With the global shift and upgrading of the manufacturing industry, an increasing number of manufacturers are turning their attention to Southeast Asia.
As an emerging investment destination in the region, Cambodia has become a strategic hub for manufacturing enterprises aiming to relocate to Southeast Asia and expand into the ASEAN market. This is due to its stable political environment, advantageous geographic location, low labor costs, increasingly improved infrastructure, and tax incentives that have drawn the attention of global investors.
For enterprises planning to establish operations in Cambodia, understanding the country’s tax policies is particularly important. Proper comprehension and utilization of these policies can not only help reduce costs but also ensure compliance with local laws and regulations, thereby mitigating potential tax risks.
This article will provide an analysis of the taxes required for enterprises operating in Cambodia and the tax incentives available to them, offering a clear tax guide for businesses looking to set up operations in the country.
Taxes Required for Enterprises Operating in Cambodia
Cambodia implements a nationwide unified tax system based on a territorial tax regime, primarily collecting taxes through profit tax, value-added tax (VAT), personal income tax, and others. The main taxes that enterprises are required to pay include corporate profit tax, VAT, withholding tax, personal income tax, and contributions to the social security fund. Additionally, enterprises owning real estate are also subject to land tax.
Corporate Profit Tax: The standard corporate profit tax rate in Cambodia is 20%. However, the tax rate for the extraction of natural resources (such as oil, gas, timber, and minerals) is 30%, while the rate for insurance businesses is 5%. Enterprises with Qualified Investment Project (QIP) status enjoy a 0% tax rate during the exemption period.
Companies are required to file and prepay profit tax monthly to the General Department of Taxation. The prepayment amount is 1% of the monthly turnover (excluding VAT), and the deadline for prepayment is the 25th of the following month. At the end of the fiscal year, companies must calculate and pay the final income tax, which is the remaining balance after deducting all allowable expenses and the prepayments made. The annual tax return filing deadline is typically March 31 of the following year.
Withholding Tax: Withholding tax is a critical consideration for cross-border payment transactions involving international investments. When enterprises make payments abroad for dividends, interest, or royalties, a 14% tax rate applies. Multinational investors should carefully plan their business structures to ensure compliance and proper tax remittance.
Value-Added Tax (VAT): Cambodia levies VAT on the supply of goods and services at a standard rate of 10%. Exports and certain zero-rated supplies are exempt from VAT. Virtually all businesses operating in Cambodia are required to pay VAT, and VAT returns must be filed by the 25th of each month.
Personal Income Tax: Cambodian residents are taxed on wages earned both domestically and abroad at progressive rates ranging from 0% to 20%. Non-residents are taxed at a flat rate of 20% on wages earned within Cambodia. Employers are required to withhold and remit taxes monthly on behalf of their employees based on the progressive tax rates.
Social Security Fund: Cambodian law mandates that employers contribute to the social security fund to provide benefits such as healthcare, unemployment, and pensions. Employers are required to contribute approximately 4% of their employees’ salaries to the social security fund on a monthly basis.
Enterprises and individuals can manage tax filing and payment through various methods, including the online tax management system (E-Tax) launched by the General Department of Taxation (GDT). They can also file and pay taxes in person at GDT offices, through banks and other payment platforms, or with the assistance of accounting firms and law firms.
For enterprises, understanding the required taxes and applicable rates is crucial, but equally important is gaining insight into Cambodia's investment tax incentive policies. To attract investment and foster economic growth, the Cambodian government has introduced a range of tax incentives and has signed agreements with numerous countries and regions to avoid double taxation.
By fully leveraging these incentives, enterprises can effectively reduce costs, optimize their tax structures, and drive long-term sustainable development.
Cambodia Investment Tax Incentive Policies
Ⅰ. Micro, Small, and Medium Enterprises (MSMEs): 2-6 Years Tax Incentive Period
On June 19, 2024, Dr. Aun Pornmoniroth, Deputy Prime Minister and Minister of Economy and Finance, issued a ministerial decree, announcing that the Cambodian government will provide tax incentives to micro, small, and medium-sized enterprises (SMEs) registered between 2023 and 2028. The incentives include exemptions from taxes, fines, and interest owed prior to registration, as well as exemptions from paying patent taxes, registration fees, and profit taxes. The incentive period ranges from 2 to 6 years.
The decree specifies that eligible enterprises must come from four priority sectors: retail, wholesale, and repair; accommodation and catering; handicrafts; and agriculture and agricultural associations. The specific incentives are as follows:
Micro Enterprises Registered between 2023 and 2028: Exempt from paying tax registration fees, information update fees, and tax registration certificate printing fees.
Small Enterprises Registered between 2024 and 2025: Exempt from taxes, interest, and fines owed due to non-compliance with tax obligations before registration. Exempted from paying tax registration fees, information update fees, and tax registration certificate printing fees. Exempt from patent tax (Patent Tax) for the year of registration, 2024, and 2025.Exempt from profit tax, minimum tax, and prepayment of profit tax for two years.
Medium Enterprises Registered between 2024 and 2025: Exempt from taxes, interest, and fines owed due to non-compliance with tax obligations before registration. Exempted from patent tax (Patent Tax) for the year of registration, 2024, and 2025.Exempt from profit tax, minimum tax, and prepayment of profit tax for two years.
Ⅱ. Qualified Investment Projects (QIP): 3-9 Years of Corporate Profit Tax Exemption
A Qualified Investment Project (QIP) refers to an investment project that has received the final registration certificate issued by the Cambodia Development Council (CDC) or the Provincial/City Investment Sub-Committee (PMIS).
QIP projects with an investment of over $2 million are directly handled by the CDC, while those under $2 million are managed by the Provincial/City Investment Committees (PMIS).
Enterprises can choose between two options based on their specific circumstances: Exemption from corporate profit tax, or special depreciation benefits.
Exemption from Corporate Profit Tax: Depending on the industry and investment activities, businesses are exempt from profit tax for a period of three to nine years, with the exemption period starting from the date of first revenue generation.
After the profit tax exemption period ends, Qualified Investment Projects (QIPs) are entitled to pay profit tax at proportional rates of the total amount of tax payable as follows: 25% for the first two years, 50% for the next two years, and 75% for the final two years.
Special Depreciation Benefits: For tangible assets (new or second-hand) used in the production or processing process, a special depreciation allowance of 40% is permitted.
Enterprises can choose between two options based on their specific project circumstances: Exemption from corporate income tax, or special depreciation benefits.
Ⅲ. Economic Zone Tax Incentives: Up to 9 Years of Profit Tax Exemption
According to the Kingdom of Cambodia's Land Law, economic zone developers can establish special economic zones in border areas or independent regions under a national land concession and lease the land to investment enterprises.
Enterprises investing in and developing projects within government-approved economic zones in Cambodia can enjoy a corporate profit tax exemption for up to 9 years. Additionally, equipment and construction materials imported for infrastructure development within the zone are exempt from import duties.
Furthermore, compared to other Southeast Asian countries, Cambodia's major economic zones (including industrial parks) have clearly defined leading industries, offering more specialized and distinct investment opportunities rather than a uniform approach.
Ⅳ. Double Taxation Avoidance Agreements with 11 Countries
According to a press release from the Cambodia National Taxation Department on April 18, Cambodia has signed the "Agreement on the Avoidance of Double Taxation and the Prevention of Tax Evasion" with 11 countries and regions, including China, Singapore, Thailand, Vietnam, South Korea, and others.
Additionally, Cambodia is currently negotiating with seven countries—Philippines, Laos, Myanmar, France, Japan, Morocco, and the United Arab Emirates—on similar agreements.
The signing of these agreements provides investors with clearer tax rules for cross-border investment and operations, helps avoid double taxation, and enhances the convenience of tax compliance. The combination of multiple tax incentives and a favorable policy environment helps reduce the tax burden on investors and promotes the long-term healthy development of businesses.
While businesses in Cambodia can benefit from lower tax rates and various tax incentives, it is essential for companies to remain vigilant about tax compliance requirements to ensure adherence to Cambodia’s tax laws and regulations. Timely tax filings and payments are crucial for avoiding potential tax risks.
It is important to note that in practice, a company's tax situation may vary depending on factors such as industry, business model, scale, and applicable policies. Therefore, the information provided in this article is for reference purposes only. Businesses are advised to consult with professional tax advisors or relevant institutions to ensure the accuracy and compliance of their tax handling.
As a full-service brokerage, Cambodia Securities Company is dedicated to providing comprehensive, one-stop services to help businesses establish themselves smoothly in Cambodia and navigate the process of listing on the stock exchange. From the initial setup of the business to preparing for listing, we offer professional guidance and consulting to ensure compliance with all regulatory requirements. We also assist businesses in formulating future financing plans, actively promoting Cambodia’s integration with international markets, and helping international investors focus on Cambodia. This, in turn, enables companies to raise capital effectively and support their sustainable development.
Manufacturing Industry Expands to Southeast Asia: A Comprehensive Guide to Investment and Taxation in Cambodia!