Cambodia Unveils Strategic Tax Incentives Propelling Economic Growth Across Key Sectors

• 4 December 2023
• Property Focus
• 2309 Views

The Cambodian government has rolled out a series of tax incentives, particularly in the real estate sector, showcasing a commitment to fostering business resilience and invigorating the national economy amidst the COVID-19 pandemic.

The real estate industry, a pivotal driver of Cambodia’s economic recovery, enjoys exemptions from property tax in selected areas, coupled with a waiver on transfer tax for homes under US$70,000, alongside extended tax payment periods for housing developers. (Read more)

Beyond the real estate horizon, the General Department of Taxation has outlined tax incentive measures for several key sectors:

1. Qualified Investment Project (QIP):

• QIPs are poised to benefit from an income tax exemption spanning three to nine years. Furthermore, a unique incentive allows for a graduated income tax payment post-exemption, with growth rates set at 25%, 50%, and 75% for two consecutive years.
• Value Added Tax (VAT) Favour: Supporting industries and contractors engaged in the export of garments, textiles, footwear, handbags, and hat industries receive favourable VAT treatment.
• Tax Incentives for Cutting, Sewing, and Aligning: QIPs involved in cutting, sewing, and aligning activities enjoy specific tax incentives.
• Textile Industry Support: A temporary suspension of income tax exemption payment for textile industry enterprises has been instituted, providing a strategic financial respite.

With qualified investment projects, sectors and activities related to real estate and construction are not applied with incentive measurements. (Read more)

2. Securities Sector:

The securities sector basks in a 50% income tax exemption for three years, coupled with tax liability favour, and a 50% withholding tax deduction on dividends from holding and trading securities.

3. Finance Sector:

• Temporary suspension of the implementation of value-added tax (VAT) on non-financial services
• Deductible tax preference on interest payments on foreign loans of microfinance institutions.

4. Agriculture Sector:

• Additional tax incentives for rice cultivation, rice buying and export rice production
• Value-added tax on the import and supply of goods in the agricultural sector is under the state’s charge
• Value-added tax preference for rice contractors for rice export
• Tax incentives for small and medium enterprises (SMEs) in priority sectors (agricultural or agro-industrial products)
• Tax incentives for the supply of unprocessed agricultural products
• Suspension of income tax exemption for the agricultural sector (preferential agricultural products include rice, corn, soybeans, pepper, cashew nuts, cassava and rubber)
• Tax incentives for enterprises of producing, supplying in local or exporting of rice, corn, soybeans, pepper, cassava, cashew nuts and rubber.

5. Education Sector:

• Tax exemptions for educational institutions include income tax exemption, including income tax relief and minimum tax, value-added tax, and withholding tax on interest and dividends until 2028.

6. Tourism Sector:

• Exemption of tax obligations for travel agents and tour operators

7. Construction Sector:

• Allowing construction enterprises to pay taxes according to the actual calculation of each project in advance
• Measures to support the development of construction and real estate in Borey (Read more)

As of 30 September 2023, the Royal Government’s approval of the National Strategy for Informal Economic Development 2023-2028 promises additional taxation facilitation, reinforcing support for the informal economy. These groundbreaking measures underscore Cambodia’s commitment to sustained economic development and prosperity.

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*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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