Due to the cheap labor costs and the fast growing economy, more and more foreigners are choosing to register a company in Cambodia. Traditionally, Cambodia has been an ideal location for companies in the textile industry that want to outsource the more labour-intensive part of their production in order to reduce costs. In recent years, however, the Cambodian government has implemented policies to attract investment in other sectors through the establishment of Special Economic Zones and its Qualifying Investment Projects (QIP) scheme. Therefore, you should consider setting up a business in Cambodia, especially if your business activities qualify for QIP status. To set up a business in Cambodia, you can follow the steps below:
1. Select an optimal business entity
Before proceeding with the establishment of a business, you will first want to select a business structure that best suits your long-term goals and business activities. While there are many different types of business entities in Cambodia, most entrepreneurs will choose between setting up a subsidiary (limited liability company) or a branch when they want to expand their business to another country.
The main difference between a limited liability company and a branch is the liability. In the case of a limited liability company, the company is considered a separate legal entity from the shareholders and directors of the company. This means that they cannot be held liable for any debts and obligations of the company, except for the number of shares they hold in the company if the company goes bankrupt. A branch, on the other hand, is seen as an extension of the parent company. In other words, the parent company is held responsible for the debt and liability of the branch. In the event of bankruptcy, the parent company will be responsible for paying off the debt for its Cambodia branch.
Both limited liability companies and branches will have to pay corporate and value added tax (VAT) if they meet the minimum threshold. There is no requirement to appoint a local resident director or company secretary for either type of business entity. Instead, the company must appoint a local representative and have a registered office address.
However, unlike a limited liability company, a branch cannot apply for QIP (Qualifying Investment Project) status. A QIP status can grant a company in Cambodia corporation tax, duty exemption for certain imports, and other monetary benefits. However, not all business activities qualify for QIP. You may consider establishing a subsidiary (limited liability company) instead of a branch if your business activity qualifies for the QIP application.
If you do not intend to conduct income generating activities in Cambodia, you may also consider setting up a representative office. A representative office is an extension of the parent company and does not have a separate legal entity. If you are not ready to start operations in Cambodia, you may want to set up a representative office in Cambodia to conduct market research beforehand and promote the presence of your parent company.
2. Reserve company name
After choosing the optimal business structure, you can proceed with registering your business name. First, you need to create an account in Cambodia’s online business registration portal, also known as the Single Portal. This can be done by creating an account on CamDigiKey and entering your personal details. After your account has been created, you will be able to access the company registration portal, where you can reserve your company name. Don’t forget to check the availability of your company name using the search function on the Ministry of Commerce website before registering your company name.
3. Prepare Founding Documents
After you have reserved your company name, you can start preparing the documents needed to register a company in Cambodia. Some of the required documents are a lease from the office of the company, identification documents of shareholders and directors, and the articles of association of the company. If one of the shareholders in the company is a legal entity, you must also provide the authorization letter, certificate and articles of association of the parent company.
4. Register your company
Through the Single Portal, you can register your company with the Ministry of Commerce by submitting the required documents. The department needs a maximum of 8 days to process your application.
5. Complete Tax Registration
When you register for your company in the Single Portal, you can also register your company for tax with the General Tax Authorities via the same application. Documents required include proof of property tax paid or company property information. You must also provide information about your business bank account within 15 business days of tax registration. In Cambodia, companies are classified into three categories of taxpayers: small taxpayers, medium-sized taxpayers, and large taxpayers based on the declared amount of annual income. In general, medium and large taxpayers pay a corporate tax rate of 20%, while small taxpayers pay a corporate tax rate ranging from 0% to 20%.
6. Open a business bank account
The last step is to open a business bank account with a reputable bank. It is important that you separate corporate finance from personal finance through a corporate bank account to ensure greater transparency and accountability. There are many types of business bank accounts that you can open, such as business checking account, business savings account, trading account, and multi-currency account. Many companies typically have more than one bank account, and each bank account has different functions. However, if you have a small business, it might be better to start with just one business bank account.
With the launch of the new Single Portal, it has become relatively easier to register a company in Cambodia as the whole incorporation process can be completed online. Many government services can also be applied for through the Single Portal and the Cambodian government has plans to expand this system to include more government agencies. If you are having trouble registering through the portal, you can refer to the user manual on the portal.