New Investment Law Indirectly Provides Tax Incentives for Construction Sector

• Sommana Yan
• 29 November 2021
• Uncategorized
• 4346 Views

Cambodia has recently officially endorsed the new investment law, which provides a wide range of favourable conditions, tax exemption, and non-tax incentives for qualified investment projects (IQP).

What is IQP? Are construction companies/projects eligible for incentives?

QIP refers to an investment project that has received a registration certificate from the Council for the Development of Cambodia or the Capital / Provincial Investment Subcommittee.

The IQPs must be within sectors such as industry and manufacturing, physical infrastructure, agriculture, agro-industry, small and medium enterprises, green energy, special economic zones, services, education, as well as training and productivity.

IQPs can either receive full or partial tax incentives depending on the type of investment and discretion of the committee. Similarly, IQPs can apply for three types of incentives including basic incentive, additional incentive, and special incentive; but again, whether to be granted with which one (or all) depends on the committee’s discretion.

Basic Incentive
There are two options based on investors’ choice. The first option is the income tax exemption for a period of 3 to 9 years, depending on the sector and investment activities. Meanwhile, the second option is the capital expenditure tax deduction of up to 200% for up to 9 years.

Additional Incentive
This will provide a 150% tax deduction for expenditures of IQPs related to research, training, transportation, as well as the construction of accommodation, canteens, and nurseries.

Under this incentive, the government will also exempt value-added tax (VAT) on the purchase of locally produced inputs. This incentive is to link local producers to the project’s production chain and to promote the use of local products.

Special Incentive

This is a special method which the government will specify in the annual law on financial management. Eligible projects are those in sectors deemed beneficial for economic and social development.

What about construction projects?

Construction firms or projects will not have direct incentives based on this law. However, construction projects of the aforementioned IQPs or specified sectors will get incentives.

In other words, IQPs will receive customs, VAT, and special tax exemption for the import of construction materials, construction equipment, production equipment, and production inputs, based on the type of business.

*The information contained in this article is provided for information purposes only and is not intended to constitute any legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

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