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Cambodia Tax Alert: Additional Incentive for Qualified Investment Project

Cambodia Tax Alert: Additional Incentive for Qualified Investment Project

March 14, 2019

As seen recently, the Royal Government of Cambodia (“RGC”) has been making a number of improvements in the investment regime in order to attract more investors and encourage existing investors to continue and/or expand their business operations in Cambodia.

To this end, on 13 February 2019, the RGC issued Sub-Decree No. 33 ANK.BK (on the Amendment of Article 15 of Sub-Decree No. 11 ANK.BK on the Implementation of the Law on the Amendment of the Law on Investment), which provides for a Tax on Income (“TOI”) exemption for existing Qualified Investment Project (“QIP”) companies that expand their investment activities.

Below is a summary of the pertinent points on this additional incentive:

  • Expansion of investment activities refers to:
    • Expansion of an existing production line
    • Expansion by diversifying production for different product brands that are in the same product line
    • Expansion by installation of modern technology to increase production capacity or protect the environment
    • Expansion of infrastructure serving telecommunications services
  • Excluded activities:
    • The purchase or transfer of a QIP already granted a TOI exemption period
    • The injection of additional capital to pay up existing registered capital
  • Capital of the expansion project must be at least equal to the minimum capital stated in Section 2, Annex 1 of Sub-Decree No. 111 ANK.BK.
  • Similar to new QIPs, the TOI exemption period for an expansion project comprises a trigger period, plus a three-year period, plus a priority period:
    • The trigger period starts when the expansion project is recognized as a QIP and ends when the expansion project derives its first revenue.
    • The priority period is determined by the Financial Laws in force.
  • The exempted revenue of the expansion project is calculated as follows:
    • Exempted revenue = Total revenue × (capital of the expansion project/total capital)
    • Where:
      • Total revenue = Revenue from existing project + revenue from expansion project
      • Total capital = Capital of existing project + capital of expansion project
  • An inter-institutional body (led by the Ministry of Economy and Finance (“MOEF”) with the Council for the Development of Cambodia) will be set up to grant QIP status to expansion projects.

Details of the establishment of this body, and the procedures and rules for granting QIP status to expansion projects will be specified in a Prakas to be issued by the MOEF. We will update you further when this Prakas is issued.

On a different note, we understand that another reason for the issuance of Sub-Decree No. 33 ANK.BK was to reconfirm the 2017 Financial Law, which revised Article 24 of the Law on Taxation (“LOT”). Most QIP companies are still of the view that they are exempt from 1% Minimum Tax (“MT”). However, Sub-Decree No. 33 ANK.BK emphasizes that QIP companies (like all other companies) that do not maintain proper accounting records will be subject to 1% MT – which is in line with the revised Article 24 of the LOT specified in the 2017 Financial Law.

To be considered as having proper accounting records, companies need to obtain written confirmation from the General Department of Taxation (“GDT”). Companies that are granted gold or silver status by the GDT are also exempt from 1% MT.

If you have any questions on any of the topics discussed in this alert, or would like assistance with obtaining confirmation (about proper accounting records or compliance status) from the GDT, please contact the undersigned, or your usual VDB Loi adviser.

VDB Loi is a network of leading law and tax advisory firms with offices in Cambodia, Indonesia, Laos, Myanmar and Vietnam. We provide the highest quality solutions for transactions and taxation. Our general areas of practice are corporate, finance, licensing and disputes. Our principal specialized areas of practice are energy, infrastructure, real estate and construction, telecom, and taxation.

You can find more information on our Cambodia office here.

Kind regards,


An ACCA-qualified adviser, Sivila is an expert in Cambodian taxation with over 10 years of tax consulting experience, including several years with Big 4 firm KPMG.

At VDB Loi, he advises on tax structuring, disputes, and controversy, and conducts tax due diligence for clients across a range of industry sectors, including financial services, telecommunications, real estate, and garment manufacturing.

Sivila is also an associate member of the Kampuchea Institute of Certified Public Accountants and Auditors (KICPAA).

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