Foreign Direct Investment in Cambodia’s Real Estate Market

The Law on Investment in the Kingdom of Cambodia was implemented on 15 October 2021.

This legislation has attracted increased foreign investment to Cambodia by providing a clear, transparent, predictable and non-discriminatory legal framework for investment. It offers several incentives and guarantees for investors, several of which do not apply in neighbouring Southeast Asian countries:

INCENTIVES FOR FOREIGN INVESTORS

• Income tax exemption
  Foreign investors are exempt from income tax for the first five years of operation. After this period, they are subject to a reduced rate of income tax.
• Land ownership
  Certain restrictions notwithstanding, foreign investors may be eligible to own land in Cambodia.
• Repatriation of profits
  Foreign investors have the freedom to transfer funds in and out of Cambodia.
• Customs duty exemption
  Foreign investors are exempt from customs duties on imported goods used for their investment.

GUARANTEES FOR FOREIGN INVESTORS

• Non-discrimination
  Foreign investors are protected from discrimination based on their nationality.
• Access to dispute resolution
  Foreign investors have access to international dispute resolution mechanisms, such as the International Chamber of Commerce.
• National treatment
  Foreign investors are entitled to the same favourable treatment as domestic investors.
• Protection from expropriation
  Foreign investments are safeguarded from expropriation, except in cases of the public interest for which there must be adequate compensation.

The amendment to the Strata Title Law of Cambodia (2009), introduced in 2015, has made it easier for foreigners to purchase property in Cambodia. This amendment establishes a more transparent and democratic system for managing strata-titled buildings.

The amendment to the Strata Title Law of Cambodia has brought the following benefits:

BENEFITS FOR FOREIGN INVESTORS

• Equal rights
  Foreign investors have the same ownership rights as Cambodian citizens for owning strata titles. This allows foreign investors to own and enjoy strata-titled properties, as well as utilise communal areas.
• Transparent rules
  The rules for the sale and transfer of strata titles have been made more transparent and democratic. This simplifies the process for foreign investors wanting to buy and sell strata-titled properties.
• Building size
  The minimum-size requirement for a strata-titled building was adjusted to 100 units. This change facilitates the development of condominiums that are more appealing and affordable for foreign investors.
• Fire safety standards
  Strata-titled buildings are now mandated to have a fire-safety system, providing added security for foreign investors.

These benefits have positioned Cambodia as a more attractive destination for foreign investment in the real estate sector. In recent years, there has been a notable increase in the number of foreign investors acquiring strata-titled properties in Cambodia.

The Trust Law of Cambodia (2019) is a significant piece of legislation that promotes the expansion of the trust sector in Cambodia. This law establishes a clear and comprehensive legal framework for the use of trusts, protecting the interests of settlors, trustees and beneficiaries of trusts.

BENEFITS FOR FOREIGN INVESTORS

• Increased investment
  The Trust Law of Cambodia has led to a rise in foreign investment in Cambodia by providing a clear framework for trust utilisation. Trusts can be employed to invest in various assets, including real estate, businesses and securities.
• Reduced risk
  The law minimises the risk of disputes between trustors, beneficiaries and trustees through a clear process for dispute resolution.
• Enhanced asset management
  The law enhances the value of trusts by assuring foreign investors of ownership and management certainty.
• Asset protection
  Trusts provide foreign investors with a means to safeguard assets from creditors, lawsuits and other risks.
• Tax planning
  Trusts can facilitate tax reduction for foreign investors.

The Trust Law of Cambodia offers numerous benefits to foreign investors considering the use of trusts to hold assets in Cambodia. The law establishes a clear and comprehensive legal framework for trust utilisation and includes safeguards to protect the interests of foreign investors.