In the wake of the COVID-19 pandemic, the Royal Government of Cambodia has introduced new measures to help mitigate the impacts of the pandemic on the country’s businesses and economy. In particular, the new measures introduced in the government’s May 26 press release, Additional Measures to Support the Private Sector and Workers Seriously Impacted by the COVID-19 Pandemic and to Recover and Promote Economic Growth after the End of this Pandemic, support businesses by extending the validity of previous measures and by introducing new provisions to increase access to financing, to allow loan restructuring, and to reduce tax burdens.

Increased Access to Business Finance

To enable businesses to better access financing, the Ministry of Economy and Finance (MEF) has introduced an additional USD 200 million into the Credit Guarantee Fund, which guarantees loans through financial institutions so that enterprises that may have previously faced difficulty accessing loans have the ability to obtain working capital.

The government has also previously provided capital to small businesses through low-interest loans granted by the Agriculture Rural Development Bank (ARDB). Following the pandemic, the ARDB has dropped interest rates on loans for working capital from 6% to 5%, and on loans for investment capital from 6.5% to 5.5%, to help make capital financing more accessible. The maximum term of ARDB investment loans has been shortened to five years (from seven years), and working capital loan terms remain capped at a two-year maximum tenure.

Businesses that have not been officially registered with the government may apply for loans before completing registration so long as they fulfill the registration conditions within one month after obtaining the loan. The government recently launched the online Business Registration Platform to cut registration time to eight days (from three months) by streamlining the registration procedures—previously handled by several ministries, the Tax Department, and the Council for the Development of Cambodia—into a single process.

In addition to the credit guarantee fund and the reduced interest rates on ARDB low-interest loans, the MEF has also prepared additional financing of USD 300 million to promote growth in primary sectors during and after the crisis.

Loan Restructuring and Changes to Co-Financing Scheme Loans

Building off the previous directive to all banks and financial institutions to restructure loans, the government has made adjustments to some requirements and conditions and has also begun allowing restructuring of loans taken out through the Co-Financing Scheme for Small and Medium Sized Enterprises. 

Under this USD 100 million scheme, which was launched this year, SMEs in certain priority sectors can borrow up to USD 200,000 for working capital and up to USD 300,000 for investment capital. The maximum interest rate on these loans is 7% per year, and the repayment period has now been lengthened to seven years (from four).

While originally SMEs could only access the loans if they planned to create job opportunities for at least five people with the loan funding, now SMEs are only required to create new job opportunities (number unspecified) using the loan. Businesses in the medical device and pharmaceutical sectors may also be eligible for the loans in addition to the priority sectors outlined in Sub-Decree No. 124 S.E., dated October 2, 2018, on Tax Incentives for Small and Medium Enterprises in Priority Sectors.

In allowing restructuring of loans that had been taken out through this program, repayment schedules for qualifying loans may be changed from monthly to quarterly or semiannual repayments.

Reducing Tax Burden

The government’s measures to reduce the tax burden on many businesses include various tax reductions, waivers, and exemptions. The withholding tax on new loans from foreign and domestic sources has been reduced to 5% for 2020 and 10% for 2021, with the normal rate of 14% resuming in 2022. For existing loans, the withholding tax has been reduced to 10% for 2020, with the normal rate resuming in 2021. In addition, the government has continued tax exemptions for all monthly taxes paid by hotels, guesthouses, and travel agencies, as well as for tourism license renewal fees for 2021. In addition, tourism enterprises that have been unable to resume operations will continue to be exempt from making monthly contributions to the National Social Security Fund. All airlines registered in Cambodia will be exempt from their obligation to pay a minimum tax and prepayment tax on income for the duration of two more months (June–July 2020).

Additional Social Support Measures

Finally, the government has granted an extension of the cash-for-work program, which provides cash-based compensation for short-term labor projects in target areas, through 2020. The government has also introduced a social protection program to support the daily livelihoods of poor and vulnerable families across the country.