Self-employment Setting up a business in Cambodia
[J-Tao Report] In 2012 Foreign Direct Investment in Cambodia increased by 73%, the South-East Asia average was only 2%. Thanks to more relaxed legislation by the Council for the Development of Cambodia (CDC) it has become easier for both Cambodian natives and expats alike to start their own businesses in the country.
Cambodia is becoming an ideal place for entrepreneurs wanting to work for themselves or expand an already existing business. The start-up costs are comparatively low and Cambodia boasts a growing economy with a flourishing middle class. The downside is the process of starting a business has become slower over recent years as more bureaucracy has been introduced.
By law, foreigners are still unable to acquire land for business use, but leasing opportunities in Cambodia are good. Be careful, however, that you deal directly with the owner of the property. An application for a business in a subleased unit will be rejected, so make sure you know who you’re dealing with.
How to get started
Just as if you wanted to work in Cambodia, if you intend to set up a business you’ll need to register for a work permit with the Ministry of Labour; there is also an additional annual registration fee of US$100. When you register you will be provided with a labour book, in which you are required to record the members of staff you employ.
In order to verify your intention to set up a business in Cambodia you need to deposit US$1,000 into a Cambodian bank account, this deposit can be withdrawn once the company is established. In some cases you may also need to provide proof from your home country that you have no criminal record.
As well as registering with the Ministry of Labour, there will also be licences that need to be obtained at an additional cost. The type of license needed will depend on the type of business you are starting. The license for importing/exporting goods is included in registration with the ministry. However, for example, a license for a restaurant can cost between US$150-300, depending on the number of seats it has.
It is the responsibility of the business owner to get the appropriate licenses for their type of business. It is a good idea to seek advice from a legal or accounting firm to avoid fines and potential closure of your business.
For small business such as guesthouses, bars and restaurants it is advisable that they are registered as a limited company and under sole proprietorship. If profits fall below a set threshold then the business does not need to be registered to pay VAT, tax payments are managed by the local tax department. These businesses will need a license from the Ministry of Tourism, who will carry out checks concerning safety and sanitation.
Expansion of foreign companies
Companies wanting to move into the Cambodian market are still required to register with the Ministry of Commerce even though they are not a new business.
There are two options for companies wanting to establish operations in Cambodia. They can open a Branch Office which can function like the original company and like any other business in Cambodia. Or, they can open a Representative Office, which although restricts what the company can do; for example, they will not be able to buy or sell goods, is an option used by some companies to gather information about the market before deciding to commit to the move.
The Cambodian Investment Board has introduced incentives for investors wanting to start businesses in specific fields; technology, job creation, exports, tourism, environmental conservation, and rural development, which means they can apply for exemption from taxes, duties and application costs.
Investment that does not encompass these specific industries will not have the same incentives and the application should be sent directly to the Ministry of Commerce.