Can Foreigners Own Business Cambodia?

Doing Business in Cambodia
Located in South-eastern Asia bordering the Gulf of Thailand, the Kingdom of Cambodia is a constitutional monarchy. The Royal Cambodian Government was formed in 1993 on the basis of UN-sponsored elections that were internationally recognized as free and fair. It is located in between Thailand, Vietnam and Laos. Cambodia established full diplomatic relationship with the US after the formation of the freely-elected royal Government.

Following Japanese occupation in World War II, Cambodia emerged as an Independent country in 1953 after being freed by its colonizer, France. Extension of Vietnam war to Cambodia resulted in the birth of ‘Khmer Rouge’ rebel group which took over Phnom Penh in 1975. At least 1.5 million Cambodians died from execution, forced hardships, or starvation during the Khmer Rouge regime under Pol Pot. After much internal strife and bloodshed, Cambodia sought to reappear on the world scene as a nation with socialist leanings, People’s Republic of Kampuchea. The travails of citizens continued until the war-ravaged society was reunited under the monarchy in 1993 ( http://en.wikipedia.org/wiki/Cambodia. Source: asiabiznews.net

Basic Facts About Cambodia
Cambodia lies entirely within the tropical region. As is the case with any other Southeast Asian nation, Cambodia’s climate is marked by monsoons, which are characterized as tropical wet and dry, due to the distinctly marked seasonal variations.

Cambodia’s topography consists of Central plains, drained by the Tonle Sap (Great Lake) and Mekong and Bassac Rivers. The country is known for its thick forests and has mountains in the southwest (Cardamom Mountains) and in the north (Dangrek Mountains).

With substantial hydro-power potential and abundant natural bio-diversity, Cambodia has other natural resources like oil and gas, timber, gemstones, some iron ore, manganese and phosphates ( http://www.nationsonline.org/oneworld/cambodia.htm Exploitation of these natural resources have taken the forms like illegal logging and strip gemming.

Chief among its industries are – tourism, textiles and garments, beverage, food processing, rice milling, fishing, wood and wood products, rubber, cementa and gem mining among others. It has a coastline of 443 kilometers.

Cambodia is divided into 24 provinces including the capital Phnom Penh. Districts and municipalities are the second-level administrative divisions. The country’s provinces are divided into 159 districts and 26 municipalities. Cambodia’s official language is Khmer. Majority of Cambodians practise Theravada Buddhism.

Cambodia got into the Association of Southeast Asian Nations (ASEAN) in 1999 and acceded to the World Trade Organization (WTO) in 2004. Since then, Cambodia has been making efforts to ensure integration of its legal system with other systems in the ASEAN member countries ( Guide to Business in Cambodia (PDF ), BNG Legal, Feb 2010 @ http://www.bnglegal.com. Source: asiabiznews.net

Business Laws in Cambodia
Cambodians often employ traditional methods of dispute resolution which are informal. Everyday disputes are frequently taken to elderly persons or to other people commanding respect in villages and communities. Instruments of Alternative Dispute Resolution (ADR) are also put to use. In 2001, Cambodia ratified the ‘UN Convention on the Recognition of and Enforcement of Foreign Arbitrary Awards’. Cambodian law empowers courts to recognize and enforce foreign arbitrary awards (ibid.) Under Cambodian law, a foreign business is a legal person formed under the laws of a foreign country which has a place of busines and conducts business in the Kingdom of Cambodia. Foreign enterprises are subject to registration at the MOC. Three main forms of foreign business are- a representative office (RO), a branch and a subsidiary.

An RO is considered as a cost centre deriving no income from its activities and is not subject to Cambodian tax laws. However, an RO is subject to – withholding tax on salaries paid to employees in Cambodia, a patent tax and an annual business operation tax.

Branch office of foreign business entity is the same as the parent company. The branch and the foreign company have joint liability with respect to losses and debts of a branch office and the Branch office must all meet local tax obligations.

A subsidiary is a company incorporated in the Kingdom of Cambodia and has at least 51 percent of its capital held by a foreign company. Each subsidiary is subject to commercial registration, handled by the Cambodian MOC.

However, insufficient legal framework is sometimes blamed as a hurdle to doing business in Cambodia and for lack of foreign investment befitting the potential of modern day Cambodia.
Source: asiabiznews.net

Work Culture in Cambodia
Cambodia is a collective society with altruistic spirit. Individuals are subservient to group whether such a group is family, neighbourhood or company ( http://www.kwintessential.co.uk/resources/global-etiquette/cambodia.html ). Etiquette and protocol guidelines are used to maintain a sense of societal harmony.

The Cambodian traditional greeting is a bow combined with folding of hands together at the chest level. However, with foreigners, Cambodians are used to handshakes and local women may adhere to traditional greeting. The usual practice is to reciprocate with the greeting as extended.

In Cambodia, showing emotions is considered to be a negative behaviour. Anger, impatience or frustration shall be kept to oneself by hiding the feelings. Otherwise, it would lead to a loss of face.
In business meetings, one is advised to speak clearly, slowly and avoid use of slang, adages or colloquial utterances. Source: asiabiznews.net

Company Formation in Cambodia
To directly hire staff and conduct most business activities in Cambodia, a foreign business will need to incorporate a company in Cambodia. The experts at New Horizons will assist you in determining the best entity for your business and will assist you with all aspects of the registration process.
Receive a Quote to Open a Company in Cambodia. Source: nhglobalpartners.com

Limited Liability Company
The limited liability company is the most common type of business entity that foreigners use to establish a business in Cambodia. To establish this entity type, you must have at least two shareholders and one director. They can be foreigners and do not need to reside in Cambodia. However, you will need to have a registered agent in Cambodia.

You will also need paid up capital of at least USD $1,000. Higher capital requirements may be imposed for certain industries or complex projects. You will need to deposit the paid-up capital in a corporate bank account in Cambodia before the company is setup. You will also need real office space.
After incorporation, you will need to file annual returns and annual tax returns. You must also register for VAT. Your company may also be subject to routine audits. Source: nhglobalpartners.com

Wholly Foreign Owned Enterprise
The wholly foreign owned enterprise is a type of limited liability company that is established entirely by foreign investors. This type of business entity is often used to produce products in Cambodia to export them to other countries.

To establish this type of business, the company must complete the entire registration and incorporation process, so it is the most expensive type of entity to establish. Source: nhglobalpartners.com

Public Limited Company
The public limited company or joint-stock corporation is only available to banks, financial institutions and companies that are listed on the Phnom Penh Stock Exchange. This type of entity is free to trade in shares and can have more than 30 shareholders. Setting up this type of business is similar to setting up other legal entities in Cambodia. Source: nhglobalpartners.com

Branch Office
Many companies decide to set up a branch office in Cambodia to handle local operations and to do business in the country.