in the country for more than 182 days during the calendar year, and companies organized, managed or having their principal place of business in-country are required under the Law on Taxation (“LoT”) to pay taxes on income and profits earned worldwide. Residents earning foreign-sourced income are entitled to receive credit for foreign taxes paid. Foreign Investors and other enterprises generally come under the real regime taxation system. Real regime taxpayers (“RRT”) include all large, medium and small incorporated taxpayers an, except sole proprietorships.

75. What are resident, non-resident and its different taxable of income sources?

Based on taxation regulations, the definition of resident and non-resident taxpayer, affected on foreign incorporate entities and natural person have different obligation to the tax payment and tax rate. Resident taxpayers are required to pay tax on the worldwide income source and non-resident taxpayers are required to pay tax on the Cambodia income source.

Rule of residency and non-resident are defined by Article 3 of the LoT as follows:

The term “resident taxpayer” means:

a. Any physical person who is domiciled in or has a principal place of abode in Cambodia, or who is present in Cambodia for more than 182 days during the calendar year;

b. Any legal person or pass-through organized or managed in Cambodia, or having its principal place of business in Cambodia.

The term “non-resident taxpayer” means not a resident taxpayer as defined above and receives income from a Cambodia source.

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Taxes

76. As a foreign investor, what taxes will I have to pay on my business?

Foreign investments and other enterprises under Real Regime Tax (“RRT”) will be affected by the Tax on Profit (“TOP”), the Minimum Tax, the Value Added Tax (“VAT”) , Special Tax, various Withholding Taxes, Customs duties, Salary Tax on Cambodian and foreign employees and others Compliable Taxes.

Other taxes that can affect foreign investors include a Specific Tax on certain Merchandise and Services as well as other minor taxes. According to the Law on Taxation, companies must register with the General Department of Taxation (“GDT”) of the Ministry of Economy and Finance (“MEF”) within fifteen (15) working days of business registration, approved by MOC or commencement of economic activities. Recently, the existing companies are entitled to apply for registration of the company to update company information with the GDT. All existing companies amended the Memorandum and Articles of Association (“Article”) shall give the notification to GDT within fifteen (15) working days, after the approval on the mended Article by MOT.

77. What kinds of tax returns must be filed? When are they due?

All Foreign investments and other enterprises under RRT are required to comply with tax obligations in particular their filing of tax return applications at the GDT or other tax branches as follows:

1) The monthly tax return; 2) The annual tax return; and 3) The patent payment.

Firstly, the RRT are required to file the monthly tax return and the return lodged with the GDT or other tax branches no later than 15 days following the month end. The monthly tax return application covers of the following taxes including VAT, prepayment of profit tax, withholding tax, salary tax, fringe benefit tax and other applicable taxes

Secondly, the RRT are required to prepare a comprehensive annual tax return which must be submitted to the GDT or other tax branches by the end of March of each financial year. The annual tax return sets out a company’s

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financial performance and position for the applicable period and reconciles the accounting profit to the taxable profit.

Tax on profit is due on the higher of minimum tax (1% of income) or 20% of taxable profit. However where 20% of taxable profit exceeds the minimum tax paid during the year, the minimum tax paid during the year can be offset with the RRT’s liability to profit tax.

Information required includes details of capital contributions, employees, balance sheet, income statement, products/goods sold, deductable expenses, the Prakas on Tax on Profit (“TOP”) calculation and others applicable information.

Thirdly, the RRT are required to pay the patent payment by 31 March of each financial year for each business activity it carries out. The amount of patent payment depends on the classification of taxpayer within which the RRT falls; small, medium or large

78. What taxes will I owe on profits from my investment?

The general rate of the Tax on Profit is 20% (twenty percent), but the Law on Taxation has exceptions and exemptions. An investment company, registered under the council of the development of Cambodia with a tax holiday enjoys a 0% (zero percent) rate. Insurance activities are taxed at a rate of 5% (five percent) of gross premium income. Profits of a company investing in oil and gas are taxed at 30%.

Commercial enterprises under RRT are subject to a monthly Prepayment Tax on Profit at the rate of 1% (one percent) of monthly turnover inclusive of all taxes except VAT. The Prepayment can be offset against the annual Tax on Profit liability and the Minimum Tax.

The Minimum Tax is a separate tax calculated at 1% (one percent) of annual turnover inclusive of all taxes, except VAT. It is payable at the time of the annual liquidation of the Tax on Profit.

79. How are capital gains taxed?

There is no separate capital gains tax in Cambodia. All earned income from capital gains from the sale of various assets and immovable property by the

44

Taxes

company is taxed the same as regular Tax on Profit at the rate of 20% (twenty percent).

80. Does Cambodia have a branch profit tax?

Cambodia does not tax branch profits to be remitted abroad separately from the taxable profit of the company. However, certain payments made by a resident taxpayer to a non-resident taxpayer are subject to a withholding tax of 14% (fourteen percent), including payments of interest income, dividends, royalties, rent, other property income, and compensation for management and technical services.

81. Will I be required to pay personal taxes in Cambodia?

Personal income tax in Cambodia is outside the scope of Cambodian taxation. However the broad nature of the general provisions for TOP included in LoT capture the majority of these non-specific transactions through the application of the permanent establishment rules and broad definition of doing business and conduct of trade. In order to clearly establish the effects of Cambodian tax legislation on personal income it is critical to define the potential income sources for private individuals recognized under the LoT. Sources of personal Income including salary income, interest income, foreign sourced income, dividends income, business income, and property income (rental/sale) are subject to pay taxes.

Salary income, for example, paid by the RRT, is subject to tax. Practically this places the obligation for the payment of taxes arising on these income streams with the RRT taxpayers who are making the salary payments. The RRT are obliged by LoT to withhold the amounts outlined below from the individual receiving the payment. Salary income of the resident taxpayer is subject to the Tax on Salary at progressive tax rate from 0% (Zero percent) to 20% (twenty percent), it depends on the rate salary to earn. Non-resident taxpayer is subject to tax at a flat tax rate of 20% (twenty percent) on received from Cambodia Sources.

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82. Will it be required to withhold and pay salary or income taxes for my employees? Does that include foreign employees? What about consultants and others on contract? What about foreign employees who work for short periods?

Both the employer and the employee are jointly liable for the payment of the Tax on Salary regardless of whether the salary is paid in Cambodia or overseas. However, the employer is the first responsible party. Employers must withhold and pay taxes for both local and foreign employees.

A Withholding Tax on Salary is calculated according to a schedule of earnings which ranges between 0% (zero percent) and 20% (twenty percent). As of January 1, 2015, the tax is 0% (zero percent) for those earning less than KHR 800,000 per month (equivalent to USD 200 per month) and 20% if the earnings are more than KHR 12,500,000 per month (equivalent to USD 3,125 a month) and it is expected to be amended in the near future. This tax is applied monthly. There is no annual return.

Employee also is subject to tax on Fringe benefit at a rate of 20% of the gross value of the received benefits, except the received benefits are exempted by tax regulation. Fringe benefit mainly include: Food, Vehicle a house or housing (accommodation), utilities, household helpers, loan at less than the market rate of interest, discount on the sale of goods, non-work related education assistance.

Consultants and other contract workers (non-employees) also must pay taxes, with rates varying depending on whether they are residents or non-residents and what kind of work they do. A resident contractor doing consulting, management and some other services is taxed at 15% (fifteen percent), while non-residents are taxed at 14% (fourteen percent). The withholding tax in these instances is considered the final tax.

Foreign employees who work in Cambodia only for short periods will be taxed as non-resident taxpayers on their Cambodian sourced income at the flat rate of 20%.

83. Will my business be required to pay value-added tax (“VAT”)?

Yes, most probably. A 10% (ten percent) VAT is applicable on supplies of most goods and services, with the exception of public postal services, hospital and

46

Taxes

medical services, public transportation, insurance, certain financial services, importation of certain articles for personal use, recognized non-profit public interest activities, and electricity.

Taxpayers subject to VAT must register, usually at the time of incorporation, and are thereafter required to file VAT returns and payment of the tax on a monthly basis.

84. What kind of customs duties apply in Cambodia?

Import duties are variable depending on the goods to be imported, but generally range between 0% (zero percent) and 35% (thirty-five percent). Taxes on luxury items such as automobiles can be considerably higher. There are exceptions for goods for personal use and goods exempted by international treaties, and for international and local NGOs. There is a duty exemption for equipment, construction and raw materials if the company gains Qualified Investment Project (“QIP”) status with the CDC.

Export duties are levied on only a limited number of items, such as rubber, unprocessed precious stones, timber, certain live animals and animal products (including fish and most seafood), minerals, oil and gas.

85. Does Cambodia have any double taxation treaties?

Recently, Cambodia has signed agreements for the avoidance of double taxation with Singapore and China.

86. What accounting requirements are there for foreign businesses?

The Law on Corporate Accounts, Audit and Accounting requires that a company’s accounting records shall be prepared in Khmer and expressed in Cambodian Riel. Enterprises carrying out business with foreign countries or subsidiaries of foreign companies may be authorized to prepare accounting records in English and in a currency other than Riel in addition to the accounting records in Khmer and Cambodian Riel. However, the company’s financial statements must be prepared in Khmer and in Cambodian Riel.

Accounting records, financial statements, ledgers and documentary evidence must be kept for ten (10) years from the end of the financial year in which the

47


records relate. Such ledgers include a general journal, accounting ledger and inventory book.

87. What are the requirements of tax audit?

Tax authority can conduct the tax audit the tax in one of the follow periods: (1) within three 3 years after the date of the tax returns was submitted. (2) within ten years after the tax was required to be submitted if there is evidence of the obstruction of the implementation of tax provision. (3) any time with the written request of the taxpayer. Three type of tax audit are Desk Audit to review risk on tax return at tax return at tax office, Limited Audit to examine immediately at taxpayers business premise and Comprehensive Audit to examine at taxpayer business premise for multiple periods and all types of taxes. Desk Audit and Limited Audit are conducted by Department of Large Taxpayers, or conducted by Tax Brach while Comprehensive Audit is conducted by the Department of Enterprise Audit.

88. What are the penalties for not compliance with tax regulations?

There are two types of tax penalties: Administrative Penalty and criminal penalty. Administrative penalties for tax avoidance, negligence and serious negligence and these penalties including 10%, 25% and 40% of the amount of the underpaid tax plus 2% interest on the amount of the underpaid tax for each month and these are based on level of involvement of negligence and avoidance. Criminal penalty has been imposed for tax evasion by a fine from USD 2,500 to USD 5,000 and/or imprisonment form 1 to 5 years. However, Criminal penalty provision has not been implemented.

89. Are there any other taxes in Cambodia?

Yes, fiscal taxes are payable on certain transactions such as filing of applications with government entities and other documents.

Companies are also required to pay an annual Patent Tax.

Registration tax is payable on the transfer of registration of immoveable property, company shares and vehicles and other means of transportation.

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Taxes

Annual immovable property tax is payable on certain properties, usually in urban areas with a market value of over KHR 100,000,000 (equivalent to USD 25,000).

Unused land tax is payable on undeveloped land that is not subject to annual immovable property tax

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Chapter 10 Intellectual Property

Intellectual property (“IP”) protection, and the means by which that may be achieved, has developed at a remarkable pace in Cambodia. From the country’s accession to the Madrid Protocol for the International Registration of Marks in March 2015 (which allows Cambodian brand owners the potential to protect their marks through a single application covering more than 110 countries) to its recent accession to the Patent Cooperation Treaty (“PCT”), Cambodia’s IP landscape is burgeoning. The imminent introduction of a new data based system for registering trademarks and the collaboration of the Cambodian authorities with IP offices of countries with more established patent protection systems is further strengthening the sector. Cambodia’s IP laws set out the requirements for registration and these comply with international standards.

90. How do I register and protect my trademark, patents, utility model certificates, industrial designs and copyrights in Cambodia?

In Cambodia, there are three different ministries responsible for the registration of trademarks, patents, utility model certificates, industrial designs, and copyright. Different procedures apply to the registration of each, all of which are clearly set out within the relevant laws. Because Cambodia requires that an agent be registered in the country, a Power of Attorney is required for a local agent to act for a foreign investor in registering IP. Fees for all relevant filings are published by the Ministry of Commerce (“MOC”) and Ministry of Economy and Finance (“MEF”).

Trademarks are registered with the Department of Intellectual Property Rights (“DIPR”) of the MOC. As in other countries, one must provide specimens of the marks, proof of authorization from the owner of the mark, proof of any international registrations, and a completed application. The MOC complies with the international class system of marks and a mark may be registered in multiple classes.

Patents, utility model certificates, and industrial designs are registered with the Ministry of Industry, Mines and Energy (“MIME”). The procedures and

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Intellectual Property

requirements for registration are in conformity with those of other countries as well as with the relevant international instruments and standards.

Copyrights are registered with the Ministry of Culture and Fine Arts, however, as in most other jurisdictions, copyright subsists automatically and registration is not a legal requirement.

91. Can an international registered trademark be recognized in Cambodia? If not, what can be done to get an international trademark recognized and protected in Cambodia?

Yes. Since joining the Madrid Protocol, international trademarks are recognized in Cambodia and may be protected via the Madrid System.

92. What are the benefits of the registration? How long does the protection last? What is required to renew a registration?

A registered trademark is protected for ten years and is renewable indefinitely. The registered owner must file an “affidavit of use or non-use of the trademark” within the fifth anniversary of the date of registration. If the affidavit isn’t filed, the trademark can be removed from the Register.

Patent protection, as in other jurisdictions, generally lasts twenty years from filing of the application. An annual fee is required to be paid to maintain a patent or patent application in the applicable register.

93. Can a trademark be assigned? What is the procedure?

A trademark can be assigned by submitting an application that must be signed by the assignor and assignee (together with the applicable fee).

94. How effective are the measures that might be taken against infringements?

The Dispute Resolution Unit of the Intellectual Property Department of the Ministry of Commerce handles infringement complaints if the trademark owner requests. The Unit has proven effective to date. A court action would be a last resort.

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Notwithstanding Cambodian court decisions not being publicly available, we are not aware of any patent infringement actions having been brought in Cambodia and the nascent patent protection system remains relatively untested.

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Chapter 11 Anti-Corruption Law

The anti-corruption activities of the Royal Government of Cambodia are progressing towards consistent enforcement of the laws as the Anti-Corruption Unit (“ACU”), an entity created in tandem with the promulgation of the 2010 Anti-Corruption Law (“ACL”), continues to enforce the law.

95. Is it legal to make “unofficial” payments to governmental officials?

Until 2011, the payment of “unofficial” fees (i.e., payments which are not specified in or authorized by law) to Government officials for the performance of their routine duties was a long standing and accepted practice in Cambodia. However, this position changed as a result of the implementation of the Royal Government of Cambodia’s Anti-Corruption Law (“ACL”). Among other things, the ACL makes the payment of unofficial fees to governmental officials illegal in nearly all cases, including so-called “facilitation fees.”

96. Are payments other than to government officials prohibited by the ACL?

Yes. the ACL also prohibits payments made to employees of private companies, officials of public international organizations, and persons in special positions, such as witnesses in a court proceeding.

97. When did the ACL come into effect?

The ACL came into legal effect in August 2011.

98. Does the new law only apply to Cambodian nationals?

No, it applies to foreign nationals and legal entities.

99. What are the potential penalties applicable under the ACL?

The ACL provides a range of penalties including imprisonment, fines, loss of company assets, and deportation.

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Anti-Corruption Law

100. Is the ACL the only such law that I should be concerned about?

No. Many countries, such as the USA, the UK, Australia, Japan and South Korea have extra-territorial anti-corruption laws which may apply to citizens of such countries, entities incorporated in such countries, and entities which may have connections in such countries. We therefore advise our clients to consider Cambodian and foreign laws which may expose them to liability for acts committed and omissions in Cambodia.

101. What impact does the ACL have on business?

Compliance with the ACL can lead to time delays and increased costs where a person or company doing business in Cambodia requires a government approval, license, registration, or government issued documentation. The Anti-Corruption Unit and government ministries are not unmindful that compliance with the ACL is not yet universal and may have negative impacts. Many ministries have implemented measures to make their practices consistent with the ACL, including implementing official fee schedules and time tables and automating processes online. As a result doing business has become easier.

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Chapter 12 Impact of Civil Code

A civil code is a systematic collection of laws designed to comprehensively deal with the core areas of private law.

102. What is the Civil Code?

The Civil Code is the fundamental law governing legal relations for civil matters in Cambodia. The Civil Code sets out the general principles governing legal relations in civil (as opposed to criminal or administrative) matters, including matters such as property rights, legal existence, contracts, torts, family, succession and inheritance.

The Civil Code has repealed all or part of a number of other important laws, including most of the Law on Marriage and Family, most of the Law on Contracts and part of the Land Law.

The Civil Code must also be read in conjunction with the Law on the Implementation of the Civil Code, which amended many of the Civil Code’s provisions.

103. When did the Civil Code become effective?

The Civil Code became legally effective on 21 December 2011.

104. What areas does the Civil Code cover?

The Civil Code is divided into nine books; (1) General Rules, (2) Persons, (3) Real Rights, (4) Obligations, (5) Contracts and Torts, (6) Security, (7) Relatives, (8) Succession, and (9) Final Provisions.

105. What are the new forms of juristic persons in the Civil Code and how do they impact foreigners?

The Code provides for new forms of “juristic persons”, including incorporated associations and incorporated foundations (non-profit organizations), however the implementing regulations for these new forms of incorporation

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Impact of Civil Code

are not yet in force. The Code also includes provisions defining ‘permanent residence’ and ‘domicile’ of juristic persons.

The new forms of juristic persons do not provide any new rights for foreigners.

106. How has the Civil Code affected the 2001 Land Law?

The Civil Code repealed and replaced some aspects of the 2001 Land Law.

The Code defines and distinguishes immovable and movable property and establishes “real rights” in relation to such property, including rights of ownership, possession, usufruct, lease and servitude (easements). Note that most rights over immovable property require registration before they can be asserted against third parties.

107. How has the Civil Code affected contract law in Cambodia?

The Civil Code repealed most of the old law on Contracts. The forms of contract covered in the Civil Code include sale, exchange, gift, loans for consumption or use, leases, mandates (the grant of power to administer business on behalf of another), deposits (bailment), partnerships and life annuities. The Civil Code also covers liabilities such as torts and unjust enrichment.

The Civil Code addresses the full range of contract law issues, including contract formation, invalidity and rescission of contracts, , performance and remedies for breach of contract including specific performance, damages and termination. There are also special provisions governing prescription/limitation of actions and assignment, subrogation, set-off, release, novation and merger of claims and obligations.

The Code also governs principle-agent relationships, which may be based on a contract or be established without a contract.

108. Does the Civil Code deal with Secured Transactions?

Yes, the Civil Code operates in addition to the Law on Secured Transactions, establishing five types of security rights; being the rights of retention,

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statutory liens, hypothecs (mortgages), transfers of title for security and guarantees.

109. Does the Civil Code deal with family law and succession?

Yes, the Civil Code deals with engagement, marriage, matrimonial property, divorce, relations between parents and children, adoption, parental power and guardianship. The Civil Code also deals with matters of Succession, including Wills, inheritance and succession pursuant to Will, and the rules of intestacy. The Succession provisions are complex and include provisions relating to protected heirs (“legally secured portions”) that can override the provisions in a deceased’s Will.

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Chapter 13 NGO

Cambodia’s first ever Law on Non-governmental Organization (“NGO”) has recently been promulgated in 2015. The law makes it illegal any organization operating its non-profit project(s) in the country without proper license and registration documents. Therefore the law has since urged many NGOs outside of the proper acknowledgement from the government authority to take action and pursue proper registration.

The Royal Government of Cambodia divides NGOs into two categories which are required to undergo two different types of registration. One being a local NGO, with Cambodian national managing and founding key members, and the other being an International NGO (“INGO”), with an existing NGO headquarter registered in foreign country outside of Cambodia.

110. Local NGO

Generally speaking, registration of for local NGO has been rather simple and straight forward, have not experience any rejection from the Government. The legal compliance is minimal, and there is no budget plan required. Thus far, establishing a local NGO has been a straight forward three-step process: (1) Preparing a set of required application documents, and submit to the Ministry of Interior (“MoI”); (2) Registration with the General Department of Taxation (“GDT”); (3) Registration with the Ministry of Labor and Vocational Training (“MoLVT”).

111. International NGO

Registration process of International NGO is more time-consuming and complex in comparison to the registration of the Local NGO. As current practice stands, the application of registration of INGOs in Cambodia consists of:

• signing a Memorandum of Understanding initially with the relevant line ministry based on the INGO core values and purpose (which can be time-consuming and slightly challenging to identify),

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NGO

• signing a Memorandum of Understanding subsequently with the Ministry of Foreign Affairs and International Cooperation (‘’MOFAIC’’).

• the GDT (even if the tax liabilities for a foreign NGO are minimized)

• following registration with the MOFAIC, where applicable the NGO may register with:

▪ The Ministry of Economy and Finance (“MEF”) to receive the potential tax exemptions: most likely profit tax, tax on salary and withholding tax is still a requirement for NGO to pay;

▪ the Ministry/Department of Labor and Vocational Training(“MoLVT”); and

▪ In addition, the NGO may also be registered with the Council for Development (“CDC”) in Cambodia if it wishes to import materials with custom exemption.

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Chapter 14 Tourism

Tourism is one of the most flourishing and influential sectors in Cambodia, making it one of the most “popular” types of foreign direct investment in the country. The Royal Government of Cambodia (“RGC”) sets certain licensing requirements, and regulations as boundaries to ensure certain level of governmental control, and a leveled playing field for all onshore and offshore investors however, overall, the investment climate in this sector is less restrictive and instead more incentivized and investment-friendly.

112. May a tourism company or hospitality business be foreign-owned?

Yes. There is no restriction on the nationality of any shareholder of any tourism company or hotels and restaurants and no requirement that any shareholder be Cambodian. Companies owned by foreign nationals are permitted to be incorporated as independent entities or be established as a branch of a foreign entity. A foreign held company/hotel/restaurant may also open a representative office, however such offices are not entitled to carry out operations and may only provide certain support to other local or foreign entities.

In addition to the shareholders, there are no restrictions on the nationality of any director of a company/hotel/restaurant.

A foreign-owned company, however, may not hold title to land in Cambodia, in which case, many have opted a for separate land holding structure, for instance, long-term lease or nominee arrangement.

113. What is required to establish Tourism Company? What licenses and other government approvals are required?

The investor must first establish a limited liability company by filing company start-up application at the Ministry of Commerce (”MOC” and when the company is registered, the company must proceed to making initial tax filing at the General Department of Taxation (“GDT”).

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Tourism

Once the tax filing is completed, the company is to apply for tourism license from the Ministry of Tourism (“MOT”), which includes a USD 5,000 fees to be deposited to the account of the MOT at FTB Bank.

114. What is required to establish a Hotel? What licenses and other government approvals are required?

Three to four-star hotels with investment capital of USD 1,000,000 and above are eligible to apply for a Qualified Investment Project (“QIP”), which offers tax incentives such as import tax exemption on materials to use for building and operating the hotel, and profit tax exemption during the initial operation period. The initial registration is summarized per below:

• The application process commence at the Council for the Development of Cambodia (“CDC”) for an intensive review and if successful would result in CDC issuing a Final Registration Certificate, approving the hotel to be a QIP;

• The QIP is then required to register as a limited liability company with the MOC and make initial tax filing at the GDT as every other company;

• Next, the hotel/company must obtain a construction permit from the Ministry of Land Management and Urban Planning to begin construction of the hotel.

• At around the same time with the construction permit application, the company must also apply for a tourism license from the MOT;

• Lastly, the company/hotel is required to obtain an approval on an Environmental Impact Assessment report from the Ministry of Environment in order to commence operation of the hotel.

On the other hand, hotels with investment capital of lower than USD 1 million, the investor must undergo similar steps as to establishing a tourism company, by first register for a limited liability company at the MOC, and subsequently, proceed to making initial tax filing at the GDT. Finally, the company/hotel must apply for the tourism/hotel license from the MOT.

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Useful Contacts

Government

The Council of Ministers Minister Sok An Sec. of State Bun Ouy Friendship Building, 41 Russian Federation Blvd, Phnom Penh Tel : 855-23 212 490 855-23 212 934 Fax: 855-23 212 490 [email protected] [email protected]

Ministry of Commerce Minister Pan Sorasak Sec. of State Ouk Prada No. lot 19-61, St 113B, Khan Sen Sok, Phnom Penh Tel: 855-23 866 425 Fax: 855-23 866 425 [email protected]

Ministry of Economy and Finance Minister Aun Pornmoniroth Sec. of State Vongsey Vissoth No. 60, Street 92, Phnom Penh Tel: 855-23 724 664 Fax: 855-23 427 798 [email protected]

Minister of Industry and Handicraft Minister Cham Prasidh Sec. of State Sat Samy No. 45, Preah Norodom Blvd, Phnom Penh Tel: 855-23 222 504 Fax: 855-23 210 544 [email protected]

Ministry of Mining and Energy Minister Suy Sem Sec. of State Ith Praing No. 79-89, Pasteur (St. 51), PhnomPenh Tel: 855- 23 219 574 Fax: 855- 23 219 584 [email protected]

Ministry of Land Management, Urban Planning and Construction Minister Chea Sophara Sec. of State Chhan Saphan No.771-773, Preah Monivong Blvd, Phnom Penh Tel: 855-23 215 659 Fax: 855-23 215 277 [email protected]

Ministry of Agriculture, Forestry and Fisheries Minister Ouk Rabun Sec. of State Yuth Phouthang No. 200, Preah Norodom Blvd, Phnom Penh Tel: (855) 23 211 351 (855) 23 726 129 Fax: 855-23 217 320 [email protected]

Ministry of Environment Minister Say Sam Al Sec. of State Khieu Muth No. 48, Preah Sihanouk Blvd, Phnom Penh Tel: 855-23 212 994 Fax: 855-23 212 540 [email protected]

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Useful Contacts

Ministry of Posts and Telecommunications Minister Prak Sokhonn Sec. of State Sarak Khan Corner Ang Eng (Street 13) & 102, Phnom Penh Tel: 855-23 724 809 Fax: 855-23 426 011 [email protected]

Ministry of Tourism Minister Thong Khon Sec. of State So Mara Lot 3A, St. 169, Phnom Penh Tel: 855-23 884 974 Fax: 855-23 885 039 [email protected]

Ministry of Public Works and Transport Minister Sun Chanthol Sec. of State Toch Chankosal Corner Preah Norodom Blvd/Street 106, Phnom Penh Tel: 855-23 427 845 Fax: 855-23 214 907 [email protected]

Ministry of Labor and Vocational Training Minister Ith Sam Heng Sec. of State Pich Sophoan No. 3, Confederation de la Russie, Phnom Penh Tel: 855-23 884 375 Fax: 855-23 884 376 [email protected]

State Secretariat of Civil Aviation Sec. of State MAO HAVANALL No. 62, Preah Norodom Blvd, Phnom Penh Tel: 855-23 211 019 Fax: 855-23 211 019 [email protected]

Administration Police No. 3EoA, Chakrey Ponn, St 208, Ministry of Interior H/P: 855-12 909 789

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Useful Contacts

Embassies and Consulates

British Embassy

No. 27-29, St 75, Daun Penh, Phnom Penh Tel: 855-23 427 124 Fax: 855-23 427 125 [email protected]

Embassy of Bulgaria

No. 227 -229, Preah Norodom Blvd,Phnom Penh Tel: 855-23 217 504 Fax: 855-23 212 792 [email protected]

Embassy of Australia

No. 16B, St National Assembly, PhnomPenh Tel: 855-23 213 470 Fax: 855-23 213 413 [email protected]

Embassy of Cuba

No. 96-98, St 214, Phnom Penh Tel: 855-23 213 965 Fax: 855-23 217 428 [email protected]

Embassy of Brunei Darussalam

No. 237, St 51, Phnom Penh Tel: 855-23 211 457 Fax: 855-23 211 456 [email protected]

Embassy of France

No. 1, Preah Monivong Blvd, Phnom Penh Tel: 855-23 430 020 Fax: 855 -23- 43 00 41 [email protected]

Embassy of the Republic of Korea

No. 50-52, St. 214, Phnom Penh Tel: 855-23 211 900/3 Fax: 855-23 219 200 [email protected]

Embassy of Laos

No.15-17, Mao Tse Tung Blvd, Phnom Penh Tel: 855-23 997 931 Fax: 855-23 720 907 [email protected]

Embassy of Germany

No.76-78, St 214, Phnom Penh Tel: 855-23 216 193/381 Fax: 855-23-217 016 [email protected]

Embassy of Malaysia

No.220-222, Preah Norodom Blvd, Phnom Penh Tel: 855-23 216 176 Fax: 855-23 726 101 [email protected]

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Useful Contacts

Embassy of India

No.5, St 466, Phnom Penh Tel: 855-23 210 912 Fax: 855-23 213 640 [email protected]

Embassy of Pakistan

No.45, St.310, Phnom Penh Tel: 855-23 996 890 Fax: 855-23 992 113 [email protected]

Embassy of Japan

No. 194, Preah Norodom Blvd, Phnom Penh Tel: 855-23 217 161-4 Fax: 855-23 216 162 [email protected]

Embassy of Philippines

No. 182, Preah Norodom Boulevard, Tonle Bassac, Phnom Penh Tel: 855-23 222 303 Fax: 855-23 215 143 [email protected] [email protected]

Embassy of the Republic of

Indonesia

No. 1, Street 466 Corner Norodom Boulevard 90, Phnom Penh Tel: 855-23 216 148 Fax: 855-23 217 566 [email protected]

Embassy of the Russian Federation

No. 213, Samdech Sothearos Blvd, Phnom Penh Tel: 855-23 210 931 Fax: 855-23 216 776 [email protected]

Embassy of China

No.156, Mao Tse Tuong Blvd, Phnom Penh Tel: 855-23 720 920 Fax: 855- 23 720 922 [email protected]

Embassy of Myanmar

No.181, Preah Norodom Blvd, Phnom Penh Tel: 855-23 223 761 Fax: 855-23 223 763 [email protected]

Consulate General of

Switzerland

Tel: 855-23 219 045 Fax: 855-23 213 375 [email protected] [email protected]

Embassy of the Republic of Singapore

No.129, Preah Norodom Blvd, Phnom Penh Tel: 855-23 221 875 Fax: 855-23 210 862 [email protected]

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Consulate of Belgium

No. 404D, Preah Monivong Blvd (93), 1st Floor, Phnom Penh Tel: 855-23 214 024 Fax: 855-23 214 024 [email protected]

Royal Thai Embassy

No.196, Preah Norodom Blvd, Phnom Penh Tel: 855- 23 726 306 Fax: 855-23 726 303 [email protected] [email protected]

Delegation of the European

Union to Cambodia

No.100A, Preah Norodom Blvd, Phnom Penh Tel: 855-23 216 996 Fax: 855-23 216 997 [email protected]

Embassy of the Socialist

Republic of Vietnam

No. 436, Preah Monivong Blvd, Phnom Penh Tel: 855-23 726 284 Fax: 855-23 726 495 [email protected]

Embassy of DPR of Korea

No. 39, St Samdech Suramarith (St 268), Phnom Penh Tel: 855-23 217 013 Fax: 855-23 217 013

Embassy of the Sovereign

Military Order of Malta

No.10, St 370, Phnom Penh Tel: 855-23 368 184 Fax: 855-23 368 184 [email protected]

Embassy of Sweden

No.445, Preah Monivong Blvd (St. 93),Corner of St 232, 10th Floor, Phnom Penh Tel: 855-23 861 700 Fax: 855-23 861 701 [email protected]

Embassy of the United

States of America

No.1, St 96, Wat Phnom, Phnom Penh Tel: 855-23 728 000 Fax: 855-23 728 600 [email protected]

Royal Danish Embassy

No.8, St 352, Phnom Penh Tel: 855-23 987 629 Fax: 855-23 993 065

[email protected]

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Useful Contacts

Business and Trade Associations

American Chamber of Commerce in Cambodia (AmCham)

Biz Café 1st Floor, Himawari Hotel Apartments, 313 Sisowath Quay , Phnom Penh Tel: 855-15 333 715 Fax: 855-77 886 699 [email protected] www.amchamcambodia.net

Cambodia Federation of Employers & Business Association (CAMFEBA)

No.44A, St320, Phnom Penh Tel: 855-23 222 186 Fax: 855-23 222 185 [email protected] www.camfeba.com

Australian Chamber of Commerce (AusCham)

No.20, St Kramuonsar corner (St 114), Phnom Penh Tel: 855-99 505 441 [email protected] www.auschamcambodia.com

Chambre de Commerce Franco-Cambodgienne

No.33 E2, Sothearos Blvd, Phnom Penh Tel: 855-23 221 453 Fax: 855-23 221 453 [email protected] www.ccfcambodge.org

British Chamber of Commerce in Cambodia (BritCham)

British Embassy Phnom Penh. 27-29 Street 75, Sangkat Srah Chak, Khan Daun Penh, Phnom Penh Tel: 855-977 210 103 855-12 323 121

[email protected]

www.britchamcambodia.org

International Business Chamber Cambodia (IBC)

12th Floor, Phnom Penh Tower, Preah Monivong Blvd, Phnom Penh Tel: 855-23 964 455 [email protected]

www.ibccambodia.com

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Japanese Business Association of Cambodia (JBAC)

2F, Phnom Penh Tower, #445, Monivong Blvd. (St.93/232), Phnom Penh, Cambodia Tel: 855-12 725 503 855-23 866 220 www.jbac.info

Cambodian Association for Mining and Exploration Companies (CAMEC)

No.24, St 462, Phnom Penh Tel: 855-23 210 225 Fax: 855-23 213 [email protected] www.camec-cambodia.com

Indian Chamber of Commerce in Cambodia (ICCC)

No.34, Street 208, Phnom Penh, Cambodia Tel: 855-98 805 999 [email protected] www.icc-cambodia.com

Singapore Business Club (Cambodia)

No.129, Preah Norodom Blvd, Phnom Penh Tel: 855-23 360 855 855-12-812-525 Fax: 855-23 360 850 [email protected] [email protected] www.singaporeclubcambodia.com

Malaysian Business Council of Cambodia (MBCC)

No.87, Street 294, Boeng Keng Kong 1 Phnom Penh, Kingdom of Cambodia Tel: 855-16 836 222 Fax: 855-23 990 999 [email protected] www.mbccambodia.org

The Garment Manufacturers Association in Cambodia (GMAC)

No.175, Jawaharlal Nehru (St. 215), Phnom Penh Tel: 855-23 301 181 855-98 8 122 133 Fax: 855-23 882 860 [email protected] www.gmac-cambodia.org

European Chamber of Commerce in Cambodia

No.33 Sothearos, Phnom Penh, Cambodia Tel: 855-23 964 141 [email protected]

www.eurocham-cambodia.org