1. INTRODUCTION

The National Social Security Fund (“NSSF”) has long been established to provide security for employees in Cambodia. Whilst initially focusing on health insurance, in recent years it has expanded into also providing pension provisions. Sub-Decree No. 32 on the Social Security Scheme on Pension for Persons Defined by the Provisions of the Labour Law, promulgated on 04 March 2019 initiated this shift, and its provisions have been clarified in further Sub-Decrees and Prakas. This newsletter will explore the requirements of employers, the benefits of employees and the implementation of the law.

2. REGISTRATION OF THE NSSF

All employers with one (01) or more worker is required to register with the NSSF. The process for registration with the NSSF was set out in Prakas No 168/22 on the Formalities and Procedures for Registration of Company, Employee and Contribution Payment for Persons Defined Under Provisions of the Labour Law, enacted on 05 July 2022.

An employer is required to register within 30 days of commencing activities. Any new employees must also be registered by the employer within three (03) days of beginning employment.

Non-registration with and failing to pay the contributions to the NSSF can lead to a fine of 30 times the base daily wage rate, which was increased to US$ 20.00 with the implementation of Inter-Ministerial Prakas No. 326 on Base Daily Wage dated 25 November 2022. Therefore, lack of registration and failing to pay the contributions can result in a fine of up to approximately US$ 600.00. The fines shall be calculated according to the number of workers whose contributions are deducted by employers and in violation of the provisions of this law.

3. CONTRIBUTIONS OF THE PENSION SCHEME

In general, contributions are made by the employer on a monthly basis. The contributions required for the first five (05) years of employment are set at 4% of an employee’s wage. The contribution shall be borne as follows:

• 2% from the employer; and
• 2% from the employee.

4. PENSION ENTITLEMENTS OF EMPLOYEES

Employees are entitled to either an old age pension, an old age allowance, or an invalidity pension. In addition, a survivor’s pension is available to the family members of those who were entitled to one of the pensions listed.

5. FOREIGN EMPLOYEES

The pension schemes shall apply to persons defined by the provisions of the Labour Law including persons who have 2 (two) or more jobs. Based on Article 3 of Sub-Decree No. 32, employee refers to all kinds of employees and all nationalities of the formal sector including persons defined by the provisions of the Labour Law. Therefore, the foreign employees are obliged to pay the contribution and are entitled to pension benefits.

6. CONCLUSION

The pension schemes shall apply to persons defined by the provisions of the Labour Law including persons who have 2 (two) or more jobs. Based on Article 3 of Sub-Decree No. 32, employee refers to all kinds of employees and all nationalities of the formal sector including persons defined by the provisions of the Labour Law. Therefore, the foreign employees are obliged to pay the contribution and are entitled to pension benefits.

1. The director or owner of an enterprise defined by Labour Law should register their enterprise and employees in accordance with the existing laws and regulations and pay the contribution into the pension fund in compliance with Sub-Decree No. 32 to avoid any possible fines and for the benefits of their employees.
2. Whilst all enterprises are required to pay contributions to a pension fund, providing these benefits to employees through NSSF rather than a private insurance company can reduce expenditure.

1. INTRODUCTION

As of 2021 there were stated to be 54 Special Economic Zones (“SEZs”) in Cambodia, spanning the entirety of the country, with zones in Sihanoukville in the south, the capital Phnom Penh and in border towns such as Bavet. SEZs were created in two pieces of legislation promulgated on the same day; Sub-Decree 147 on the Organisation and Function of the CDC and Sub Decree 148 on the Establishment and Management of Special Economic Zones, which both came into force on 29 December 2005. The function of these special economic zones is to stimulate growth in the Cambodian economy by incentivising investment, primarily in the manufacturing sector, by providing tax incentives, improved infrastructure and a simplified method of operation in Cambodia. This newsletter will set out the procedures of setting up a company in an SEZ as well as the investment incentives available.

2. PROCEDURE

To set up in a Special Economic Zone, a company must become a Qualified Investment Project (“QIP”), the status of which is granted by the Council for the Development of Cambodia (“CDC”). Most SEZs have a one stop shop within its own borders, enabling an investor to complete the entire process with the SEZ administration rather than dealing directly with the CDC. In general, the application procedure follows the following steps:

• Submission of an Investment Proposal to the CDC
• Issuance of the Conditional Registration Certificate (“CRC”)
• Company registration with the Ministry of Commerce (“MOC”)
• Obtaining all necessary licenses from the relevant ministries as listed in the CRC, on behalf of the Applicant
• Registration with the General Department of Taxation (“GDT”)
• Construction plan approval from the local authorities and the Ministry of Land Management, Urban Planning & Construction
• Environmental Impact Assessment as performed by the Ministry of Environment
• Environmental Impact Assessment as performed by the Ministry of Environment
• Issuance of the Final Registration Certificate

3. BENEFITS UNDER THE NEW LAW ON INVESTMENT

The new Law on Investment, promulgated on 15 October 2021, aims to establish an open, transparent, predictable and favourable legal framework to attract and promote quality, effective and efficient investment by Cambodian nationals or foreigners. This is to enable socio-economic development in the Kingdom of Cambodia, by increasing Cambodia’s competitiveness, increasing the productivity of local industries, establishing an investment incentives regime and providing protection to investors’ rights. The new Law states that a project set up in a SEZ is considered as a Qualified Investment Project (“QIP”) and therefore is entitled to the investment incentives outlined in the legislation. The incentives available to projects in an SEZ are referred to as basic and additional incentives.

4. ADVANTAGES OF OPERATING IN AN SEZ IN CAMBODIA

There are SEZs in operation in much of the developing world, and thus attracting foreign investment of this kind is highly competitive. In addition to the simple one stop shop procedure, reasonable time frame for establishment and the investment incentives outlined above, there are other advantages for choosing to operate in a Cambodian SEZ:

5. CONCLUSION

The rapid growth of SEZs in Cambodia since their introduction in 2006 demonstrates their enduring ability to attract investment. With the relatively simple and speedy set up process combined with the additional benefits conferred upon QIPs by the recently promulgated Law on Investment, operating within an SEZ can become an even more attractive proposition. With its improving infrastructure and its central geographical location, Cambodia is positioning itself as a major manufacturing hub for the next decade and beyond.

1. INTRODUCTION

Whilst gambling for Cambodian citizens is not permitted under Cambodian law, the gambling industry has seen incredible growth in Cambodia over the past decade, ostensibly to service foreign clients. To this end, border towns such as Bavet and Poipet have a large number of casinos to allow citizens of neighbouring countries, where gambling is illegal, to partake. In addition, the southern town of Sihanoukville has seen incredible growth in the number of casinos in the past decade, culminating in a nationwide total of 193 casinos in 2020. To bring clarity and increased oversight to the sector, the Royal Government introduced the Law on Management of Commercial Gaming in 2020, and further clarified the regulations in subsequent Sub-Decrees. This newsletter will focus primarily on the licensing and requirements for casino-based gambling.

2. GAMBLING ZONES

The Law on Commercial Gambling Management separated the commercial gambling zones into two types: (1) prohibited zones and (2) permitted zones. In prohibited zones, all or certain types of commercial gambling are prohibited for the purpose of preserving culture, religion, or other reasons. The permitted zones are those geographical areas located outside of the prohibited zones. . Permitted zones also cover casino games and betting which are only permitted within the premises of a casino.

3. COMMERCIAL GAMBLING REGULATOR

The Commercial Gambling Committee of Cambodia (CGCC) is the competent authority responsible for issuing all relevant licenses relating to centers operating commercial gambling and commercial gambling activities in Cambodia. Commercial gambling refers to casino gambling, betting gambling, luck-based gambling and/or other commercial gambling operated for the purpose of making profits or for business purposes. Pursuant to the Gambling Law, subject to the types of commercial gambling and related activities, the CCG, may issue the following licenses:

• Casino gambling
• Betting gambling
• Luck-based gambling
• Other commercial gambling
• Special employees
• Promotors (junkets) and
• Manufacturers, installers, importers, sellers and/or distributors of equipment and/or gambling software.

4. TYPES OF CASINO LICENCES

5. Meetings

The requirements for an application for a casino gambling licence are as follows:

• Being a company legally established and registered (with company and tax registration) under Cambodian Laws and having a governing structure which clearly determines the duties and responsibilities, ensuring accountability, transparency, effectiveness, and good corporate governance.
• Having enough financial and human resources with the required knowledge, ability and experience based on their position in the company.
• Having enough infrastructure and IT system to provide service as casino operator and Backup System to ensure safe and effective operation.
• Having location equipped with enough instruments for casino operation.
• Having system and policy on risk management and internal control.
• Having business control mechanism on casino operation.

6. MINIMUM CAPITAL REQUIREMENTS

The minimum capital requirement for casino operators within integrated resorts shall be at least KHR 800,000,000,000 (approx. US$ 200 million), whilst that for casino operations outside integrated resorts shall be at least KHR 400,000,000,000 (approx. US $100 million).

Prior to the enactment of the Law, there were no integrated resorts as all existing casino operations were considered as stand-alone operations (i.e., outside integrated resorts). For these existing casino operators duly licensed to operate prior to the enactment of the Law, the minimum capital requirement of at least KHR 400,000,000,000 (approx. US$100 million) must be satisfied over a period of time. This minimum capital requirement shall be implemented in five phases as follows:

7. LICENSING PROCEDURE & TIMEFRAME

8. APPLICATION & STUDY FEE

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

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.