New Sub-Decree on the Implementation of the Investment Law

In order to implement the provisions of the Investment Law dated 15 October 2021, the Royal Government of Cambodia adopted Sub-Decree No. 139 ANKr.BK (the “Sub-Decree”) on the Implementation of Investment Law dated 26 June 2023.

Notable updates under the Sub-Decree are as follows:  

1. New procedure for qualified investment project (“QIP”) registration
2. New negative list to provide more clarity on the projects that are ineligible for QIP registration
3. New investment incentive scheme
4. New guidance on the acquisition, sale, or merger of an investment project
5. Reasons for nullification of an investment project

1. New Procedure for QIP Registration

In order to obtain QIP status, investors need to register their investment projects with the Council for the Development of Cambodia (“CDC”). Applications are submitted to either the CDC or the Provincial/Municipal Investment Subcommittee (“PMIS”) based on the size of the investment:

• For projects with investment capital of less than US$5 million, applications are submitted to the PMIS.
• For projects with investment capital of US$5 million or more, applications are submitted to the CDC.

The QIP application can be submitted either in written form or online through the CamDX online platform. Once a complete application package is received, the CDC or PMIS will review it and provide an official response (rejection or issuance of a Registration Certificate) within 20 working days.

However, the issuance of a Registration Certificate does not relieve an applicant from procuring other operating licenses and permits as required under applicable Cambodian laws. The Sub-Decree aims to speed up this process by specifying that any delay by the relevant competent authorities in issuing the required operating licenses without a proper reason will not impede the implementation of the investment project.

2. New Negative List

The Sub-Decree specifies a negative list of sectors and activities for which investment projects are not eligible to register as a QIP and thus are not entitled to the corresponding investment incentives. There are four investment sectors—agriculture, services, manufacturing, and infrastructure—and under each sector, the Sub-Decree sets out specific business activities and criteria for determining QIP registration eligibility.

3. New Investment Incentive Scheme

The Sub-Decree provides, in detail, a new investment incentive scheme, as below:

Basic tax incentives

A QIP registered under the Investment Law is eligible for basic tax incentives consisting of either a Tax on Income exemption period or accelerated depreciation.

Customs duty incentives

In addition to the selection of a basic tax incentive, QIPs are entitled to the following exemptions from import duties and taxes as applicable:

• Exemption from customs duty, specific tax, and value added tax (“VAT”)on the importation of construction material, construction equipment, and production equipment for use in a production line.
• Exemption from customs duty, specific tax, and VAT on the importation of production inputs for export QIPs and supporting industry QIPs to serve their production line.
• Exemption from customs duty, specific tax, and VAT on the importation of production inputs for specific domestic QIPs to serve their production line.

Additional incentives

In addition to the basic tax incentives, a registered QIP is eligible for the following additional incentives:

• Zero-rated VAT on locally-produced production inputs in order to implement the QIP.
• Permission to deduct 150% of the following expenses:
  • R&D and innovation costs
  • Human resource development costs for vocational training to Cambodian workers
  • Construction costs for accommodation, canteens, food courts, nurseries, and other facilities for workers
  • Costs to modernize production line machinery
  • Welfare promotion costs for Cambodian workers
• Exemption from customs duty, special tax, and VAT on the importation of construction materials and equipment for the construction of accommodation, nurseries, emergency rooms, food courts where food is provided free of charge or sold at a reasonable price exclusively for workers of the QIP and within the investment project.
• Reduction in the customs duty, special tax, and VAT for QIPs involved in new car assembly for the local market based on the percentage of locally-made materials and the fulfillment of two of the specified conditions, as follows:
  • 50% for the use of components as a final product without further processing
  • 70% for the use of components as a final non-painted product
  • 80% for the use of non-welded and non-painted components
  • 90% for the use of non-pressure, non-welded, and non-painted components

4. New Guidance on the Acquisition, Sale, or Merger of Investment Projects

The Sub-Decree provides the specific procedure, including the list of required documents, to apply for approval of the acquisition, sale, or merger of an investment project from the CDC or PMIS. Investment projects subject to an acquisition, sale, or merger will continue to be eligible for the relevant investment incentives, guarantees, and protections.

5. Reasons for Nullification of an Investment Project

The CDC or PMIS has the discretion to nullify an investment project for any of the following reasons:

• The inability of the investor to implement the investment project.
• The dissolution of the corporate investor by the unanimous decision of the shareholders.
• The dissolution of the corporate investor by court order.
• non-compliance with the Law on Investment and applicable regulations; and
• Per the request of the relevant ministries/institutions or the investor.