(Last updated: 18 May 2011)

Business opportunities

Despite poor commercial infrastructure and weaknesses in Cambodia's legal framework, opportunities exist for Australian companies.

Australian companies are well positioned to take advantage of opportunities in the following areas:

• Extraction of offshore oil and gas reserves
• Mineral extraction of bauxite and gold
• Consumables
• Dairy products
• Meat
• Beverages (wine)

Development activities financed by the World Bank, the Asian Development Bank and other donors provide opportunities for Australian firms to participate in infrastructure projects or provide professional services.

For general inquiries concerning Austrade’s services, please contact Austrade Direct on 13 28 78.

Business etiquette

Business tips

Many of these are shared in other parts of Asia, with Thai business practice bearing perhaps the closest resemblance.

Cambodians traditionally greet each other by pressing their palms together in front of their bodies and bowing, called a 'sompeah'. Generally a younger or lower rank person initiates the greeting. This custom has been partially replaced by the Western practice of shaking hands. It is considered acceptable for foreigners to shake hands with Cambodians of both sexes.

The head is regarded as the highest part of the body, both literally and figuratively. As a result Cambodians don’t approve of touching anyone there, even in a friendly gesture.

If possible, a business card in both English and Khmer on the reverse side should be presented during the initial greeting.

While English is becoming more widely spoken, foreigners should try to ascertain whether their partner is fluent in English and, if not, utilise an interpreter to ensure a smooth meeting and follow-up.

Cambodian businessmen can be addressed with 'Mr' and their first name, or for women, 'Madam'. Many senior managers of Cambodian companies or high level officials also have the title 'Your Excellency'.

In Cambodia, social engagements such as eating or playing golf, are useful to create a level of mutual trust and understanding between business partners. Foreign businesses who have been successful in the Cambodia have taken considerable time to build the necessary business and government contacts to operate successfully.

Face-to-face contact is very important in initial dealings with Cambodians and a capacity to understand (often) very different set of viewpoints. It is important not to become angry, abusive or frustrated with Khmers. Voicing one’s anger is unlikely to achieve much, particularly if a Khmer is forced to 'lose face' in front of his or her colleagues.

It is very important to determine at the outset in any business dealings the hierarchy and seniority of whom you are dealing with, and those responsible for decision-making. Correspondence and communications should be addressed to the senior decision-makers. Bear in mind that decisions often take a considerable length of time as they are relayed up and down the chain of hierarchy due to the lack of delegation within companies or government ministries.

Foreigners should take care to avoid a confrontational or aggressive style in their business meetings. Cambodians are generally not direct or forthright in their dealings and take to subtle, rather than blunt, messages. Cambodians will often say yes to direct questions, but this may only mean that they hear and understand you, but nothing more.

A small token of gratitude in the form of a gift is always appreciated when visiting a Cambodian. Gifts should always be offered with the right hand. If wanting to be particularly polite, foreigners should support their right elbow with the fingers of their left hand. Before entering a Cambodian home, shoes should always be removed.

While the Khmer language is not easy, Cambodians will sincerely appreciate any efforts to learn their language. Basic greetings or several words in Khmer, even if mispronounced, will act as a good icebreaker in business dealings and show that you are keen to understand an integral part of Cambodian culture.

It is considered rude to point with your feet, particularly the soles of your feet, towards a person or object, use your hand instead. Try to avoid doing so when sitting opposite anyone. Tuck your feet away under your body when sitting on the floor or on a chair.

For men, lightweight suits, including one dark suit and tie for official occasions, are appropriate as formal business attire. Light coloured suits are also acceptable. Trousers and an open-neck shirt are acceptable office wear on most occasions. For women, most styles of Western dress are acceptable in Cambodia, but very short dresses and skirts and brief tops should be avoided. Cotton is the most appropriate fabric because of the heat.

Please also note: Bribery of foreign public officials is a crime. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas. For more information, go to the Attorney General's Department on foreign bribery.

Tariffs and non-tariff barriers

Tariff duties on goods are levied on numerous import items and consist of only ad valorem duties. Imported goods are assessed at their customs value including insurance, freight, customs duties and specific tax. Imported goods are subject to Cambodia’s VAT of 10 per cent.

Cambodia follows the harmonised system of tariff, classified into eight digits. While on paper there are currently 12 import tariff bands, duties have been simplified generally to a four band system, with rates ranging from zero to 120 per cent.

Tariff duties are imposed on the following items:

• Raw materials such as cement, iron, tile and brick, and items considered essential to daily life, including meats and fruits – 7 per cent.
• Equipment and machinery – 15 per cent.
• Finished products such as television, radios and house furnishings – 35 per cent.
• Luxury goods, including automobiles, wine, cigarettes and cosmetics – 70 per cent.

Imports which are exempt from tariffs include imports:

• By diplomatic missions
• For humanitarian or religious purposes
• That provide incentives in accordance with the 1994 Law on Investment
• Of commercial samples

Of various ad hoc exemptions, as decided by the Prime Minister, Cambodia is not yet a member of the WTO, although it has stated its intention to accede. Cambodia has been a member of ASEAN since April 1999, and has commenced reducing tariffs on ASEAN products according to its obligations under AFTA.

Cambodia’s accession as a signatory to the ASEAN, Australia, New Zealand Free Trade Agreement (AANZFTA). (AANZFTA) will take place once it ratifies the Agreement, expected by 2010. AANZFTA which entered into force on 1 January 2010 will deliver new opportunities and create greater certainty across the board for Australian exporters and investors.

Australian exporters can now access Austrade’s AANZFTA tariff finder. The tool provides an easy reference for Australian exporters who want to know what the applicable tariff rate is for their products under the AANZFTA.

The Ministry of Economy and Finance abolished the system of customs valuation based on an indicative price list in September 1993. The decision stipulates that customs value will be based on CIF market values, and will be expressed in riels. Insurance must be purchased in Cambodia if a consignment has no insurance policy from abroad.

All goods on which the customs duty is more than US$300 must have their customs value approved by the Valuation Office at the Department of Customs and Excise Headquarters in Phnom Penh. Seven major border checkpoints are empowered to approve customs values for goods with a customs duty of US$300 or less. There is a fee of approximately US$4 for this service.

Cambodia operates a Pre-Shipment Inspection Scheme (PIS), which requires the inspection company, SGS, to determine whether the invoice price (transaction value) corresponds to the open market price of the goods. Exemptions for pre-shipment inspection would be shipments with a FOB value of less than US$4000. Under the scheme, importers will have to pay the intervention fee for the PIS service prior to application for inspection. For more details, the SGS Liaison Office can be contacted on +855 15 919 121.

Non-tariff barriers

Import restrictions

There are no quantitative restrictions on imports into Cambodia. There are import prohibitions on narcotic drugs and poisonous chemicals.

Most imported goods may enter Cambodia without an import license. Import licensing requirements cover only a small number of products, as specified in the Ministry of Commerce Announcement No.2211 and as described below:

• Weapons, explosives and ammunitions (permit required from the Ministry of National Defence).
• Vehicles and machinery for military purposes (permit required from the Ministry of National Defence).
• Gold, silver, precious stones and articles thereof (permit required from the National Bank of Cambodia).
• Pharmaceuticals and medical material (permit required from the Ministry of Health).

Product certification, labelling and packaging

Labelling

Camcontrol, a unit of the Ministry of Commerce is responsible for setting standards. The Ministry of Commerce requires foodstuffs to have a label including the following information:

• Name of goods
• Producer name and address
• Source
• Quantity
• Batch number and production date
• Expiration date
• In€gredients
• Directions for use (if necessary)
• License of authorising institution (if required for local products)

Packaging

Goods should be carefully packaged to protect against adverse weather conditions, particularly heat and humidity. There is no cold storage in Cambodia.

Methods of quoting and payment

Quotes are usually on a CIF basis in US dollars. Initial transactions should be by confirmed, irrevocable letter of credit.

Documentary requirements

Packing list

Particulars required in the cargo manifest are as follows:

• Bill of lading number
• Port of loading and unloading
• Consignee and consignor
• Description and gross weight of goods
• Quantity, marks, numbers and type of packages

Imported goods require an import declaration form. Goods shipped through Vietnam via the Mekong River must also have a transit licence.

Very small quantities of trade samples can be brought into Cambodia tax-free. A letter to the Director of the Customs Department seeking an import tax exemption and with supporting reasons should be sent prior to importation. Larger quantities of trade samples are subject to payment of import tax.

Weights and measures

The metric system.

Public health requirements

Imported live animals, plants and foodstuffs of plant origin should meet the following requirements:

For live animals, various vaccinations (depending on the kind of animal) are required. The Ministry of Agriculture (Department of Production and Animal Husbandry) is in charge of vaccination controls.

For plants and foodstuffs of plant origin, a phytosanitary certificate is required. The Ministry of Agriculture (Plant Protection and Phtyosanitary Inspection) ensures phytosanitary controls at the border and issues phytosanitary certificates upon request from importers or exporters. The Inspection maintains the list of pests and plant diseases subject to plant quarantine in Cambodia. Cambodia recognises phytosanitary certificates of other countries.

Taxation

Foreign investors and investments will generally be affected by the following taxes:

A Value Added Tax (VAT) of 10 per cent was introduced in Cambodia in January 1999. The VAT is applied to the 'taxable value' of the goods or services and applies to all stages of production. Corporations, importers, exporters and investment enterprises are required to register for VAT when starting up their business.
Taxpayers will be required to file VAT returns and make VAT declarations and payments on a monthly basis, ie. By the 20th day of the succeeding month. For imports, VAT will be payable to customs at the time of import.

Several categories of imported goods are subject to excise taxes (10 per cent to 30 per cent). Those include:

• some types of cars
• car spare parts
• buses
• trucks
• motorcycles
• beverages
• cigarettes
• gasoline
• oil

The standard rate of profit tax for companies is 20 per cent. Oil and gas and a number of mineral exploitation activities are subject to a 30 per cent rate. At present, a preferential rate of nine per cent is available for investments which meet certain criteria required by the Council for the Development of Cambodia (CDC). The CDC might also grant tax holidays to certain projects for up to eight years depending on their satisfaction of these criteria. Profit tax returns are to be filed annually within three months of the end of the calendar year. In addition, a tax on profit prepayment equal to one per cent of turnover, is required to be paid on a monthly basis by the 15th day of the succeeding month.

The minimum tax is equivalent to a tax floor or minimum threshold which real regime taxpayers are required to pay. Its effect is that Cambodian taxpayers are liable to pay one per cent of annual revenue as tax to the government. Minimum tax is separate and distinct from the profit tax and is due whether or not the taxpayer has made a profit or loss. In the event that a taxpayer’s profit tax liability is greater than the minimum tax, then the minimum tax will be credited against the total profit tax liability of the taxpayer.

A flat rate of 15 per cent withholding tax applies to payment of 'Cambodia source income' to non-residents, whether overseas or within Cambodia. The rate of 15 per cent must be withheld from payments of income, such as income received from services provided in Cambodia, interest on debt obligations issued by a resident or by the government, dividends received from a resident enterprise, capital gains on property sale, rents paid on property in Cambodia, and insurance premiums.

Withholding taxes also arise from local transactions between residents, including a 15 per cent tax on payment made to individuals for services such as consulting and management fees, 15 per cent on royalties for oil, gas and minerals, 10 per cent on rental payments and 5 per cent on interest paid by local banks to resident individuals with a non-fixed term account.

A two per cent turnover tax applies to those tax-payers not within the real regime (large and/or incorporated) taxpayers. Turnover includes revenue from the supply of goods and services. Taxpayers must make monthly turnover declarations and payments.

Resident and non-resident individuals who derive assessable income from sources in Cambodia, irrespective of the place of payment, are subject to personal income tax at progressive tax rates ranging from five per cent to 20 per cent of net assessable income. For non-residents, only the Cambodian sourced salary will be subject to the salary tax. Cash salary includes remuneration, wages, bonuses, overtime, compensations and employer provided loans and advances.

There are a range of other minor taxes which might affect foreign businesses, including house and land rent tax, patent tax, fiscal stamp tax (eg. advertising postings and signages), unused land tax, and specific taxes on certain merchandise and services. To date, Cambodia has not negotiated any double taxation agreements.

Investors in Cambodia are required to prepare annual income statements and balance sheets primarily to assess profit tax liability. Accounts must be received by the Tax Department within three months after the end of the calendar year, ie. 31 March. Current law stipulates that all accounting books and records must be denominated in riel, although in practice it appears that financial statements denominated in US dollars are also acceptable.