You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

November 25, 2016

Qualified Investment Projects in Cambodia

Subscribe to Updates
Informed Counsel

Over the past decade, investors have shown a considerable amount of interest in Cambodia. Last year, foreign direct investment in Cambodia was estimated at USD 1.8 billion, or 10 percent of GDP, according to the World Bank. This interest has largely been spurred on by the government, which offers an investment scheme that has some of the most attractive incentives in the region.

The incentives include a tax holiday on profits for up to nine years if an investment project is recognized as a Qualified Invest Project (QIP) by the Council for the Development of Cambodia. Once an investment project is recognized as a QIP, it can either elect to receive an exemption on profit taxes or to use a special depreciation allowance. QIPs can also receive a raft of other benefits, depending on various factors.

Exemption on Profit Taxes

The normal corporate tax rate in Cambodia is 20 percent. QIPs that elect to receive an exemption on profit taxes enjoy a tax holiday for up to nine years. The tax holiday is comprised of a trigger period, which is followed by a three-year period, and then a priority period.

Trigger period. The trigger period begins on the date the final registration certificate is issued, and it ends on the last day of the fiscal year immediately preceding the fiscal year that the QIP derives a profit, or the third fiscal year after the fiscal year in which the QIP generates any income, whichever is earlier.

Three-year period. The three-year period commences from the fiscal year that immediately follows the trigger period.

Priority period. The priority period starts from the fiscal year that immediately follows the third year of the three-year period, and lasts from zero to three years, depending on the type of project and the amount of investment capital. The priority period is determined by a Royal Decree, which is issued by the government.

In Cambodia, most businesses are also subject to a 1 percent tax on gross revenues each month, but QIPs are exempt from this tax during the tax-holiday period.

These tax exemptions only apply to revenue and profits generated from the QIP itself, and may not be applied to any income generated from non-QIP activities. In addition, the tax break is not applicable to withholding taxes, taxes on salaries, value added tax, or any other taxes specified by Cambodian law.

Special Depreciation Allowance

QIPs that elect to receive a special depreciation allowance are granted a generous tax break on importing large amounts of machinery or other capital goods. The QIP is entitled to a special depreciation allowance of 40 percent of the value of new or used tangible property that is used in the QIP’s production or processing.

The special depreciation allowance can be applied in the first year of the purchase of tangible property, or in the first year that property is used in the QIP.

Other Benefits

QIPs receive exemptions on customs duties in the importation of production equipment, construction materials, and production inputs that will be used in the production of products for export.

In addition, QIPs receive preferred treatment when hiring foreign employees. Cambodian law normally requires employers to hire at least ten local employees for every foreigner they hire (although waivers are routinely granted). QIPs are expressly permitted by law to hire as many foreigners as necessary to work as managers, technicians, and skilled workers, provided that each foreign employee is supported by documentation proving that their qualifications and expertise are required for the job.

QIPs are also entitled to enter into land leases for an unlimited term, instead of the normal 50-year maximum term, and they are permitted to include foreign arbitration clauses in their contracts with the Cambodian government.

Special Economic Zones

QIPs can avoid having to pay VAT on imported inputs if their project is located inside a special economic zone (SEZ). SEZs were introduced by the government in 2005. According to the government’s official figures, there were 14 SEZs operating in Cambodia as of September 2015. The SEZ in Phnom Penh has 83 investors—the highest in the country—followed by the SEZ in Sihanoukville, which has 74 investors.

The government’s main purposes in establishing the SEZ program are to attract more investors and promote diversification of the industrial base away from the garment sector, which heavily dominates Cambodia’s economy. Most of the industrial base that uses SEZs is comprised of manufacturers of electronics and vehicle spare parts, and companies in the food, beverage, and household furnishing sectors.

To establish an SEZ, a zone developer must have at least 50 hectares of land and provide an anti-flooding system, a clean water system, electricity, telecommunications, a residential center for employees and employers, an adequate road system, public parks, environmental protection measures, and other related infrastructure. An SEZ must be approved by the Council for the Development of Cambodia.

Only a zone investor of an approved QIP is eligible to operate inside an SEZ. Both the zone developer and the zone investors are entitled to an exemption on profit taxes for up to nine years, and they can also receive unlimited exemption on VAT on their imports and zero-rated VAT on their turnover. Zone investors, however, need to pay tax on any imported inputs if they are used to produce products that are sold domestically.

Cambodia offers an enticing business environment for investors. With the country’s robust growth and the government’s aspiration to increase foreign direct investment through attractive investment schemes, Cambodia is rife with opportunity. As long as a number of development challenges are adequately addressed, investment and, in particular, QIPs hold a lot of potential in Cambodia.

Download Full Article
Related Professionals

Practices

Corporate/M&A

Location

RELATED INSIGHTS​ 

August 20, 2026
Vietnam’s Law on Bankruptcy and Rehabilitation No. 142/2025/QH15, passed by the National Assembly on December 11, 2025, does something many regional counterparts do not yet attempt: it instructs parties and arbitral tribunals on exactly what happens to an arbitration once a debtor becomes insolvent. Together with the Law on Commercial Arbitration No. 54/2010/QH12, the new law improves upon what used to be an uncertain area of practice, now providing an explicit, mandatory sequence of procedures. Suspension and Termination of Arbitration Proceedings Under article 40(2) of the law, once a Vietnamese court accepts a bankruptcy petition, any arbitration that concerns the debtor’s financial obligations must be temporarily suspended as soon as the tribunal receives the court’s notification. If the court subsequently issues a decision commencing bankruptcy proceedings, article 59(2) takes a further step: the suspended arbitration is terminated outright, and the underlying case file is transferred to the court handling the insolvency for resolution. The two provisions work as a sequence: first suspension, then termination and transfer, rather than as independent triggers. Meanwhile, article 60(4) reinforces this effect by vesting the bankruptcy court with exclusive jurisdiction over all claims against the debtor from the date the petition is accepted. Notably, this mechanism operates automatically, without the need for the insolvency court to issue a separate anti-arbitration order. The tribunal simply suspends or terminates the proceeding by operation of law once notified; however, Vietnamese law currently provides no procedure by which a party can apply to the insolvency court for permission to continue the arbitration despite the statutory effect. Practitioners with a Vietnamese counterparty in arbitration should treat notification of a bankruptcy filing as something to flag to the tribunal immediately since continuing to arbitrate a claim that has become subject to article 40(2) or 59(2) risks producing an award vulnerable
Read More
August 20, 2026
Thai law contains no provision that speaks directly to what happens to an arbitration when one of the parties becomes insolvent. The interaction between arbitration and insolvency is derived instead from the general operation of two separately drafted laws: the Bankruptcy Act B.E. 2483 (1940) and the Arbitration Act B.E. 2545 (2002). Because Thai courts have had few opportunities to interpret how these two statutes apply together, the practical answer to many questions, such as who represents an insolvent party in arbitration, whether an award will be enforced, and what happens to a foreign proceeding, depends on inference from general principles of insolvency, arbitration, and procedural law rather than on settled rules. Liquidation and Restructuring The Bankruptcy Act governs both liquidation, which winds up a debtor’s affairs, and restructuring (rehabilitation), which aims to preserve a business. The consequences for arbitration differ accordingly. In liquidation, the debtor’s assets vest in the official receiver, who alone can conduct or continue any arbitration affecting the estate; the debtor loses the authority to act on its own behalf. In restructuring, the plan preparer or administrator takes over that role, but there is more room for the debtor to remain involved, since the objective of rehabilitation is to keep the business operational. Restructuring carries an automatic stay that takes effect once the Bankruptcy Court accepts the restructuring petition. This stay can halt an arbitration regardless of where it is seated. In contrast, liquidation does not work through a stay; instead, the debtor’s loss of authority over its own assets and disputes is what constrains the arbitration. Neither proceeding provides a party a formal route to apply for permission to continue arbitrating—the Bankruptcy Act contains no such mechanism—though in restructuring cases the Bankruptcy Court may allow proceedings to continue where doing so will not prejudice
Read More
August 20, 2026
As part of its membership in Lex Mundi, Tilleke & Gibbins has released the latest edition of its Guide to Doing Business in Thailand, providing an overview of the legal, regulatory, and commercial considerations for companies establishing or expanding operations in Thailand. The 2026 edition offers practical insight into the country’s business environment, investment framework, and operational requirements. The guide covers a wide range of topics relevant to foreign and domestic investors, including: Investment incentives and promotion schemes Financial facilities and banking regulations Exchange controls and money transfers Import and export regulations Business structures and incorporation options Requirements for establishing a business Operational and compliance considerations Business cessation and insolvency procedures Employment and labor laws Taxation Immigration and visa requirements Prepared by Tilleke & Gibbins lawyers across multiple practice areas, the publication outlines key aspects of doing business in Thailand, including foreign investment restrictions, regulatory compliance obligations, corporate structures, employment requirements, and recent legal and economic developments affecting investors. The publication forms part of Lex Mundi’s Country Guides series, a global collection of jurisdiction-specific reference materials prepared by member firms around the world. Together, these guides help companies evaluate opportunities, compare regulatory environments, and plan international business activities across multiple markets. The full Guide to Doing Business in Thailand 2026 is available through the button below.
Read More
August 18, 2026
The Bank of Thailand (BOT) is seeking public comment on proposed amendments that would significantly expand know-your-customer (KYC) and customer due diligence (CDD) requirements for cash-related transactions at financial institutions (FIs) and specialized financial institutions (SFIs). Released on August 5, 2026, the proposed regulation would supersede BOT Notification No. 16/2569, which focused primarily on cash withdrawal transactions. The public comment period is open through September 3, 2026. The amendments reflect concerns that FIs and SFIs may be used to facilitate the movement, concealment, and conversion of criminal proceeds, potentially damaging institutional operations and public confidence in the financial system. Expanded Scope of Covered Transactions The most significant change is the broadening of the definition of “cash-related transactions.” Previously, the regulation covered only cash withdrawals and uncrossed check withdrawals. The amended regulation extends coverage to include: Cash deposits, check deposits, or receipt of funds from the public not in the form of deposit accounts; Thai baht (THB) banknote exchange (different denominations); Receipt of cash for issuing checks and drafts; and Purchase, sale, or exchange of foreign banknotes. Mandatory Identity Verification and Risk Management For all cash-related transactions, FIs and SFIs must require customers, or authorized or delegated persons, to present identification or verify their identity before every transaction, including one-time (walk-in) transactions. Specific identification requirements vary by transaction type, customer nationality, and channel (branch vs. electronic). FIs and SFIs must also establish comprehensive risk management processes and procedures for cash-related transactions. These requirements include identifying customers or authorized representatives in accordance with transaction-specific verification standards, analyzing customer behavior, implementing risk-management measures proportionate to the customer’s risk profile, and recording abnormal behavior in relevant systems. The BOT also encourages institutions to proactively guide customers toward transaction channels that offer greater traceability than cash. For corporate customers in high-risk business sectors—including foreign
Read More