On August 28, 2020, MOC issued Order No. 63/2020, which aims to implement a transition from the “first to use” to “first to file” system. Now that Myanmar’s trademark law will go into effect in April 2023, the processes for trademark registration and grand opening will start shortly, and the IPD will accept new trademark applications.  

First Soft Opening in 2020 – Since that time the IPD has begun to accept online submissions for trademarks that have been registered at the Office of the Registration of Deeds.

Second Soft Opening – The IPD will accept filing fees and appointment of representative form (TM-2 Form) for marks filed during the first soft opening period. We expect to start May or June of 2023.  

Grand Opening- The IPD will commence grand opening and begin accepting new mark filings under the WIPO e-filing system one month after the second soft opening. 

According to the seminar, the fee of the trademark registration listed are as below: 

Types of submission Official fee per mark/ per class 

Registration Fee 150,000 MMK(approx. 71.00 USD) 

Filing Fee 150,000 MMK (approx. 71.00 USD)

The IPD will soon announce the official fee for trademark registration public.  
To file the trademark registration in Myanmar, applicant must file an appointment of representative TM-2 form, certified by a notary public, granting an authorized agent power to act on behalf of the trademark holder in the registration process. A citizen of Myanmar can work as a trademark agent after completing the IPD’s trademark representative training program. The applicant (whether a citizen or a foreigner) who resides in Myanmar will not be required to notarize the TM-2 Form. 

1. Introduction

Cambodian law allows for two (2) forms of limited liability company: private limited company and public limited company. A public limited company is permitted to have a large number of shareholders by issuing shares to the public and is the vehicle used to list on the Cambodian stock exchange. The two forms of company are not only differentiated by the number of shareholders permitted to own equity, but also the corporate governance mandated by law. Whereas the board of directors of a company is expected to be effective acting with loyalty, skill and care, private limited companies have less articulated requirements in law than the more thoroughly articulated regulations for governing a public limited company listed on the Cambodian stock exchange (hereafter “public listed company”). A private limited company may have more detailed internal rules in its Articles of Incorporation or by laws, however public listed companies have law that regulates their governance in greater detail. This newsletter will articulate some important corporate governance requirements for the board of directors of both public listed companies and private limited companies, and identify some interesting differences that can inform better governance in private limited companies to be implemented through Board Resolutions and/or the Articles of Incorporation or by-laws.

2. Board Composition

The individuals comprising the board of directors of a company must collectively manage the affairs of the company in the interest of the shareholders and are responsible for the long-term success of the company. They guide the company by providing strategic direction and oversight for the benefit of the shareholder(s).

The directors of both forms of company should be over 18 years of age and elected by the shareholder(s) within twelve (12) months from the initial formation of the company or from the date of the last shareholder(s’) meeting. Unless otherwise provided for in the articles, each director is elected for two (2) years and may be re-elected, with staggered terms of office so that all of their terms do not end in the same year.

In terms of board composition, a private limited company can have a minimum of one natural person of any nationality as director and no requirement exists for expertise, independence, number, or diversity of directors.

On the other hand, a public listed company has significantly greater requirements for its board composition. It must have greater expertise, diversity and independence of its board. The greater expertise requirement and quantity of board directors, along with the requirement for independent directors, allows for more considered corporate decision-making. No small group of directors should dominate the decision-making process of the board with many qualified voices in the discussion. In terms of expertise, among other factors, to qualify as a board director, one must have experience of “at least 3 years in the relevant field to his/her position as director, demonstrated leadership ability, and an ability to play a proactive role in turnaround situations.” Diversity and independence of the board are also required. The public listed company must have 5-15 board directors with at least 20% being “independent,” meaning “free of any personal or material relationship with the company’s senior officers or other employees that might reasonably be expected to interfere with the independent exercise of his/her best judgement for the exclusive interest of the company.” Furthermore, foreign nationals serving on the board need at least 6 months of work experience in Cambodia before working as an independent director, presumably giving these directors greater context to their decision-making.

3. Powers of the Board

The board of directors is accountable to the shareholders. In both forms of company the board must propose for shareholder approval the salary or other compensation for directors; amendments or annulments to the articles of incorporation; an agreement of merger or consolidation between the company and any other person; the sale of all or major part of the company’s assets; and a dissolution or liquidation of the company.

The board holds officers of the company accountable through its reserved powers to appoint and remove all officers and determine specific rights such as the salaries and other compensation of the officers.

Furthermore the law articulates the following powers reserved for the board:

1. Issue notes, bonds, debentures, and other evidences of debt of the company and fix their absolute, relative, and contingent characteristics;
2. Declare dividends in accordance with accounting principles and the terms of payment of each class of shares entitled to receive dividends;
3. Issue shares in the company;
4. Borrow money;
5. Issue, reissue, or sell security of the company;
6. Give a guarantee on behalf of the company;
7. Mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the company to secure any obligation of the company; and
8. Close account books of each financial year and propose the annual profits for submission to the shareholders and shareholders’ general meeting.

4. Duties of Directors

Public listed companies have greater articulated duties of directors which could easily be included in articles of incorporation of a private limited company. Directors of private limited companies must act reasonably and in good faith while avoiding conflicts of interests in several contracting situations whereas directors of public listed companies must approve and publicly disclose a code of conduct, and have more clearly articulated obligations, namely:

1. Acting in good faith for the benefit of the company as a whole and shareholders;
2. Using powers for a proper purpose for the benefit of the company as a whole;
3. Not delegating powers except with proper authorization and duty to exercise;
4. Exercising care, skill and diligence;
5. Properly managing any conflict related to the interest of the company;
6. Not entering into transactions in which the directors have an interest except in compliance with approved policy and procedure;
7. Not taking improper advantage of the position of Director;
8. Not making improper use of information acquired as Director;
9. Not accepting personal benefit from the third parties conferred because of the position as a director;
10. Complying with the company’s memorandum and articles of association and resolutions; and
11. Declaring conflicts of interest.

Additionally directors of public listed companies have a legal duty to undertake necessary continuing professional development to keep themselves up-to-date with corporate governance, legislative, and regulatory developments that affect the company and its business. This can ensure that the directors remain knowledgeable about their business environment in order to continue making good decisions on behalf of the company. This continuing professional development must be declared in its public annual report allowing shareholders to assess the continuing professional development of their board.

5. Meetings

Important corporate decisions will be taken at meetings by a vote of the board of directors. Both forms of company must have a meeting of the board of directors once every three (3) months. The Chairman of the board, or one third (1/3) of the total number of serving directors, may call a directors’ meeting with a quorum being at least a majority of the total number of directors. A majority of the votes of directors present decides resolutions with the corporate secretary keeping the minutes of the meeting. Any directors present who do not register dissent to decisions are implied to have given consent. Notably, a director who is not present at the meeting at which a resolution was passed is deemed to have given consent unless within (15) fifteen days after he becomes aware of the resolution he asks for his dissent to be included in official records. Votes may be taken in writing rather than in a convened board meeting, unless the Articles of Incorporation specifically prohibit this.

Unlike a private limited company a public listed company must have at least one independent director present at board meetings. Furthermore the law states that the Board must approve a policy for provision of information to the board. Directors must be provided with complete, adequate, accurate, balanced, understandable and timely information possibly including copies of disclosure documents, budgets, forecasts, and monthly internal financial statements prior to the Board meetings. Any variance between projects and actual results must be disclosed and explained.

The Board of a public listed company must also provide the shareholders with a balanced and understandable assessment of the company performance, position and prospects on a semester basis.
Shareholders who hold at least fifty one percent (51%) of shares have the right to propose an extraordinary general shareholders’ meeting and the right to propose items on the agenda of the meeting.

6. Committees

Specialized committees can help the board deliberate on more specific issues. Committees may be established by a majority of the board of directors in a written resolution that grants specific rights to the committee. Each committee must consist of one or more directors appointed by a majority of the board of directors and conduct its meetings in the same manner as the board of directors.

Committees may not declare dividends or issue shares in the company, nor seek shareholder approval for certain board duties.

The Board of a public listed company must also provide the shareholders with a balanced and understandable assessment of the company performance, position and prospects on a semester basis.
Shareholders who hold at least fifty one percent (51%) of shares have the right to propose an extraordinary general shareholders’ meeting and the right to propose items on the agenda of the meeting.

By law public listed companies must establish an Audit Committee composed of at least three (3) members and chaired by an independent director. At least one (1) member must be a financial expert. They must also establish a Risk Management Committee if assets amount to more than 200,000,000,000 riel (around USD $50,000,000) composed of at least three (3) members and chaired by an independent director. At least one (1) member must be an expert in finance and risk management.

Private limited companies have no legal mandate for nomination process of directors, however public listed companies are encouraged to have a nomination committee composed of at least three (3) members, all of whom must be non-executive directors with at least one (1) independent director, and are recommended to have a system wherein minority shareholders can nominate directors. Roles and duties of the committee are determined by the board and should include review and evaluation for the board of the qualifications of candidates for the positions of directors or senior officers. The nomination committee may also include responsibility for setting or reviewing and recommending the compensation and remuneration of the board and senior officers.

7. Corporate Secretary and Records

The company must name a company secretary who has the right to receive and keep documents related to the affairs of the company, and must store the articles and by-laws, including amendments; minutes of meetings and resolutions of shareholders; copies of all notices required to be sent or filed in accordance with the law; and a securities register at its registered office.

A private limited company has limited further guidance for the role of corporate secretary, however could incorporate into its Articles of Incorporation specific roles as established for a public listed company.

A public listed company must appoint a senior officer of the company as corporate secretary who can assure good performance, loyalty and discipline. The corporate secretary reports to the board through the Chairman and has specified roles, namely: establish an effective working relationship with the board and senior officers of the company; support the board and board committees; keep updated on developments in law and regulations that might affect the board and company operations; keep updated with corporate governance and corporate social responsibility developments; facilitate effective communication between the board and senior officers in order to support the decision making process; and arrange and manage procedures and minutes-taking for board and shareholder meetings.

8. Directors’ Rights

Whereas no explicit “directors’ bill of rights” is included in law for private limited companies, individual directors of public listed companies have the legally articulated right to:

1. Receive agendas and information sufficiently in advance, in order to prepare for Board and committee meetings;
2. Access to up to date information about the company in a timely way;
3. Disagree, in writing, with any board action or decision, and record their dissenting voice;
4. Place items onto the agenda of board meetings;
5. Access to senior officers as reasonably needed, on a mutually convenient basis;
6. Obtain in-house advice on all duties;
7. Receive transparent and adequate compensation or remuneration; and
8. Access to independent advice if required.

By clearly articulating these rights, the director becomes more empowered to perform duties on behalf of the shareholders. If not already incorporated into the Articles of Incorporation, a private limited company would do well to use these rights as a basis for empowerment of its directors.

9. Conclusion

It is evident in law, and an entirely reasonable measure, that public listed companies have more protections in place for their shareholders compared to a private limited company. These measures should increase shareholder confidence in the governance of the company. The protections can be seen in the increased legal requirements articulated in the rights and obligations of the board and officers of a public listed company. Should a private limited company wish to improve its corporate governance for the benefit of the shareholder(s), it might adopt some of the standards mentioned in this newsletter.

1. Introduction

With the amendment to the Labour Law in 2018, seniority indemnity was introduced as a replacement for the previous regime of dismissal indemnity. Seniority Indemnity is the financial entitlement of workers under Undetermined Duration Contracts (“UDC”s). The Prakas on the Payment of Seniority Indemnity later in 2018 further defined the entitlements of employees and the requirements from employers. This newsletter will outline those entitlements and employers’ liabilities, in addition to the benefits of employees under Fixed Duration Contracts (“FDC”s).

2. Entitlements

The term seniority indemnity only applies to contracts of an undetermined length. Employees are entitled to fifteen (15) days of their wages for each one (1) year of employment.

This indemnity shall be paid to workers twice per year, as follows:

• 7.5 (seven and a half) days in June of each year; and
• 7.5 (seven and a half) days in December of each year.

During the first calendar year of employment, an employee is entitled to 7.5 (seven and a half) days of seniority indemnity should they have worked consecutively from one (1) to six (6) months.
Should an employee’s employment be terminated by the employer, they are still be entitled to seniority indemnity as follows:

• The payment of seniority indemnity in any 6-month period that the employee is terminated, which equals to 7 days of wages and other benefits, if the employee has worked during that period from 1 month to below 6 months.
• The total payment of pre-2019 seniority indemnity which the employer has not paid.

If an employee is terminated due to serious misconduct, no seniority indemnity will be paid upon that termination.

3. Payment of Seniority Indemnity

3.1. Seniority Indemnity prior to 2019 and the Requirement for Back Payment

The Prakas also provide for seniority indemnity to be paid to employees for the years worked preceding the introduction of the regulations. The Prakas stated that the total amount of seniority indemnity days owed prior to 2019 should be paid back in the following manner:

According to Instruction No. 042, the backpay of seniority indemnity before 2019 before the sectors outsides textile, garment and footwear shall delay to the end of 2021.

The maximum seniority indemnity to be paid shall not exceed 6 (six) months of the average net wages of each year that shall be back paid.

However, should an employee resign, they will not receive the back payment of seniority indemnity.

3.2. Seniority Indemnity from 2019 onwards

From 2019, the seniority of workers/employees for receiving seniority indemnity shall be calculated once per semester (6 months): the first semester is from January to June and the second semester is from July to December. After-probation workers/employees who have worked in each semester from 1 month to 6 months and have worked until the end of each semester: June and December, the workers/employees can receive a seniority indemnity that is equal to average wage and benefits of 7.5 days in each semester.

4. Exceptions

According to Instruction No. 044/19, the Ministry of Labour and Vocational Training informed the heads and staffs of foreign diplomatic representatives, agencies of the United Nations and International Organizations in Cambodia that all staff who is working for foreign diplomatic representatives, agencies of the United Nations and International Organizations in Cambodia shall be exempted from the implementation of the Prakas No. 443 dated 21 September 2018 on the Payment of Seniority Indemnity.

5. Seniority Indemnity During COVID-19

Whilst the requirement for back payment was established in the 2018 Prakas, a subsequent Notification from the Ministry of Labour delayed the implementation of this to 2021, to enable employers, especially in the context of the COVID-19 pandemic, to ensure that they had adequate liquidity to be able to furnish employees with the indemnity. However, in 2021, MoLVT issued another notification to owners of factories/establishments to begin repayments of seniority indemnity including the seniority indemnity which was unpaid during the postponement.

6. Termination

Should an employee’s employment be terminated by the employer, they are still be entitled to seniority indemnity as follows:

• The payment of seniority indemnity in any semester that the employee is terminated, which is equal to 7 days of wages and other benefits if the employee still has seniority from 1 month to below 6 months.
• The total payment of pre-2019 seniority indemnity which the employer has not paid.

7. Taxation

Based on Circular No. 003 on Tax Exemption on Pre-2019 Payment of Seniority Indemnity and Payment of Seniority Indemnity from 2019 onward, dated 11 April 2019, the tax on salary applicable to the back payment of seniority indemnity is as follows:

• Exemption for back payment of seniority indemnity prior to 2019.
• Allow the payment of seniority indemnity as a deductible expense for the purposes of income tax for that financial year.

For the tax on salary applicable to seniority indemnity from 2020 onwards, Circular No. 002 on Tax Exemption on Payment of Seniority Indemnity from 2020, dated 24 March 2020 was issued. This states the following:

• Exemption on salary tax for seniority indemnity payments under 4,000,000 KHR (approximately US$ 1,000).
• or seniority indemnity amounting to 4,000,000 KHR or above, salary tax is applicable.
• Allow the payment of seniority indemnity as a deductible expense for the purposes of income tax for that financial year.

8. Fixed Duration Contracts (“FDC”)

Seniority indemnity does not to apply to contracts that are of a fixed duration. Workers under a FDC are instead entitled to severance pay at the expiration of the fixed duration contract. The severance pay shall be at least equal to five percent (5%) of the total wages paid to the employee for the full duration of the contract.

9. Conclusion

The introduction of seniority indemnity has been a welcome benefit for employees in Cambodia, and the instructions from the Ministry of Labour have been clear. Implementation up to this date has not been as strong as it may have been, and more needs to be done by employers to ensure they are fully compliant.

I. Introduction

Cambodia has a significant population of non-governmental organizations (NGOs) with more than 5,000 operating in 2021. NGOs have a role to fill in providing needs such as disaster prevention, public health, environmental protection, education, and other public interest needs that the government may not be fully addressing.

Notwithstanding these public interest contributions, tax compliance and various regulatory requirements are demanded from non-profit organizations through a range of laws passed over the years. Parts of this legal framework are sometimes overlooked, particularly by those using counsel from outside of Cambodia, and this newsletter will update readers on the current registration and taxation regime for non-profits in Cambodia.

II. Registration of NGOs

Any non-profit organization that wishes to operate in Cambodia must officially register with the relevant authorities. Non-profit organizations (referring to associations and NGOs) in Cambodia are further distinguished into “domestic” and “foreign” categories. The Law on Associations and NGOs of 2015 defines a “domestic association” as “a membership organization established under the laws of Cambodia by natural persons or legal entities aiming at representing and protecting the interests of their members without generating and sharing profits.” A “domestic NGO” is defined as “a non-membership organization, including foundations, established under the laws of Cambodia by natural persons and/or legal entities aiming at providing funds and services in one of several sectors for the public interest without generating profits.” In essence, NGOs are independent organizations which do not rely upon members. The foreign counterparts to the domestic NGOs are distinguished by being established outside of Cambodia but seeking to conduct public interest and non-profit activities in Cambodia.

2.1. Registration of Domestic NGOs

Establishing a local NGO requires at least three (3) founding members of at least eighteen (18) years of age, and the organization needs to register with the Ministry of Interior (“MOI”) by including, but not limited to, the documents as follows:

• 2 application forms;
• 1 certificate of residence of the headquarters of the NGO from the Chief of Commune or Sangkat;
• 2 CVs of each founding member, attached with recent photographs;
• 2 statutes signed by the Chairperson of the NGO.

The statutes of the local NGO shall be in compliance with the laws of Cambodia and shall indicate some important points as follows:

• Objectives;
• Measures for selecting, terminating, dismissing, transferring and removing the position of president or executive director;
• Measures for changing the organization’s name and logo, and for amendment of statutes;
• Sources of resources or properties;
• Rules for managing resources and properties;
• Measures for dissolving and disposing of resources and properties upon dissolution of the organization.

A registration takes up to forty-five (45) working days to get a decision from the MOI. In the event that some criteria are not completely fulfilled, the MoI will inform the applicant in writing to make corrections within forty-five (45) working days, and the MoI shall render a decision about the registration within fifteen (15) working days at the latest from the date it receives the corrected documents. Should the MoI fail to decide within this period, the organization shall be considered registered under the law, and thus become a legal entity, following which the MoI must prepare documents to legalize the registration.

Domestic NGOs shall submit all Cambodian bank account information to the MOI and MEF within thirty (30) days from the date of registration. In the case of amendment of its statutes, the organization shall submit all required documents to the MOI within fifteen (15) days at the latest from the date the change is made.

2.2 Registration of Foreign NGOs

Instead of going directly to the Ministry of Interior, foreign NGOs need to register at the Ministry of Foreign Affairs and International Cooperation (“MFAIC”) to conduct any activity in Cambodia by signing a Memorandum of Understanding (“MOU”). Required documents include:

• A letter from the president of the foreign NGO requesting to appoint its representative with one attached copy of a brief biography of the person requested to be appointed, and one copy of the request to open a representative office;
• A letter confirming the address of the representative office in the Kingdom of Cambodia issued by the Commune or Sangkat Chief;
• A letter issued by a competent authority of the country of origin, authorizing the foreign NGO to operate;
• A supporting letter of the projects of the foreign NGO issued by the public authorities of the Kingdom of Cambodia;
• A letter certifying the budget for implementing the projects of the foreign NGO for at least six months, issued by its permanent office in the foreign country; and
• A pledging letter to provide all accounts of the foreign NGO in the banks in the Kingdom of Cambodia.

The MFAIC shall decide upon the application within forty-five (45) working days of receiving the documentation.

A foreign NGO shall submit its Cambodian bank details to the MFAIC and MOEF within thirty (30) days from the date on which registration is approved. In case of amendment of its statute, the organization shall submit all required documents to the MFAIC and MOEF within fifteen (15) days at the latest from the date the change is made.

III. Tax Obligations of Non-Profit Organizations

3.1. Registration for Tax Identification Number (“TIN”) with the General Department of Taxation (“GDT”)

According to “Prakas on Instruction in Tax Compliance of Associations and NGOs No. 464” issued by MoEF dated 12 April 2018, NGOs have an obligation to pay withholding tax, salary tax and other taxes (such as value added tax, prepayment tax, etc.) and duties based upon existing tax laws and regulations.

The TIN is a unique identifying number used for tax purposes assigned to taxable entities after registering with the tax administration.

Article 101 of Law on Taxation of 2003 provides that after 15 days from registering with the respective ministry, the taxable entity must register with the tax administration. Article 102 goes on to detail that upon registration, the tax administration issues the confirmation letter with a TIN. TIN should be used for documents related with the tax administration and financial matters. For every contract with a government institution, the taxable entity shall present its TIN on the contract.

The NGO is a legal entity named as a taxable entity. It is required that NGOs register with the tax administration fifteen (15) days after registering with the respective ministry (i.e., MOI or MFAIC).

According to Notification No.3033 “Registration of Separate Business Activities of Associations or NGOs” dated February 06, 2020 by MOEF, all activities of NGOs to seek income or funds shall be considered “separate business activities” and shall be registered with the tax administration as a taxpayer under the self-assessment regime within 15 days after conducting business activities according to the turnover level and the type of taxpayer as stated in Prakas 009 issued by MOEF, dated January 12, 2021.

3.2. Tax Exemption on Income Tax for NGOs

According to “Prakas on Instruction in Tax Compliance of Associations and NGOs No. 464” by MEF dated 12 April 2018. Income tax is exempted on income of:

• Any NGOs organized and functioning purely for religious, charity, scientific, or educational purposes, and no asset or income of which is used for the private interest;
• Any Associations, provided that no income of which is used for private interest of the shareholders or physical persons.

The exempt income includes legal funds or donations from individuals or entities, resources or assets of the NGOs, contribution of its members, and other sources of income, except the income from activities outside “pure objectives.”

All activities outside “pure objectives” shall be considered “separate business activities” and obliged to register with the tax administration and shall be subject to tax in accordance with applicable tax laws and regulations. The “separate business activities” shall be recorded in a separate accounting book.

3.3. Do Employees Working with NGOs Have to Pay Tax?

Another basis for confusion arises from Article 43 of the Law on Taxation, which provides that “diplomatic and foreign officials” are exempt from paying tax on salary. The law goes on to detail that this is limited to those here representing their governments in official capacities or employees in Cambodia on behalf of official international organizations recognized under the Vienna Convention, such as the United Nations or the Red Cross.

In 2001, the government considered the case for a salary exemption for NGO workers and issued “Notice No. 64 on Tax on Salary of NGO Employees.” The notice clarified the existing law and said that a salary tax exemption would be considered in relation to the following NGOs:

• Those who implement projects on behalf of a foreign government (subject to agreement between both governments);
• NGOs recognized by the United Nations;
• NGOs that are self-sufficient, comply with Cambodian law and implement development and humanitarian projects in Cambodia;
• NGOs that were granted a tax exemption in 1979;
• NGOs with a small scope/budget of less than USD$50,000 a year; and
• Employees who already pay salary tax in their own country.

Once these criteria are met, then the NGO in question must conclude a Memorandum of Understanding with the pertinent ministry.

NGOs must apply with required documents to the Ministry of Foreign Affairs and International Cooperation (MFAIC) or the Ministry of Economics and Finance (MEF), who decide whether to grant the exemption.

It is the obligation for non-exempted NGOs to withhold the amount of tax from salary of its employees and remit to the tax administration every month by latest of 15th day of the month.

3.4. Duty Free Imports

Some duty-free imports are permitted for NGOs upon separate application. For example, NGOs wishing to import duty free materials must submit all necessary documents based on the “Prakas No.2337/79” of the CDC dated August 11, 1997 to the Cambodian Rehabilitation and Development Board (CDC/CRDB) 10 days before the equipment and materials arrive. After approval of the application the NGO shall pay a nominal fee to the CDC/CRDB according to “Prakas No. 1919/01” issued by CDC dated February 21, 2001.

3.5. Other Tax Obligations of NGOs

NGOs shall file monthly and annual tax declarations for both “pure objectives” and “separate business activities” with tax authorities regardless of whether they have an exemption.

The Ministry of Economy and Finance issued Ministerial Order No. 563 dated 10 July 2020, which states that NGOs that have an obligation to submit independent audited financial statements no later than 15 July of the following year via the E-filing system if the NGOs meet two criteria: (1.) the expenses of the year exceed 2,000,000 KHR (est. USD $500,000); and (2.) the average number of employees equals 20 or more individuals.

If the NGO has no obligation to submit an independent audited financial statement, the Accounting and Auditing Regulator issued Instruction No.002 dated 27 January 2022, that states the NGO must submit its financial statement via the E-filing system no later than 15 April of the following year.

According to Prakas No.001 of the Accounting and Auditing Regulator dated 12 January 2022 on public service fees:

• 100,000 KHR (around USD $25) for NGOs that have an obligation to submit audited financial statement; and
• 60,000KHR (around USD $15) for NGOs that do not have any obligation to submit audited financial statement.

Penalties will apply for any failure to comply with the requirements according to Sub-Decree No. 79 ANKr.BK dated 1 June 2020 on provisional fines for violations of the Law on Accounting and Auditing. The penalties depend on the type of violation and the company’s status. Amount of penalty ranges from 1,500,000 KHR (around USD $375) for medium taxpayers and 2,000,000 KHR (around USD $500) for large taxpayers.

IV. Dissolution of NGOs

A domestic non-profit organization may suspend its activities by providing its activity and financial report, and subsequent written notice, to the MOI whereas a foreign NGO shall provide these reports and written notice to the MFAIC.

Having a misunderstanding that NGOs are completely tax-exempted entities can lead to the dilemma of having significant tax liabilities discovered by a government auditor required to settle all outstanding unpaid taxes including penalties and interest prior to dissolution.

V. Conclusion

NGOs do much to assist in the development of Cambodian society. To exist in Cambodia, they do have obligations to register and fulfill their tax obligations. The legal framework for these entities is becoming clearer yet ambiguities remain which are resolved through existing practice. Non-profit organizations can benefit from some tax exemptions and it is advisable to remain updated about how to benefit from these. However, getting an exemption can be a complex and drawn-out procedure. To avoid future issues, it is wise to assume nothing until a decision about tax exemption status has been given in writing by the MoEF.

1. Introduction

The Law on Public-Private Partnership (PPP law) includes 14 chapters and 48 articles, was enacted on November 18, 2021, and abrogates and replaces the Law on Concessions (2007). The PPP law is intended to attract private investment into infrastructure projects by using state-offered financial assistance, guarantees, and/or investment incentives to facilitate agreements between the state and one or more private partners. The purpose of the partnerships is to restore, repair, expand, build, operate and/or maintain public infrastructure and/or to provide public services within a certain period under which the private partner invests, bears risks, and receives benefits based upon performance. While at present Cambodia seems to be developing infrastructure at a torrid pace, the law opens the door to development of significant new infrastructure in a wide range of sectors and this newsletter is meant to articulate some of the more salient points of the Law on Public-Private Partnership.

2. Scope & Competent Authority

The PPP law applies to all qualified projects seeking private investment into public infrastructure and public services. New investments under this law could be into roads, bridges, railways, airports, ports, public parking, canals, digital technology, mines, energy, education, health, environmental protection, tourism, water management, science, agriculture, and other public sectors as permitted by separate laws.
The law is implemented under the overview of the Ministry of Economy and Finance (MEF). The MEF has roles and responsibilities such as one-stop service, developing the PPP project by issuing regulations and standard operating procedures (SOPs), reviewing and providing risk allocation of the PPP project, and controlling and managing all PPP projects. Implementing Agencies (IA) amongst public sector institutions also play a key role in identification, selection, and implementation of the PPP projects.

3. Financial Support Mechanisms

To assist in the development of the project, the state may offer various forms of support including viability gap financing, availability payments, sovereign guarantees, asset contributions and/or investment incentives offered via the Law on Investment. Any financial support from the state may be offered via the national budget, official development assistance, or a special viability gap financing facility established under this law.
To further finance the project, the private partner may also establish security rights including over the project assets or the pledge of proceeds or accounts receivable in accordance with the applicable laws and regulations in Cambodia including the Law on Secured Transactions and the Civil Code.

4. Rights to Enter into a PPP Contract

As the name indicates, the PPP law forms a partnership between the public and private sectors.
The authorized public entities with the right to enter into PPP contracts include ministries, institutions, equivalent public entities, public administration establishments, public enterprises, and subnational administrations. These entities have only the right to enter into a PPP contract under their specific subject matter jurisdiction following the applicable laws and regulations.
The private counterpart to the public sector partner could be an incorporated company in the Kingdom of Cambodia, a foreign company registered in accordance with foreign laws, or any public enterprise that is not the implementing agency and has obtained the delegation of power in accordance with other applicable laws and regulations.

5. Selection of Private Partner

The selection of the private partner can by conducted for solicited projects and unsolicited projects. The selection of solicited projects can be implemented through a competitive bidding methodology or through a direct negotiation/selection methodology.
Unsolicited proposals that bring a new concept, technology, or innovation can also be received by IAs and brought forward for in-principle approval by the Royal Government of Cambodia through the MEF. The unsolicited proposals will be studied and then recommended to be procured through direct negotiation or bidding.

6. Duration

Based upon the negotiation, the PPP contract will specify the contract period and conditions to extend the contract. The term will be based upon factors such as the project assets’ life expectancy and the duration the private partner requires to recover its investment. Normally the initial contract period shall not exceed 30 (thirty) years from date of singing of the contract, however the Royal Government of Cambodia may fix the initial contract period beyond 30 years depending upon the PPP model. (Art, 41 LPPP)

7. Termination and Hand Back

The PPP contract will specify the circumstances for contract termination prior to its expiry, such as in the event either party to the PPP contract defaults on its obligations, force majeure, and/or early termination by the Royal Government. In the event of early termination, the PPP contract shall specify the rights and obligations of both parties to be fulfilled, mechanisms and formulas for calculating compensation. (Art 42, LPPP)
In the event the Private Partner has the obligation to hand bank the Project Assets(s) to the Royal Government, the PPP contract shall specify the conditions and procedures for hand back. (Art 43, LPPP)

8. Dispute Resolution

In the absence of a clearly articulated dispute resolution in the PPP contract, the first effort for dispute resolution will be mediation between the IA and private partner via the MEF, failing which within 2 (two) months of the initial request for mediation the matter may be sent to Cambodian or international arbitration with the consent of both parties. If there is no mutual consent for arbitration, either party may file a complaint within the Cambodian court system.

9. Common PPP Models

Annex 2 (two) of the PPP law identifies the following common PPP models:
Build-Operate-Transfer: The IA grants the private partner a right for design, finance, construct, operate, and maintain project asset(s) and collect fees, tolls, rentals, and other user charges from users of the project’s facilities or services for an agreed contract period as stipulated in the PPP contract. After the expiry of the PPP contract, the private partner transfers all rights and benefits relating to the project and the project asset(s) back to the IA, in accordance with the terms of the PPP contract.

• Build-Own-Operate-Transfer: The IA grants the private partner a right to design, finance, construct, own, operate, and maintain project assets and collect fees, tolls, rentals, and other user charges from users of the project asset(s) or services for an agreed contract period as stipulated in the PPP contract. After the expiry of the contract period, the private partner shall transfer all rights and benefits relating to the project and the project asset(s) back to the implementing agency in accordance with the terms and conditions of the PPP contract.
• Build-Own-Operate: The IA grants the private partner a right to design, finance, construct, own, and operate project asset(s) in perpetuity or for an indefinite period, in accordance with terms and conditions of the PPP contract. The private partner shall be entitled to make commercial use of the project asset(s), including collecting fees and other incomes from users of the project asset(s) or services.
• Management Agreement / Operations and Maintenance Agreement: The private partner provides daily services relating to operations and maintenance of existing project asset(s) or other state assets owned by the IA in return for service charges payable by IA or other parties in accordance with the terms and conditions of the PPP contract.
• Design-Build-Finance-Operate-Maintain: The IA grants the private partner a right to design, build, finance and provide operations and maintenance services for project asset(s) in accordance with terms and conditions of the PPP contract. The private party shall have the rights to collect revenue through the provision of services mentioned from the IA or other parties in accordance with the terms and conditions of the PPP contract. At the end of the contract period, the private partner shall transfer the project asset(s) back to the IA.
• Design-Build-Lease: The IA grants the private partner a right to design, build, and lease the project asset(s) from the IA, operate, and provide maintenance in accordance with the terms and conditions of the PPP contract.

10. Conclusion

The PPP law, which replaces the Law on Concessions (2007), is a significant piece of legislation intended to attract private investment into public interest projects in coordination with the recently passed Law on Investment (2021). The Cambodian government may provide financial support, guarantees, and/or investment incentives which can make a formerly unviable project viable. While it is still in its infancy, this law will likely be the basis for many new partnerships to develop significant infrastructure. Monitoring opportunities, navigating the bureaucracy and making the most of the legal framework will be key to achieving successful outcomes under this new law.