On 26 June 2023, the Royal Government of Cambodia (“RGC”) issued Sub Decree No. 139 on the Implementation of the Law on Investment (“Sub Decree No. 139”). This Sub Decree addresses investment groups, the negative list, registration procedures of investment projects, and new incentive options (including additional and special incentives for car assembly/installation investment projects). It also deals with the authority, and aftercare services, of the Council for the Development of Cambodia (“CDC”) and the Municipal-Provincial Investment Sub-Committee (“MPISC”), as well as merger and acquisition/sale of investment projects, and investment project nullification.

Sub-Decree No. 139 has 7 Chapters and 10 annexes.

The Sub-Decree governs investment projects that have been registered with the CDC or MPISC.  Investment projects herein refer to the three types of Qualified Investment Projects (“QIPs”), being, Export QIPs, Supporting Industrial QIPs, and Domestically Oriented QIPs, as well as Expansion QIPs (“EQIPs”), and Guarantee Investment Projects (“GIPs”).

The Sub-Decree further divides investment groups’ activities into three categories, namely investments in: (i) High-tech and Priority projects, (ii) Medium-tech, and (iii) Low-tech.

Notably, the negative list in Annex 1 of the Sub-Decree, abrogates Sub-Decree No. 111 dated 27 September 2005.

Further significant key features of Sub-Decree No. 139 include:

1. Registration of Investment Projects

Individuals and legal entities who intend to register investment projects must complete the form(s) and provide the documentation listed in the annexes of the Sub-Decree: QIPs (Annex 5),  EQIPs (Annex 6), and GIPs (Annex 7).

Applicants can also register and find the related documents on the website of the CDC.

The applicant can apply through its representative and shall pay an administration fee as set out in Joint Prakas, No 991 MEF.PRK, dated December 28, 2012, on the Provision of Public Services of the Council for the Development of Cambodia.

Proposed investment projects must meet the following conditions:

The investors shall apply for any applicable licenses from relevant ministries and authorities whilst applying for the registration. Upon obtaining the Registration Certificate, the investors have to submit a report to the CDC or MPISC within 20 (twenty) days following the completion of the tax declaration filing and thereafter every 6 months. The report includes, but is not limited to, import tax, VAT, investment project implentation, employees-worker numbers, and environmental obligations.

Investment projects that have been terminated, closed, or suspended because of procedural non-compliance will not be allowed to be re-registered. Likewise, any investment projects that were terminated or closed with the intention of evading tax will not be allowed to be re-registered as QIPs.

2. Aftercare Service by the CDC or MPISC

Under the Sub-Decree, investors can now request for aftercare service provided by the CDC or MPISC by filing the relevant form annexed to the Sub-Decree. The services include, but are not limited to:

• Assessing and understanding developments and issues that investors face;
• Preparing meetings between relevant ministries, departments, and investors
• Consulting and coordinating with relevant ministries, departments, and provincial-level authorities to assist in issuing any applicable licensing requirements to the investors
• Consulting with investors on finding sites for investment projects that could access the economic zones and essential economic borders in Cambodia, ASEAN region and Sub-Mekong region
• Cooperating with relevant authorities for investor incentives

3. Incentives

For the avoidance of doubt, the Investor is eligible to receive incentives as long as the investment projects are not within the threshold requirement under the negative list (Annex 1) of the Sub-Decree. This means that the investment project’s capital must be higher than the threshold requirement. Besides standard incentive options provided under the Law on Investment (Art. 26), Sub-Decree No. 139 includes new additional incentives for investment projects to attract more investors to invest in domestic products and human resources.

Additional QIPs incentives:

1. VAT exemption (0% VAT) for the purchase of domestic-oriented products to implement the QIPs
2. Deduction of 150% from the tax base for the following activities:

• Research, Develop and Innovation
• Development of human resources
• Construction of accommodations, canteens, or nurseries for workers/employees
• Upgrading of Machinery
• Activities that support the welfare of workers/employees i.e. transportation from factory to workers/employees accommodation etc…
• Invest in waste treatment infrastructure

New car assembly/installation QIPs that supply domestic markets are entitled to customs duty, special tax, and VAT deduction if the required criteria set out below are fulfilled:

• 50% for the use of components as a final product without further processing and using more than 400 components in one vehicle or having at least 150 person workforce or investment capital from USD 5 Million
• 70% for the use of components as a final non-paint product and using more than 500 components in one vehicle or having at least a 300-person workforce or investment capital from USD 15 Million
• 80% for the use of non-weld and non-paint components and using more than 600 components in one vehicle or having at least a 500-person workforce or investment capital from USD 35 Million and
• 90% for the use of non-pressure, non-bend, non-weld, and non-paint components and using more than 700 components in one vehicle or having at least a 600-person workforce or investment capital from USD 45 Million

4. Merger and Acquisition or Sale

Sub-Decree No. 139 allows investment projects established through Merger, Acquisition, or Sale to receive incentives, guarantees, and protection as long as the nature of the business is not prohibited by the laws and regulations or is not restricted by the registration certificate or other concession agreements. Those who intend to merge, acquire, or sell shall submit their application to the CDC or MPISC and attach it with other supporting documents. After review, if approved, the investors will then obtain an official permit from the CDC or MPISC to operate as an investment project.

5. Nullifying Investment Projects

Nullification of the investment projects can happen voluntarily or at the CDC’s or MPISC’s  discretion based on the following reasons:

• Inability of the investor to continue the implementation of the investment project
• Board Resolution to discontinue the investment projects
• Investor fails to fulfill the requirements under the Investment Certificate
• Investor fails to implement the project within a period of 12 months after obtaining the Registration Certificate
• The project’s activity is different from the Certificate.

Date of announcement: 26 June 2023

If you have any questions or require any additional information, please contact Matthew RENDALL,  Piseth PANHA, or  Sreypich HOUT of SOK SIPHANA & ASSOCIATES.

This alert is for general information only and is not a substitute for legal advice.