A few days ago, Cambodia enacted, through the Royal Decree (“Royal Kram”) NS/RKM/1021/014, Cambodia’s New Investment Law, a law inspired by the Industrial Development Policy 2021-2025. This law replaces both the Investment Law of 1994 (03/NS/94) and its amendment (NS/RKM/0303/2009). The aim is to provide national and foreign investors with a more open, transparent, and predictable regulatory framework under the supervision and management of the Council for the Development of Cambodia (CDC). Let’s analyze the main aspects of its content briefly to see if it meets the expectations for which it was enacted.
The first aspect of Cambodia’s New Investment Law deals with the procedure for registering an investment project. Unlike the previous regime, which required submitting a written application to the CDC or the Provincial or Local Investment Subcommittee, the current law simplifies this process by allowing online submission. It also streamlines the steps required, moving from obtaining two certificates – the Provisional Registration Certificate and the Final Registration Certificate – to a single Registration Certificate that can be automatically executed. While this doesn’t eliminate the need for permits and licenses, it represents a notable advancement.
Another aspect to consider in Cambodia’s New Investment Law are the incentives, especially for projects contributing to education, research, development, innovation, large industrial parks or shopping centers, private sector involvement in infrastructure development, logistics, digital industry, environmental management, and biodiversity conservation. These projects are eligible for three types of incentives: basic, additional, and special incentives based on their significance and scope.
Regarding basic incentives, investors can choose between an income tax exemption for 3 to 9 years (depending on the investment type and sector) followed by a gradual tax rate of 5% for 2 years, 10% for the next 2 years, and 15% for the final 2 years; or a 200% deduction of certain expenses including capital depreciation over 9 years. In addition to basic incentives, investors can receive exemptions from value-added tax on locally manufactured production inputs and a 150% deduction for research, development, innovation, and human resources expenses as part of Cambodia’s New Investment Law. Special incentives, yet to be defined, will be granted to projects with significant potential contributing to national economic development.
Apart from simplifying application procedures and specifying eligibility conditions for incentives, Cambodia’s New Investment Law provides various guarantees and protections for investors that were not present in previous regulations. These include compensation for losses due to civil war, armed conflict, or emergencies; equal treatment for national and foreign investors (with exceptions such as land ownership restrictions for foreign investors); protection against nationalization or expropriation; price regulation restrictions; removal of foreign exchange control limitations; dividend repatriation facilitation; and intellectual property rights protection.
Cambodia’s New Investment Law presents a notably different landscape compared to the previous one. This landscape will further evolve with the approval of the Public-Private Partnership Bill inspired by the 2016-2020 Public-Private Partnership Strategy for Managing Public Investment Projects. Additionally, aligning Supplementary Decree No. 111 ANK/BK with the new Law is crucial. This decree currently regulates a Negative List of activities restricted to national or foreign investors and requires modification for the full effectiveness of the new Law.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
