Policies and Regulations

Cambodia Strengthens The Supervision Of Economic Concessions, Chinese Companies Need To Pay Attention

Cambodia strengthens the supervision of economic concessions, Chinese companies need to pay attention
On August 18, Cambodian Prime Minister Hun Sen issued a government order announcing the establishment of an interdepartmental committee to conduct regular inspections and evaluations of economic concession land development projects. Hun Sen said that for companies that have obtained economic concession land but have not developed it in accordance with laws and regulations, or use the concession rights to develop larger land, resell space to set up land, and criminal community people’s land, The government will take back its economic concessions.
The economic concession land policy is a preferential land policy launched by the Cambodian government to encourage enterprises to invest in large plantations and farms. Enterprises can use the land at a lower rent for up to 99 years, but they must strictly follow the plan for land development year by year. However, since the implementation of the concession land policy, conflicts between development companies and the indigenous residents of the concession land have continued to occur, which has attracted the attention of the media and NGOs. After 2012, the Cambodian government no longer approved new economic concession land.
According to statistics, 121 companies in Cambodia have obtained economic concession land, involving 17 provinces and 1,233,640 hectares of land. Most of the 82 foreign companies are from Vietnam. There are about 20 Chinese companies operating economic concession land in Cambodia, mainly engaged in rubber, cassava and rice planting, and some land ownership disputes are also involved, which are being sorted out under the attention of the Economic and Commercial Office of the embassy.

Cambodian business registration process

In order to encourage foreign businessmen to invest in Cambodia and accelerate the construction and development of the national economy, the Royal Government of Cambodia has set up a special agency - the Cambodian Development Council, referred to as "CDC". This institution has an evaluation committee, which is attended by officials from the Ministry of Finance and Economics, the Ministry of Commerce, the Ministry of Industry, the Ministry of Environmental Protection, the Taxation Bureau, and the Customs. One-stop service.
When applying for the establishment of a company in the Cambodian Development Council-Cambodia Investment Committee, the economic report of the investment project must be provided for approval. At the same time, investors need to provide:
(1) Company name: (Khmer or English).
(2) List of shareholder members: the number of shareholders is not limited, if it is a natural person shareholder, it is necessary to provide a non-criminal certificate, a copy of the passport, a Cambodian entry visa, a foreign address, an email address, a telephone number, and 15 2-inch photos; If it is a legal person shareholder, it is necessary to provide the company's business license, tax registration certificate, company articles of association and the company's power of attorney to the representative (these materials must be in English and notarized by the notary office of the country of residence), At the same time, it is necessary to provide the non-criminal record certificate of the legal person shareholder representative, a copy of the passport, a Cambodian entry visa, the address of the company or the party, and 15 2-inch photos.
(3) Share allocation and position allocation: Most of the articles of the company's articles of association are basically a model, The share allocation ratio can be registered according to the actual situation, and the positions are generally: company chairman, company director and company member.
(4) Investment scale: The investment amount must be more than 1 million US dollars, but the capital verification only needs to provide a bank fund certificate of 25% of the investment amount.
(5) Company address: The location of the company and the area of the factory building (more than 2500 square meters) must be provided, and there must be a lease contract or property right certificate (required to be stamped and certified by the county/district government); when signing the lease contract, the landlord must provide A copy of the land title certificate and a copy of the ID card.
(6) Plant construction drawing and construction approval document; the landlord shall provide the plant construction drawing and construction approval document approved by the land department.
(7) Total number of employees: for garment, shoe-making and other textile projects, the total number of employees should be less than 500, and the ratio of Cambodian employees to foreign employees is 10:1.
(8) Business content: It is necessary to state the product name of the enterprise, try to write as much as possible.
(9) Production product price and export ratio: more than 80% of the products for export can enjoy preferential treatment of permanent import customs tax and value-added tax; otherwise, customs tax and value-added tax exemption can only be enjoyed in the first year of operation tax treatment.
(10) Countries where the products are exported: It is better to fill in a complete list. The garment and shoe-making industries generally export to the United States, the European Union, Japan, Australia, etc.
(11) List of raw materials and equipment for duty-free import: the name, model, place of origin, quantity and price of the material must be specified.
(12) Applying for investment projects and environmental protection: Cambodia is a country that pays attention to environmental protection. If an investment project has great harm to environmental protection, it will be difficult to obtain approval during the review. For example: build a tire factory, then import waste tires for sale or export after retreading; build a battery factory, then import waste batteries for deep processing and then sell or export; Such investment projects are generally not approved by the evaluation committee due to environmental protection considerations. Even after obtaining approval documents, they will still encounter troubles when importing these waste materials.
After providing the above information, after being reviewed and approved by the Cambodian Development Council, the one-stop services completed by the Cambodian Development Council for investors include:
(1) The CDC issues the investment project establishment approval document and the import duty-free approval document.
(2) The Ministry of Finance and Economics stamps the list of imported duty-free materials for confirmation, and submits it to the customs for registration and implementation.
(3) After the Ministry of Commerce issues the company's business license, company approval documents, archive materials, company official seal, and stamps the administrative seal on the company's articles of association formulated by the CDC, it is archived and filed.
(4) The tax bureau conducts tax registration and issues the company tax registration certificate and value-added tax certificate.
(5) The Ministry of Industry issues the factory construction approval document and issues the industrial license.
(6) The Ministry of Environmental Protection issues environmental protection approval documents and signs environmental protection contracts.
In addition, investors should also pay attention to:
(1) If the company produces goods for export, it shall apply for an export tax exemption approval document, that is, the approval document for exemption from profit tax can enjoy the preferential treatment of exemption from profit tax and additional tax on profits.
(2) The company produces products for non-export and is an affiliated enterprise that supplies goods to the exporting company, After completing the company registration procedures, it is necessary to apply for a permanent import value-added tax exemption approval; After the company starts to operate, it needs to apply for industrial support approval to enjoy the preferential treatment of value-added tax exemption.
(3) The company produces products for export, but due to the lack of orders, when it needs to do processing with supplied materials, it should apply for an industrial support approval document to enjoy the preferential treatment of exempting from processing tax (value-added tax).

Summary Of Cambodian Company Law

Company law
Overview

The laws directly related to commercial legal entities mainly include: Law on Commercial Enterprises,Law Bearing Upon Commercial Regulations and Commercial Register, Civil Code, and various normative documents issued by the Ministry of Commerce of Cambodia.
The main types of commercial legal entities include: sole proprietorship (equivalent to individual industrial and commercial households in my country), partnership, company, and branch office and representative office of foreign companies.
Foreign investors usually set up companies to conduct business, but sometimes only set up offices or representative offices. Unlike companies, offices and representative offices are not independent legal entities, and their legal responsibilities are ultimately borne by the head office. According to Article 274 of the Commercial Enterprise Law, a representative office can conduct work such as market research, participate in exhibitions, contact customers, etc., but cannot sell goods/services, and cannot participate in manufacturing, processing and construction activities.
Article 278 of the same law stipulates that an office may carry out any activities permitted to a representative office, and may also sell goods/services and participate in manufacturing, processing and construction activities. In addition to the different scope of business activities, the difference between an office and a representative office is also reflected in the tax burden and legal risks arising from business activities. Therefore, the type of legal entity to be established needs to fully consider the needs of investment.

Corporate Governance

The Commercial Enterprise Law divides companies into two types: private limited company and public limited company. A public limited company can issue shares to the public, while a private limited company cannot. Due to the immature securities market, there are only a handful of public limited companies at present. Unless otherwise specified, the following content refers to a private limited company (referred to as the "Company").

Cambodian law has very flexible regulations on the establishment of private limited liability companies, and the requirements for corporate governance are relatively loose:
(1) Registered capital: The minimum registered capital is USD 1,000.
(2) Shareholders (meeting): The number of shareholders is between 1 and 30. When there is only one shareholder, there is no shareholder meeting. The only difference between a company with one shareholder and a company with more than one shareholder is that when there are more than one shareholder, a shareholder agreement is required between the shareholders. When more than 51% of the company's shares are held by Cambodian natural persons or Cambodia-funded companies, the company is considered a Cambodian company, otherwise it is a foreign-funded company. Foreign-funded companies have the same business qualifications as Cambodian companies, but they are not allowed to own land.

Shareholders (meeting) decide on major issues of the company, and their main rights are:
1. Formulate, revise and supplement the articles of association of the company;
2. Check company documents such as articles of association, shareholder meeting resolutions, meeting notices, etc.;
3. Appointment and dismissal of directors;
4. Appoint and dismiss external auditors and determine their remuneration;
5. Only limited to the amount of capital contribution, limited liability;
6. Restricting the rights of directors by resolution of shareholders;
7. File a shareholder derivative action;
8. Listen to the annual company financial report of the board of directors and conduct verification;
9. Approval of capital increase and capital reduction;
10. Pre-emption rights for new shares;
11. Wholesale company merger, division, dissolution;
12. Approval for the establishment of branches, etc.

Restrictions On Shareholders (Meetings):

1. When the company is unable to repay due debts or is insolvent, it shall not pay dividends;
2. Shareholders must abide by the rights restrictions in the articles of association, such as share transfers and operating restrictions;
3. Shareholders are strictly prohibited from borrowing money from the company;
4. Shareholders must sign or initial the articles of association;
5. If the shareholder knows or intentionally causes the company to fail to pay taxes, pay less tax, or fail to pay withholding tax to the tax bureau, the shareholder shall be jointly and severally liable for the tax difference.

(3) Authorized Representatives: There are no special requirements on the number, nationality, term of office, and procedures of shareholder representatives. However, referring to the requirements of the Commercial Enterprise Law for directors and the provisions of the Civil Code, shareholder representatives must be persons with full capacity for conduct, no criminal record, and non-Cambodian civil servants.
(4) Director (meeting)/Chairman: The company must appoint at least one director. Directors are appointed and dismissed by shareholders. When there are multiple directors, each director elects the chairman. The change of chairman will not affect the original chairman’s continued role as director. Directors manage the affairs of the company and represent the company externally.

The Main Rights Of Directors (Meetings):

1. Convene a general meeting of shareholders according to the proposal of shareholders;
2. Check various documents and records of the board of directors;
3. Propose changes to the charter and submit an application for charter change;
4. Appoints and dismisses company officers and board committees, and determines their remuneration.
5. Deciding on dividends and retaining reserves;
6. Submit annual financial statements (Article 227) before the annual meeting of shareholders and report at the meeting;
7. Approve the annual financial statements;
8. Approved the merger of the company and proposed to convene a general meeting of shareholders;
9. Issuance of debt evidence such as bills and creditor's rights;
10. Propose the sale of most or all of the company's assets;
11. Announcing dividends, raising debts, and issuing securities; providing external guarantees (guarantees, mortgages, pledges, and other security interests);
12. Closing account books, etc.;
13. Proposing mergers and divisions of companies;
14. Propose to dissolve or liquidate the company;
15. Proposal to open a branch office.

Procedural Matters Of The Board Of Directors (Meeting):

1. When there is no special provision in the articles of association of the company, the term of office of directors is 2 years and they can be re-elected;
2. The board meeting shall be held at least once every three months;
3. The board of directors is convened by the chairman or 1/3 of the directors, or in accordance with the company's articles of association;
4. There is no limit to the meeting place of the board of directors, and the meeting can be substituted by written form; When the number of people present reaches 1/2 of the number of the board of directors, it is valid; the resolution of the board of directors is passed if it is passed by more than half of the number of people present; The board of directors votes on one person, one vote, and directors not present at the meeting may authorize directors present to vote in writing.

Special Notes On Directors' Responsibilities:

1. Directors should promptly disclose conflicts of interest with the company, such as disclosing that they have an interest relationship with a contract or the company’s counter party;
2. When the company issues shares, if the purchaser has insufficient capital contribution, the directors shall bear joint and several liabilities;
3. Honesty and credit, reasonable and prudent obligations, and seeking the best interests for shareholders;
4. Making false and misleading company documents can be punished by imprisonment for up to 6 months and a fine of 250 to 2500 US dollars; If the intentional use of fraudulent documents in commercial activities, can be sentenced to 1 to 5 years in prison, and a fine of 250 to 2,500 US dollars.

(5) Supervisors: The Commercial Enterprise Law does not require the establishment of supervisors; However, Article 62 of the Civil Code, which came into effect in December 2011, stipulates that all legal persons must have at least one director and cannot be appointed by directors or company employees. External auditors can serve as supervisors, and supervisors are appointed by the articles of association, shareholders or the board of directors. Article 63 of the Civil Code, the main duties of supervisors are: a) to supervise the operation of the company; b) to require directors and company employees to submit progress reports on the company's business;
c) Check directors’ proposals and documents submitted to shareholders’ meetings and the board of directors; d) Require directors to stop behaviors that violate laws, articles of association, and company goals, and report to shareholders; e) Prosecute directors on behalf of the company. This is an example of conflict of laws in Cambodia.

Whether to set up supervisors: The Civil Code lacks legal practice experience, and the Commercial Enterprise Law does not require the establishment of supervisors, and few people in the industry follow them. Specific compliance risks remain to be seen.

(6) General manager: Since directors are the company's executive agency, the general manager is not required to set up an agency, but directors can appoint and dismiss company management personnel, including the general manager, and decide their remuneration. Directors themselves can act as general manager.
(7) Legal representative: Cambodian law does not have the concept of legal representative or legal representative, Directors and general managers authorized by directors can be understood as the in fact legal representatives of the company.

Company Registration

The company registration process is relatively simple, and the operation is relatively mature. The applicant first fills in the form stipulated by the Cambodian Ministry of Commerce, submits a registration application to the Cambodian Ministry of Commerce, and after the Ministry of Commerce approves; the applicant then applies for tax registration to the Cambodian Taxation Bureau. The whole process takes about 14 working days. Government personnel can process it quickly or slowly, and pay attention to communication.
It is recommended to hire a lawyer or agency to assist in the company registration.

Obligations After Company Establishment

The Commercial Enterprise Law stipulates that after completing various registrations, the company's stationery, billboards, etc. must be marked in Khmer, and the Khmer font size must be larger than other languages. But in practice, many companies go against it.

Before the company starts business, it must submit the "Opening Statement" to the Cambodian Ministry of Labor for record. After opening, the company must report the existence of the company to the Ministry of Commerce of Cambodia every year.

Changes in the articles of association, changes in equity, changes in registered address, changes in business scope, etc. that occur during the company’s existence need to apply to the Ministry of Commerce for change registration.

Summary Of Cambodian Labor Law

Labor Law
Overview

Cambodia's latest labor law was promulgated in 1997. On the basis of the 1992 labor law, it was revised to meet the most-favored-nation treatment and the generalized tariff system given by the United States. Therefore, the legal provisions are more detailed, and the protection of workers is more thoughtful. However, some clauses overestimate the actual situation and increase unnecessary burdens on employers.

Labor laws impose virtually no restrictions on investors utilizing Cambodian labor. Labor laws impose some restrictions on foreigners working in Cambodia, but compared to other countries in the region, such restrictions are very loose.

Labor law is the law to protect labor and is public policy. Therefore, the various conditions and benefits provided by the employer cannot be lower than the requirements of the labor law, otherwise they will be invalid. All in all, compliance with labor laws can be challenging for investors.

Foreigners Working In Cambodia

Article 261 of the Labor Law stipulates that foreigners must obtain permission from the Ministry of Labor to work in Cambodia. On July 16, 2014, the Ministry of Labor and the Ministry of the Interior jointly issued regulations requiring companies to submit information on the employment of foreigners. Including the disclosure of the total number of employees, employee turnover, quotas for using foreigners, employment contracts for foreigners, as well as passport and visa information of foreigners, work permits, etc., for inspection. On August 20, 2014, the Ministry of Labor issued regulations to stipulate the proportion of foreign employees employed by enterprises. In January 2015, the Ministry of Labor issued operational guidelines for enterprises to apply for work permits for foreigners. Businesses that illegally employ foreigners will be fined (up to $180) and foreigners may be deported.

The Main Requirements And Procedures For Enterprises To Employ Foreigners In Cambodia Are As Follows:

(1) Requirements for employed foreigners: foreigners must hold legal passports, valid visas (business people generally hold E-type visas, and a few hold K-type visas), have no infectious diseases, and are suitable for work;
(2) Proportion restrictions on hiring foreigners: In principle, companies are required to give priority to hiring Cambodians, and companies can hire foreigners as professionals, engineers or engage in other professional work. The employment of foreigners generally does not exceed 10% of the total number of Cambodian employees employed, specifically broken down into: office employees, no more than 3%; professionals, no more than 6%; non-professionals, no more than 1%. When it exceeds 10%, the enterprise needs to specify special reasons, such as the expertise and professional skills of the personnel to be hired.
(3) Program requirements:
1. Apply for quota first: The enterprise shall submit a quota application to the Ministry of Labor before the end of November each year, and at the same time explain the number of foreigners to be hired in the next year, the number of Cambodian employees, and the reasons for hiring foreigners. When applying for a quota, an application form must be submitted, stating the number of people to be employed, the change of personnel, etc. The application fee is estimated at $20.
2. Re-apply for a work permit: After obtaining the quota approval, apply for a work permit for each foreigner by the end of March of the following year at the latest. When applying, you must submit the application form, the total number of existing employees (Cambodia, foreigners), photos of foreigners, passports and visas (type E or K), employment contracts, and medical certificates. The application fee is estimated at $100 per person.

Internal Rules And Regulations Of The Company

Enterprises employing more than 8 people must formulate internal rules and regulations, which must be signed and confirmed by the inspector (Inspector) of the Ministry of Labor. Changes to the Ministry's rules and regulations must also be signed and approved by the inspector. Internal rules and regulations mainly include: job application, job description, medical examination, working hours, vacations, wages, benefits, access control, punishment measures, etc.

Internal Regulations And Charters Should Be Publicly Displayed Within The Enterprise.

Hire Staff

Companies should give priority to hiring Cambodians. Businesses are not allowed to take any money when they hire people, nor can they ask employees to work to cover what they owe to the business. Persons under the age of 15 shall not be employed. It is strongly recommended to only hire persons over the age of 18.

Employee Type

The labor law divides employees into four types: ordinary employees, temporary employees, part-time employees, and probationary employees. The labor contracts signed by ordinary employees are divided into fixed duration contracts (FDC) and undetermined duration contracts (UDC). A written labor contract with a definite initial period of no more than 2 years is FDC, and other cases are UDC. The Labor Arbitration Committee held that the FDC can be extended several times, but if the total term exceeds 2 years, then the contract belongs to the UDC.
Temporary workers are those who perform specific tasks that need to be completed on a short period of time, or who perform temporary, intermittent or seasonal work. However, if temporary employees work 21 days a month for more than 2 consecutive months, then these employees will be identified as ordinary employees. Temporary employees are paid the same as ordinary employees for the same work, but enterprises can reduce the treatment according to the working hours of temporary employees. Enterprises can not provide annual leave, sick leave, holidays, bonuses and other benefits to temporary employees, but should increase hourly wages accordingly to compensate for their losses. Part-time employees refer to people who work less than 48 hours a week, and companies can reduce the treatment in proportion to the working hours of part-time employees.
Enterprises can set a trial period, but the longest shall not exceed 3 months.

Salary

The Cambodian government only stipulates minimum wages for the textile, clothing and footwear industries, and there is no minimum wage requirement for other industries. It only requires that "the wages paid are sufficient to maintain human dignity." In 2015, the textile, apparel and footwear industry had a minimum wage of $128 and a probationary minimum wage of $123.
Wages must be paid on working days and pay slips must be provided. If the salary payment day falls on a holiday, it should be paid in advance.
Wages shall not be arbitrarily deducted.

The Labor Law imposes strict restrictions on the deduction of wages by enterprises. Enterprises can only deduct corresponding costs from wages under four circumstances, and the wages paid after deduction cannot be lower than the minimum wage:
1. Employees fail to return tools, equipment; or
2. The employee damages items under his control or use; or
3. Employees owe payments to the Business Benefits Store; or
4. Employees are required to pay union dues.
The Labor Law also expressly lists the circumstances under which wages cannot be deducted absolutely. For example: Fines are imposed on employees for violating rules and regulations or refusing to work overtime, part of wages is deducted as a deposit for contract renewal, etc.

Operating Hours

Normal working hours are 8 hours a day, 6 days a week. At least 1 day off per week, usually Sunday. Those who work after 22:00 in the evening and before 05:00 the next day belong to night work. Night work shall be paid 1.3 times wages/hour. Overtime is limited to emergency and exceptional matters, and overtime must be voluntary by employees, with a maximum of 2 hours per day. If employees are unwilling to work overtime, the enterprise shall not impose any punishment. Calculation of overtime pay: Monday to Saturday, 1.5 times the salary/hour; Monday to Saturday night overtime, 2 times the salary/hour; Sunday and public holidays, 2 times the salary/hour.

Public Holiday, Vacation

The government generally announces the public holidays for the following year around October each year. Ordinary employees have 18 days of paid annual leave per year (1.5 days per month). Other employees are entitled to paid annual leave pro rata based on hours worked. For every 3 years of service of ordinary employees, the company should give 1 extra day of paid annual leave. For example, an employee who has worked for 5 years has 19 days of paid annual leave; an employee who has worked for 7 years has 20 days of paid annual leave.
Employees can only take paid annual leave after working for one year. If an employee requests paid annual leave, the company cannot refuse unless there is a particularly urgent reason. However, the enterprise can stipulate how long in advance the employee must notify the enterprise before taking paid annual leave. Paid annual leave shall not be waived by agreement. The paid annual leave that has not been taken can be used as wage payment.
Special leave refers to marriage leave, funeral leave, maternity leave, etc. Businesses should generally not deny special leave requests. Businesses can deduct the days of special leave from the employees' remaining days of paid annual leave. If the employee has no paid annual leave to deduct, the enterprise can require the employee to work for replacement, but the working hours shall not exceed 10 hours per day and 54 hours per week.
Employees can apply for sick leave, and if the sick leave exceeds 6 months, the company can terminate the labor contract. If the sick leave does not exceed one month, the company will pay 100% of the wages; in the second and third months of sick leave, 60% of the wages will be paid; from the fourth month of sick leave, no wages will be paid.
90 days of maternity leave. For employees who have worked for one year during their maternity leave, the company must pay 50% of their wages. For mothers who are breastfeeding babies under one year old, enterprises should give one hour of breastfeeding leave per day. This breastfeeding leave cannot be exchanged for money.

Occupational Health And Safety

If there are more than 50 people in the workplace, an infirmary must be set up. The infirmary must be equipped with doctors, doctor's assistants, nurses, hospital beds, necessary medicines, etc.
There must be toilets in the workplace, and the number of toilets is determined according to the number of employees. The regulations of the Ministry of Labor have detailed regulations on the floor, lighting, drainage, and cleaning frequency of the bathroom.
Safe drinking water must be provided in the workplace. Alcohol is not allowed in the workplace.
In addition, the law has detailed regulations on lighting, noise, ventilation, temperature, etc. in the workplace.

Work-Related Injuries

Work-related injuries refer to accidents that occur due to work reasons, or during working hours, or on the way directly to and from get off work. Occupational diseases are work-related injuries.
Businesses must pay for medical and health care costs, disability costs, and death costs incurred by employees as a result of work-related injuries. If an employee deliberately causes a work-related injury, the company is not responsible.
The law has detailed calculation formulas for compensation for work-related injuries, disability and death.

Punish Employees

Enterprises can punish employees, but they must comply with laws and internal rules and regulations. When an enterprise punishes employees, there must be evidence, and the punishment measures imposed by the enterprise on employees should be compatible with the violations of the employees. For serious misconduct by employees, the company can immediately fire, but it must be done within 7 days from the day the company knows about it; Punishment decisions in other circumstances must be made within 15 days from the day the enterprise learns about it.

The Employee Has The Following May Be Considered Serious Violations:

1. Deceiving the enterprise;
2. Fraud, refusal to abide by the labor contract, leaking secrets;
3. Serious breaches of disciplinary, safety and hygiene rules;
4. Threatening or attacking colleagues or businesses;
5. Instigate other colleagues to engage in serious violations;
6. Conduct political campaigns, events or protests in the workplace;
7. Use of violence in strikes, etc.
The court can determine whether the employee's behavior is a serious violation according to the specific circumstances. However, a strike that complies with the law is not considered a serious violation.
The enterprise can suspend the performance of the labor contract according to the internal rules and regulations (the enterprise does not pay wages and the employees do not need to work), but the suspension is limited to very few cases, such as:
1. Suspend the labor contract of an employee according to the legal internal rules and regulations; or
2. The business faces serious economic problems, but such suspension must be carried out under the supervision of the Ombudsman.

Dissolution And Termination Of Labor Contract

(1) Cancellation and termination of FDC
Before the agreed time limit expires, the enterprise shall notify employees in advance whether to renew the labor contract according to the time limit prescribed by law. The maximum notice period is 15 days in advance. FDC automatically renews by the same period without prior notice.
If the notice period is shorter than the law, the enterprise shall provide payment in lieu of notice as compensation. In the event that there is a notice not to renew the FDC, the company also needs to pay severance compensation. The severance compensation is 5% of the total salary received by the employee during his working period in the enterprise.
If the FDC period has not expired, and the employee has seriously violated the regulations, the company can terminate the FDC within 7 days of knowing the serious violations. The two parties can also terminate the FDC through consensus, but the company needs to pay 5% of the severance compensation. If the enterprise illegally terminates the FDC, in addition to paying 5% of the severance compensation, it also needs to pay the employee wages for the unfulfilled period within the FDC period as compensation. Similarly, if an employee illegally terminates the FDC, he must also compensate for the losses caused to the company.
(2) Cancellation and termination of UDC
Employees can terminate the UDC for any reason. When employees voluntarily leave the company, the company does not need to pay severance compensation. When an employee seriously violates the regulations, the company can terminate the UDC within 7 days from the date of knowing the serious violation, and does not need to provide any resignation compensation or compensation. In other cases, the enterprise can only terminate the UDC based on legal reasons such as the employee's ability, behavior, or enterprise requirements, and provide advance notice and compensation for resignation according to law.
The period of advance notice depends on the employee's working years in the company, and the maximum is 3 months, otherwise the company must pay a substitute notice fee.
The resignation compensation is determined according to the employee's working years in the company. For every one year, the payment is 15 days, and the maximum is 6 months.
When the company terminates the UDC without legitimate reasons, in addition to the resignation compensation, compensation equivalent to the resignation compensation shall be required.

Labor Dispute

Labor disputes are generally resolved through negotiation, mediation, arbitration, strikes, and litigation. Individual disputes and collective disputes go through different resolution steps. An individual dispute generally refers to a dispute between an enterprise and an employee, and a collective dispute generally refers to a dispute between an enterprise and a group of employees. If the dispute is a trade union, it is generally considered a collective dispute.
Usually, the parties to the dispute first resolve the dispute through negotiation. If the negotiation fails, they enter into the mediation procedure. The mediation is presided over by the Ministry of Labor and completed within 15 days. Individual disputes can voluntarily choose whether to enter the mediation process. During the mediation period, the employee side cannot strike, and the company side cannot prevent employees from working. Once the mediation reaches an agreement, both parties must implement it.

Tips on how to resolve business disputes in Cambodia

Commercial Dispute Resolution

In Cambodia, the main methods of dispute resolution are conciliation (including third-party mediation, mediation), arbitration and litigation. Reconciliation is the most important and common method of dispute resolution, followed by litigation, and arbitration started the latest, almost zero.
Generally, commercial companies try to avoid resolving disputes through litigation. Civil litigation implements the system of three final trials, that is, civil litigation cases can be heard by up to three levels of courts. The courts at all levels in Cambodia have a relatively long period of processing cases and are easily influenced by the outside world. Therefore, litigation is not the preferred method of dispute resolution. However, litigation has advantages that other dispute resolution methods do not have, such as court injunctions and mandatory etc.
The only arbitration institution in Cambodia is called the National Commercial Arbitration Centre, which started operations in 2014. At present, there is no news about the arbitration award, and the fairness and efficiency of the arbitration remain to be seen.
Cambodia is a member state of the New York Convention. Foreign arbitrated awards can be recognized and enforced by the Cambodian Court of Appeal, and there are precedents. Whether, and to what extent, foreign arbitrate awards can be recognized and enforced remains uncertain.
Therefore, when it comes to the dispute resolution clauses of business contracts, or when dealing with disputes, the above-mentioned characteristics of Cambodia should be fully taken into account.

Summary Of Cambodian Tax System

(1) Main tax categories

1. Corporate Income Tax

①　Taxpayers
Taxpayers of Cambodian corporate income tax are divided into resident companies and “permanent permanent establishments”. A resident company refers to a company that is established and managed in Cambodia or whose principal place of business is in Cambodia. "Permanent standing establishment" refers to the place where a branch of a foreign company or a resident agent engages in business activities in Cambodia through non-resident personnel. In addition, there are some special rules for corporate taxpayers with foreign investment.
②　Tax objects and tax rates
Corporate income tax is levied on business profits and prescribed passive income. Operating profit includes capital gains, and passive income includes interest, royalties, rent, etc. The standard tax rate for companies and permanent establishments is 20%, and investment companies encouraged by the government can enjoy a preferential tax rate of 9%,The tax rate for companies engaged in the development of oil, natural gas and specific mineral resources is 30%.
Insurance companies shall pay corporate income tax at 5% of the total insurance benefits received in the tax year.
Regarding withholding tax. Cambodia imposes withholding tax at a rate of 14% on interest, dividends, rent, royalties, technical management service fees, etc. paid to non-residents; Withholding income tax is levied on the interest on fixed savings deposits and interest on current savings deposits paid by banks at the rate of 6% and 4% respectively.
③　Calculation of taxable income and tax payable
Depreciation: The depreciation rate and depreciation method of tangible assets include: the depreciation rate of the building and its ancillary buildings is 5%, using the straight-line depreciation method; The depreciation rate of computers, electronic information systems, software and data processing equipment, etc. is 50%, using the declining balance depreciation method; The depreciation rate of automobiles and office appliances and equipment is 25%, using the declining balance depreciation method; Other tangible assets are depreciated at 20%, using the declining balance depreciation method; Special re-depreciation is implemented for the tangible assets of qualified investment projects, that is, 40% of the asset cost can be depreciated in the first year after the asset is purchased. The depreciation rate of intangible assets is amortized according to its specified life using straight-line depreciation method. The depletion of natural resources has special provisions.
Loss carry forward. Losses can be carried forward for a period of 5 years, forward carry forward is not allowed.
Other deductions. The interest deduction cannot exceed the interest income realized in the current year, and the part that cannot be deducted can be carried forward to the next year for deduction.

3. Personal income tax
①　Taxpayers
Taxpayers of personal income tax are divided into resident individuals and non-resident individuals. A person is considered a Cambodian resident if he or she resides in Cambodia for more than 182 days in a 12-month period.
②　Tax object, tax rate
Cambodia's personal income tax is mainly levied on wages and salary income. Cambodian resident individuals are taxed on their salary income from within and outside of Cambodia, while non-resident individuals are only taxed on their salary income from within Cambodia. Taxable wages are divided into cash wages and fringe benefits wages, both of which are subject to different tax rates.
Cash wages include wages, bonuses, overtime allowances, etc. Wages with fringe benefits include education allowances (other than employment-related education), accommodation allowances, allowances for certain insurances, social benefits, etc. Salaries that are tax-exempt include those of employees of recognized international organizations, diplomatic missions, etc. Members of Parliament in Cambodia do not pay salary and salary income tax.

Salary and Salary Income Tax Rate Table :

Series

Monthly Taxable Income

Part below 500,000 riels

The portion exceeding 500,000 riel to 1,250,000 riel

The portion exceeding 1,250,000 riel to 8,500,000 riel

The portion exceeding 8,500,000 riel to 12,500,000 riel

The portion exceeding 12,500,000 riels

Tax Rate(%)

1. Corporate Income Tax

Benefits: The tax on the wage portion of fringe benefits is paid by the employer at a rate of 20% of the market value of the benefit wages.
Salary
The wage income tax rate for non-resident individuals is 20%.
3. Other major taxes
①　Value-added tax
Enterprises and individuals providing goods or services in Cambodia are obliged to pay value-added tax. The VAT rate is 10%, and the zero rate applies to exported goods and services.
The following labor services are exempted from VAT: services in the public post and telecommunications industry, services in the medical and health industry, state-owned public transportation and electric power utilities, insurance and specific financial services.
②　Minimum tax
Taxpayers who are not subject to corporate income tax and VAT are obliged to pay the minimum tax. The tax basis of the minimum tax is the business income of those who provide services and goods, and the tax rate is 1%.
③　Specific Goods and Services Tax
Specific goods and services tax is levied on imported goods or specific goods and services at rates ranging from 0 to 33.33%.
④　Land and house lease tax
Businesses engaged in land and building leasing are obliged to pay land and building lease tax. Land and house lease tax is based on the lease fees obtained by land and house leaseholders, and the tax rate is 10%.
⑤　Stamp duty
Stamp duty is levied on specific official documents, specific advertisements, etc., and the tax amount depends on the place where the advertisements are placed, the lighting used, and the national language.
⑥　Unused land tax
The unused land tax is levied on unused land in cities and designated areas that are not engaged in construction, or have buildings that are not used, and specific development sites. The tax amount is determined by the Unused Land Evaluation Committee on June 30 each year, and is calculated at 2% of the market price of land per square meter.

The Cambodian Ministry of Labor launches an online system for foreigners to apply for work permits

The Cambodian Ministry of Labor announced that starting from September 1 this year, the online system for foreigners to apply for work permits has been put into use, and the website is www.fwcms.mlvt.gov.kh. However, in addition to the normal fees of US$100 and US$20 for work permit applications and work quota applications, an additional service fee of US$30 is required to use the online system.

Preferential policies in Cambodia

The Cambodian government gives foreign and domestic investment basically the same treatment. The Investment Law (adopted by the first special session of the National Assembly of the Kingdom of Cambodia on August 4, 1994) and its amendments (revised twice in 1997 and 1999) provide protection and relatively preferential tax and land leasing policies for foreign investment. In addition, foreign investment can also enjoy the Generalized System of Preferences (GSP) treatment given to Cambodia by 28 countries/regions such as the United States, Europe, and Japan.

[Investment Protection] The investment protection provided by the Cambodian government to investors includes: ① basically giving equal treatment to foreign and domestic investment, all investors, regardless of nationality and race, are equal before the law; ② the Cambodian government does not implement a nationalization policy that damages the property of investors; ③ for approved investment projects, the Cambodian government does not regulate the prices of products and services; ④ no foreign exchange controls are implemented, allowing investors to purchase foreign exchange from the banking system and transfer it abroad to settle their fiscal debts related to investment activities.

[Investment Incentives] Qualified investment projects approved by the Council for the Development of Cambodia can obtain the following investment incentives: ① Exemption from import tariffs on production equipment, construction materials, spare parts and raw materials of investment production enterprises; ② After the investment, the enterprise can enjoy a tax-free period of 3-8 years (up to 9 years in special economic zones), and after the tax-free period, a profit tax of 9% shall be paid in accordance with the tax law; ③ Profits used for reinvestment are exempt from profit tax; dividend distribution is not taxed; ④ Products are exported and are exempt from export tax.