With a relatively stable political and economic environment, Cambodia is an optimal jurisdiction to register company in. Foreign investors and business owners are looking to incorporate their business in this jurisdiction for a variety of reasons including its strategic location, business-friendly government policies, and more. In this article, we highlight the reasons you should register company in Cambodia.
What are the top reasons to register a company in Cambodia?
The reasons why you should register your business in Cambodia is as follows:
- Strategic location and connectivity:
Bordered by Thailand, Laos, Vietnam, and the Gulf of Thailand, Cambodia is located in the heart of Southeast Asia. Therefore, Cambodia is strategically located for businesses looking to enter the Asian market.
Adding to this, Cambodia also has two inland rivers that run through the country which allows for better transportation and connectivity to other jurisdictions.
The government of Cambodia has also developed the transportation infrastructure in the region. There are at present, 17 airports and 3 seaports available in the country. Thus, Cambodia is well-connected to the world and businesses can take advantage of the same.
- Tax benefits and incentives:
The Cambodian government offers businesses with various tax benefits and incentives in order to attract foreign direct investment (FDI) to the country. Most of the businesses in Cambodia (specifically in the large and medium- scaled industry) are subjected to a corporate income tax rate of 20%, which is lower than the Worldwide Statutory Average Tax Rate of approximately 24% measured across 177 jurisdictions. Small businesses are provided with additional tax incentives as they are subjected to a tax rate of between 0% and 20%, depending on their annual turnover.
If businesses are structured properly and are registered as a qualified investment project (QIP), then the government can allow them tax holidays for a period of up to 9 years or at least a special tax deduction. Even after the tax holiday, businesses will still be subjected to a relatively low corporate tax rate for the next five years. Businesses that fall under the Domestic qualified investment projects, export qualified investment projects, and supporting industry qualified investment projects categories are eligible to such tax incentives.
Businesses conducting certain activities are also provided with a complete exemption from import and export duties and value added tax (VAT).
Besides this, the government has established an extensive network of tax treaties with multiple countries including Thailand, Brunei, Hong Kong, and more. This prevents businesses from being subjected to taxation twice, thus, reducing their overall tax burdens.
- Stable political and economic environment:
Cambodia has a relatively stable political and economic environment. The government has established a strong bilateral trade agreement with China. Additionally, it is a part of the Regional Comprehensive Economic Partnership (RCEP) with various countries including Australia, South Korea, Singapore, and more. Moreover, the country is a member nation of various organisations including the World Trade Organisation (WTO), ASEAN, United Nations (UN), International Finance Corporation (IFC), and more. Thus, this strong diplomacy of the country with other nations allows the region to be relatively stable politically.
The Cambodian economy which is heavily reliant on the garment sector and services sector is growing at a fast rate. The impact of the Covid-19 pandemic has caused the economy to contract. However, the country is projected to and in fact, is actually actively recovering such that it is on a path to economic stability once again. According to the International Monetary Fund (IMF), Cambodia will become the fastest growing economy in Southeast Asia by the year 2025.
Moreover, even though the currency of the country is Cambodian Riel, the United States Dollars (USD) are widely used in the country. This is because of the fewer restrictions placed by the government on foreign exchange. Therefore, USD can be used to conduct business transactions in the region and individuals can even withdraw USD from their banks in the country.
- Well-developed infrastructure and labour force:
The government of Cambodia is actively investing in the development of the region as a way to attract foreign investors and business owners to set up their business here. Thus, Cambodia has a well-established infrastructure with a strong telecommunications network, better transportation systems, provision of basic amenities like power, water, and electricity, and more.
Additionally, with a population size of approximately 16 million individuals and a labour participation rate of 86%, Cambodia will provide businesses with access to a large labour force. Since the minimum wage set in the country is on the lower side as compared to other countries, the hiring of labour is relatively inexpensive for businesses. However, the labour is not well-versed with the English language as can be seen by their ranking of 84th out of 100 jurisdictions in terms of their English proficiency as per the EF English Proficiency Index.
- Complete foreign ownership:
The Cambodian government allows foreign investors and business owners to have 100% ownership of their business in the region. Moreover, there is no restriction on the nationality of the directors and shareholders of the business. This implies that the business owners and stakeholders will not lose any control over their business. However, foreign individuals are not allowed to purchase and own any land in Cambodia. Moreover, businesses that have a majority share (51% or more) owners by local residents (Cambodian citizens) are permitted to own lands.
Additionally, the investment laws and trade regulations that businesses must be compliant with are relatively relaxed for foreign investors.
- Special Economic Zones:
The government of Cambodia has set up over 54 Special Economic Zones all around the country. This is done to attract foreign direct investment to the country, increase business competitiveness in the country, and to thus, stimulate the economy. To attract FDI to the region, the government has to provide businesses with certain fiscal and non-fiscal incentives. These incentives include the provision of additional tax exemptions and subsidies to the businesses, availability of well-developed infrastructure, and more.
Thus, we see that there are multiple reasons as to why you should set up your business in Cambodia.