Real estate investment incentives in Cambodia

Real estate investment incentives in Cambodia

Investing in Cambodia offers some of the most attractive incentives in the region. However, only projects over a certain size can apply for Qualified Investment Project (QIP) incentives.

A Qualified Investment Project (QIP) is an investment project that has received a final registration certificate. To be admitted as a QIP, the investor has to first register the investment project with the Council for the Development of Cambodia (CDC) or the Provincial-Municipal Investment Sub-Committee to receive a final registration certificate.

For an investment project recognised as a QIP by the CDC, there are a number of eligible benefits, for example; exemption on profit taxes (this exemption only applies to the Tax on Profit and certain other income taxes); exemption on custom duties; or special depreciation allowances. The ‘tax holiday’ is often only in place for the first three to five years and if the company does not expect to turn a profit until Year 6, a QIP may not provide much of a tax incentive.

For real estate developers, it is particularly important to understand that QIPs can receive exemptions on customs duties for the importation of production equipment, and construction materials. As a QIP provides an exemption from import duties, the QIP status may be essential if it is import reliant for example. Depending on the scale of investment, other incentives are also available. There are different sets of criteria used to evaluate the eligibility of QIPs including the activities of the business, or the amount of registered investment capital. On the other hand, in order to import production equipment, construction materials, or production inputs (with the exemption of customs duties or taxes), a QIP must fulfill conditions such as,

1) Investors or their representatives shall apply for a master list of imported goods from CDC

2) After receiving approval from the CDC, the above master list shall be submitted to the Department of Customs Procedure.

3) When goods on the above master list are imported, investors or their representatives shall apply for a customs permit at the Department of Customs Procedure, attaching supporting documents such as authorisation letters, invoices, packing lists, transportation documents and other related documents as necessary.

4) After obtaining the customs permit, investors or their representatives shall complete the procedure of customs declaration.

For foreign investors meeting the necessary conditions, obtaining a QIP status is not a big problem, and one-stop services or business consultants can assist them if necessary. For small investors, such as the case of establishing offices, shops, and restaurants, the process is easy with little procedural hassles, unlike some other countries that set minimum capital requirements for foreign investors. Bear in mind that the QIP status is not provided to all small investments. A number of specific industries are only eligible for the QIP status if they can reach a minimum investment threshold. Depending on the sector, some thresholds are based on the investment amount (for example, anywhere from USD200,000 to more than USD2million) or calculated based on the scope of the project.

In conclusion, it is recommended that potential investors first consider the full list of investments available for a QIP, or consult with a local advisor regarding their specific investment. As a foreign investor, it is also recommended to first reach out to a qualified tax advisor in order to ensure maximum benefit from their incentives 

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