Under the LoI (Chapter 6), 19 investment sectors (listed in Article 24 of the LoI) – if they are not on the Negative List (still to be defined in a Sub-Decree) – shall receive investment incentives after obtaining a Registration Certificate certifying their QIP status. The incentivised sectors are:

– High-tech industries involving innovation or research and development;

– Innovative or highly competitive new industries or manufacturing with high added value;

– Industries supplying regional and global production chains;

– Industries supporting agriculture, tourism, manufacturing, regional and global production chains and supply chains;

– Electrical and electronic industries;

– Spare parts, assembly and installation industries;

– Mechanical and machinery industries;

– Agriculture, agro-industry, agro-processing industry and food processing industries serving the domestic market or export;

– Small and medium-sized enterprises in priority sectors and small and medium-sized enterprise cluster development, industrial parks, and science, technology and innovation parks;

– Tourism and tourism-related activities;

– Special economic zones;

– Digital industries;

– Education, vocational training and productivity promotion;

– Health;

– Physical infrastructure;

– Logistics;

– Environmental management and protection, and biodiversity conservation and the circular economy;

– Green energy, technology contributing to climate change adaptation and mitigation;

Other sectors and investment activities not listed by the LoI deemed by the Royal Government of Cambodia to have potential for socio-economic development

Basic incentives

Investment activities registered as QIP are entitled to choose between 2 basic incentives.

Option 1: Tax Exemption Period: an Income Tax exemption for 3 to 9 years, depending on the sector and investment activities, from the time of earning of first income. Sectors and investment activities, as well as the period of income tax exemption, shall be determined in the law on financial management and/or the LoI Sub-Decree.

After the income tax exemption period has expired, the QIP’s income tax will only increase gradually over 6 years, at a progressive rate proportional to the total tax due as follows: 25 % for the first 2 years, 50 % for the next 2 years and 75% for the final 2 years.

Further, this option includes:

– Prepayment Tax exemption during income tax exemption period;

– Minimum Tax exemption provided that an independent audit report has been carried out; and

– Export Tax exemption, unless otherwise provided in other laws and regulations.

Option 2: Special Depreciation: The second option for basic incentives entails:

– Deduction of capital expenditure through special depreciation as stated in the tax regulations in force;

– Eligibility of deducting up to 200 % of specific expenses incurred for up to 9 years. Sectors and investment activities, specific expenses, as well as the deductible period, shall be determined in the Law on Financial Management and/or the LoI Sub-Decree;

– Prepayment Tax exemption for a specific period of time based on sectors and investment activities to be determined in the Law on Financial Management and/or the LoI Sub-Decree;

– Minimum Tax exemption provided that an independent audit report has been carried out; and

– Export Tax exemption, unless otherwise provided in other laws and regulations.

In addition to the incentives of option 1 or option 2:

a. Export QIP and Supporting Industry QIP are entitled to customs duty, special tax and value-added tax exemption for the import of Construction Material, Construction Equipment, Production Equipment and Production Inputs;

b. Domestically Oriented QIP is entitled to customs duty, special tax and value-added tax exemption for the import of Construction Material, Construction Equipment, and Production Equipment. The incentives for Production Inputs shall be determined in the Law on Financial Management and/or the LoI Sub-Decree.

Additional incentives

 In addition to the basic incentives, investment activities registered as QIP receive additional incentives, which are very much focused on advancing local production, R&D and improving the working conditions of local employees:

– Value-added tax exemption for the purchase of locally made Production Inputs for the implementation of the QIP.

– Deduction of 150 % from the tax base for any of the following activities:

a. Research, development and innovation;

b. Human resource development through the provision of vocational training and skills to Cambodian workers/employees;

c. Construction of accommodation, food courts or canteens where reasonably priced foods are sold, nurseries and other facilities for workers/employees;

d. Upgrade of machinery to serve the production line; and

e. Provision of welfare for Cambodian workers/employees, such as comfortable means of transportation to commute from their homes to factories, accommodation, food courts or canteens where foods are sold at reasonable prices, nurseries and other facilities.

– Entitlement to income tax exemption for the Expansion of QIP which will be determined in the LoI Sub-Decree.

 Special incentives

 In addition to basic incentives and additional incentives, this law paves the way for the Royal Government to provide special incentives to specific sectors and investment activities that have high potential to contribute to national economic development, which are identified in Financial Law for Management.