Snapshot Of Key Legal Developments In Cambodia.

Legal News & Analysis - Asia Pacific - Cambodia - Regulatory & Compliance

9 July, 2016


Royal Kram No. NS/RKM/1516/007 promulgating the Law on Trade Union dated 17 May 2016


To complete the gaps in the Labour Law which was adopted since 1997, the National Assembly has finally adopted the Law on Trade Union. This law aims to provide for the rights and freedoms of enterprises, establishments, and all persons subjected to the Labour Law as well as personnel serving in air and maritime transportation. 

This law also sets out provisions with regard to the organization and the function of the professional organizations of workers and employers in Cambodia.

In comparison with the Labour Law, this law addresses some changes such as the eligibility conditions for staff representatives/shop stewards, and the obligation of enterprises employing eight employees or more to arrange an election of staff representative/shop stewards after three months of the enterprise's operation.

However, the rights to collective bargaining between workers and employers, the special protection against the termination of the employment contracts of staff representatives, union leaders and other personnel are assured under this new law.

In addition, this new law also determines the different sanctions for the breach of various provisions, ranging from a fine up to KHR 10,000,000(approximately US$2,500) for illegal lock-out committed by Union of Employers, to KHR 5,000,000 (approximately US$1,250) for other sanctions.


Singapore and Cambodia : Agreement on the Avoidance of Double Taxation


On 20 May 2016, the Government of the Republic of Singapore and the Royal Government of Cambodia signed a bilateral agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income ("Agreement"). This is the first bilateral agreement that Cambodia has entered into to move towards the ASEAN Economic Community since its launch in December 2015. However, this Agreement has not been ratified by the two signatory states yet.

This Agreement was entered into to promote bilateral cooperation, capital flow, sharing of technology and expertise and for tax certainty and avoidance of double taxation. As a result of the lower barriers for cross-border investments, we expect to see an increase in trade and investment flow between the two-countries.

The Agreement shall apply to persons who are residents of one or both of the contracting states and it applies to taxes on income, which are taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, and taxes on the total amounts of wages or salaries paid by enterprises, imposed on behalf of a contracting state or local authorities, irrespective of the manner in which they are levied.

After the ratification of this Agreement, the contracting states shall work together to mutually agree on a standard procedures, cooperative in exchanging information and strictly respect the non-discrimination principle.


Sub-Decree No. 72 SD.P on Management of Mineral Resource Exploration License and Industrial Mining License dated 5 May 2016


In order to control the mineral resource operations in Cambodia, the Royal Government of Cambodia issued the Sub-Decree No. 72 SD.P on Management of Mineral Resources Exploration License and Industrial Mining License, which determines the procedures, processes and conditions related to the request for and issuance of licenses for exploration and industrial mining, as well as the rights and obligations of the mineral resource exploiters.

An exploration license is valid for a period of three years, renewable for two terms; provided that each term cannot exceed two years. An industrial mining license is valid for 21 years and renewable for two terms; provided that each term cannot exceed ten years, save for exceptional circumstances.

The licensee is required to operate the activity in accordance with the terms and conditions determined by the license and with the provisions of this Sub-Decree. This Sub-Decree also sets out reporting obligations for the licensees. The license may be revoked if the licensee fails to comply with the obligations set out by the Sub-Decree.

As a result of the issuance of this Sub-Decree, any enterprises holding any license or mineral resource investment agreement before the issuance of this Sub-Decree is required to submit a letter to Minister of Mines and Energy for a new license or the amendment of the investment agreement no later than 180 days after the date of this Sub-Decree (5 May 2016).

Prakas No. 186 MOC.IP.P on Procedures to Record Imported Goods Bearing Exclusive Trademarks dated 31 May 2016


On 31 May 2016, the Ministry of Commerce ("MOC") issued a new Prakas on the procedures to register an exclusive distributorship with the Department of Intellectual Property Rights ("DIPR").

According to the Prakas, all previous approval letters issued by MOC before 31 May 2016 on exclusive distributorships, which do not provide for a specified validity period, will become null and void from 30 June 2016 onwards. These distribution agreements must be re-registered.

It is, however, important to note that the Prakas only applies to: (i) goods that bear a trademark registered in Cambodia; (ii) genuine and non-counterfeit goods; and (iii) new goods. Second hand goods, pharmaceutical products and prohibited goods are not allowed to bear exclusive trademark rights or to be registered for exclusive distributorship at DIPR.

Under this new regulation, the approval letter on exclusive distributorship shall be valid for a period of two years, subject to renewal within three months before expiry date. Upon approval, the trademark owner or distributor shall immediately publish the approval letter on the front page of any well-known newspapers for at least three consecutive issues.


Prakas No. 495 MEF on the Implementation of VAT on the Supply of Unprocessed Agricultural Products dated 6 April 2016


In order to support the Royal Government of Cambodia's rice export policy and to decrease the cost of the use of Unprocessed Agriculture Products, the Ministry of Economy and Finance has issued Prakas No. 495MEF dated 06 April 2016 on the implementation of Value Added Tax ("VAT") for the Supply of Unprocessed Agricultural Products. 

Under this Prakas, "Unprocessed Agricultural Products" refers to any grinded or non-grinded and unprocessed products of agriculture such as tree tuber, roots, tree bark, fruit, flowers or plain seeds cultivated from the farm. "Supply" means any act of selling, direct using, donation or selling for lower value, importing into any customs checkpoint area of Unprocessed Agricultural Products by any taxable person in Cambodia or so called "Self-Assessment" taxpayers.

Pursuant to this Prakas and the Sub-Decree No. 55MEF dated 30 March 2016 on the Amendment of Article 56 of Sub-Decree No. 114 dated 24 December 1999 on VAT, the supply of Unprocessed Agricultural Products by self-assessment taxpayers in Cambodia will be considered as non-taxable supply which is exempted from VAT.


Prakas No. B14-016-147 on Membership of Fast and Central Shared Switch System dated 19 May 2016


This Prakas is for the purpose of providing a faster, more effective and secured retail payment for customers of banking services in Cambodia. This Prakas covers all commercial banks and microfinance deposit taking institutions ("Institutions").

Under this Prakas, Fast and Secure Transfers ("FAST") is a retail payment system that facilitates immediate payment transactions between its members. However, such transactions must be made in Khmer Riel.

Central Shared Switch System is a central system for networking the Automated Teller Machine ("ATM") and Electronic Fund Transfer Point of Sale ("EFTPOS") between Institutions members.

All Institutions are obliged to participate as a member of the FAST system before 1 January 2017 and Central Shared Switch before 1 January 2018. Furthermore, all Institutions shall prepare a core banking system and an appropriate infrastructure to connect with the FAST and Central Shared Switch System.


Prakas No.B7.016.117P on Minimum Registered Capital of Banking and Financial Institutions dated 22 March 2016


As the banking and financial sector of the Kingdom of Cambodia has gradually improved in the last decades, the National Bank of Cambodia ("NBC") recently set out new minimum requirements for registered capital for all banks and micro-finance institutions licensed by the NBC to operate in Cambodia.

On 22 March 2016, the new Prakas No.B7.016.117P on New Determination of Minimum Registered Capital for Banking and Financial Institutions in Cambodia was issued by the NBC. The NBC has clearly determined and classified the new requirements as follows:

  • Commercial banks which are the branch of a foreign bank having its investment-grade rated by an International Credit Rating Agency must have a minimum registered capital of KHR 200,000,000,000 (approximately US$50,000,000);
  • Commercial banks which are the branch of a foreign bank which does not have its investment-grade rated by an International Credit Rating Agency must have a minimum registered capital of KHR 300,000,000,000 (approximately US$75,000,000);
  • Commercial banks which are the local banks or a subsidiary of a foreign bank, must have a minimum registered capital of KHR 300,000,000,000 (approximately US$75,000,000);
  • Specialized banks which are being the local banks must have a minimum registered capital of KHR 60,000,000,000 (approximately US$15,000,000);
  • Deposit-taking microfinance institutions must have a minimum registered capital of KHR 120,000,000,000 (approximately US$30,000,000); and
  • Microfinance institutions must have a minimum registered capital of KHR 6,000,000,000 (approximately US$1,500,000).


After this new determination, all banking and financial institutions mentioned above must comply with the new requirements set out above within two years from the date of the Prakas.


Circular No. B7-016-003 on Implementation of Prakas on Minimum Registered Capital of Banking and Financial Institutions dated 16 June 2016


The NBC has recently issued a Prakas determining new minimum registered capital for banking and financial institutions in Cambodia. Thus, in order to provide an effective implementation of that Prakas, the NBC has issued this Circular B7-016-003 dated 16 June 2016.

In accordance with this Circular, the NBC has referred the minimum registered capital of all banks and financial institution to the Prakas No. B7-016-117 P on the Minimum Registered Capital of Banking and Financial Institution dated 22 March 2016 and has clarified on certain points that the Prakas did not mention such as the investment grade, deadline to fulfil this requirement, documentation to provide and the suggestions on how to meet this requirement.

With regards to the investment grade of a foreign bank, the NBC states that it shall be provided by any of these International Credit Rating Agencies, being Moody's Investor Services, Standard & Poor's, Fitch or other independent international agencies recognized by the NBC. The investment grade shall be any grade which is equal to or better than the following:

  • Baa3 of Moody's Investor Service;
  • BBB- of Standard & Poor's and;
  • BBB- of Fitch.


Moreover, this Circular also requires all banks and financial institutions to meet at least half of the new minimum registered capital by the end of March 2017 and in full by 22 March 2018.

The NBC also suggests some mechanisms for all banks and financial institutions in order to fulfil this new capital requirement such as seeking other potential investors, merging with other banks or financial institutions, converting the form of the institution, or voluntarily dissolving itself.


Notification No. 127 MLVT/A on Re-Registration of Employees with the National Social Security Fund dated 2 May 2016


Cambodia's Social Security Scheme, in force since 2008, is being implemented by the National Social Security Fund ("NSSF") in two steps: (i) Employment Injury and (ii) Health Care and Pension Scheme. However, there are many cases where employees have been registered at the NSSF with incorrect information, causing problems in benefit claims for employment injury, and potentially disrupting the implementation of the newly enacted Health Care Scheme and the future coming Pension Scheme.

Therefore, the Ministry of Labour and Vocational Training has issued a Notification No.127MLVT/A dated 2 May 2016, calling to all owners and chairmen of entities subject to the Labour Law to re-register any of their employees having incorrect information with the NSSF.

This Notification specifies that the re-registration with the NSSF is free of charge. Furthermore, the employees shall not be considered to be at fault for previously providing incorrect information and the employer shall not be accused of child labour abuses if their employees were registered with the wrong identity. The Notification also requires all entities to ask for the identity card or passport, birth certificate, residential certificate, etc. when recruiting new employees.


Instruction No. 8726 GDT on Implementation of Stamp Duty Tax on Transfer of Ownership or Possessory Rights of Immovable Property dated 14 June 2016


Stamp duty tax on transfer of immovable property is created under the Law on Financial Management in 2010. Recently, the General Department of Taxation ("GDT") has issued the above mentioned Instruction No. 8726 GDT in order to illustrate the implementation of the provisions in relation to the stamp duty on the transfer of ownership or possessory rights of registered and non-registered immovable property.

Under this Instruction, the transfer of any or all parts of ownership or possessory rights of a registered immovable property, having the certificate of title, and the non-registered immovable property will be subject to a stamp duty with a rate of 4% of the value of the immovable property, determined by the GDT based on the market value of such property on the day of the transfer.

Moreover, the Instruction also emphasizes the procedure of the payment of the stamp duty for the non-registered immovable property and such immovable property which has already been transferred many times from one owner to another (where such transfer(s) occurred before 2 February 2016). In the event there is a first time registration or another transfer, the stamp duty tax will only apply to the last transfer.

In addition, the stamp duty tax is exempted for the following cases:

  • the receipt of ownership or possession on a land concession of private state owned land from the Royal Government of Cambodia for the benefit of economy and social purpose;
  • the receipt of ownership or possession on immovable property which is registered in the inventory list of any institutions of Cambodia;
  • the receipt of an ownership or possession on immovable property for diplomatic missions or foreign consulates or international organization or any technical corporation agency of any governments;
  • the receipt of an ownership or possession as a succession between parent and child; between spouses; and between grandparent and grandchild; and as from first time donation between father or mother and child; between spouses; and between grandparent and grandchild.


Meanwhile, deduction from the bases for calculation of stamp duty tax is allowed as follows:

  • In the event of succession between siblings and between parent-in-law and child-in-law, the deductible amount shall be KHR 200,000,000 (approximately US$50,000);
  • In the event of donation between the above, the deductible amount shall be KHR 100,000,000 (approximately US$25,000); and
  • In the event of the above transfer from the second time and being the donation between parent and child; between spouses; and between grandparent and grandchild, the deductible amount shall be KHR 100,000,000 (approximately US$25,000).


Rajah & Tann


For further information, please contact:


Eng Beng SC, Partner, Rajah & Tann

[email protected]