Due to the cheap labor costs and rapidly growing economy, more and more foreigners are choosing to register company in Cambodia. Traditionally, Cambodia has been an ideal location for businesses in the textile industry seeking to outsource the more labor-intensive portion of their production to reduce costs. However, in recent years, the Cambodian government has implemented policies to attract investments in other sectors through the creation of Special Economic Zones and its Qualifying Investment Projects (QIP) scheme. Hence, you may wish to consider setting up a company in Cambodia, especially if your business activities qualify for QIP status. To set up a company in Cambodia, you can follow the steps below:
1. Select an optimal business entity
Before you proceed with company incorporation, you would want to first 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 business owners will choose between setting up a subsidiary (limited liability company) or a branch office when seeking to expand their business into another country.
The main difference between a limited liability company and a branch office is in terms of liability. In the case of a limited liability company, the company is regarded as a separate legal entity from the shareholders and directors of the company. This means that they will not be held liable for any debt and obligations incurred by the company, except for the number of shares they hold in the company if the company goes bankrupt. A branch office, on the other hand, is regarded as an extension of the parent company. In other words, the parent company will be held accountable for the debt and liability incurred by the branch office. In the case of bankruptcy, the parent company will be responsible for paying off the debt for its branch office in Cambodia.
Both limited liability companies and branch offices will be required to pay corporate income tax and value-added (VAT) tax if they meet the minimum threshold. There is no requirement to appoint a local resident director or company secretary for both types of business entities. Instead, the company must appoint a local representative agent and have a registered office address.
However, unlike a limited liability company, a branch office cannot apply for Qualifying Investment Project (QIP) status. A QIP status can grant a Cambodia company corporate income tax holidays, exemption from import duties for certain imports, and other monetary benefits. However, not all business activities qualify for QIP. You may wish to consider setting up a subsidiary (limited liability company) instead of a branch office if your business activity qualifies for the QIP application.
Alternatively, if you do not plan to conduct any income-generating activity in Cambodia, you can 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 yet, you may want to set up a representative office in Cambodia to conduct some prior market research and promote your parent company’s presence.
2. Reserve company name
Once you have decided on the optimal business structure, you can proceed to register your company name. First, you will have 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 filling in your personal information. After your account has been created, you will be able to access the business registration portal, where you can reserve your company name. Do remember to check the availability of your company name through the search entity function in the Ministry of Commerce website before you register your company name.
3. Prepare incorporation documents
After you have reserved your company name, you can start to prepare the documents needed to register a company in Cambodia. Some of the documents required include a lease agreement of the company’s office, identification documents of shareholders and directors, and the company’s Articles of Association. If any of the shareholders in the company is a legal entity, you will also have to provide the parent company’s authorization letter, certificate, and Articles of Association.
4. Register your business
Through the Single Portal, you will be able to register your company with the Ministry of Commerce by submitting the required documents. The department will take a maximum of 8 days to process your application.
5. Complete tax registration
When you are registering for your company in the Single Portal, you can also register your company for tax with the General Department of Taxation through the same application. Documents required include proof of paid property tax or property information of the company. You will also be required to provide information about your corporate bank account within 15 working days after tax registration. In Cambodia, companies are classified into three categories of taxpayers: small taxpayer, medium taxpayer, and large taxpayer based on the amount of annual revenue declared. Generally, medium taxpayers and large taxpayers will pay a corporate income tax rate of 20% while small taxpayers will pay a corporate income tax ranging from 0% to 20%.
6. Open a corporate bank account
The last step is to open a corporate bank account with a reputable bank. It is important that you segregate company finances from personal finances through a corporate bank account to ensure greater transparency and accountability. There are many types of business bank accounts you can choose to open such as a business checking account, business savings account, merchant account, and multi-currency account. Many companies typically have more than one bank account and each bank account will serve different functions. However, if you are operating a small business, it may be better to start out with just one corporate 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 through the Single Portal and the Cambodian government has plans to expand this system to incorporate more government agencies. If you face any difficulty registering through the portal, you can refer to the user guide found on the portal.