Introduction
Cambodia is a constitutional monarchy. The present King is his
Majesty Norodom Sihamoni who acceded to the throne in
2004.1
Cambodia has a bicameral legislature, which consists of the
National Assembly and the Senate. The country's judicial system is
primarily a civil law mixture of French-influenced codes from the
United Nations Transitional Authority in Cambodia (UNTAC) period,
royal decrees, and acts of the legislature, with influences of
customary law and remnants of communist legal theory; increasing
influence of common law.
In general, it is prohibited for foreigner, either a natural
person or legal entity, to own land in Cambodia. Foreigners may be
able to acquire ownership of immovable property via incorporating a
joint venture company with Cambodian private individual or entity,
and such JV allows maximum 49% ownership of the shares. Foreigners
may acquire leasehold rights (up to 99 years) on immovable
properties in Cambodia.
The current Cambodia's legal system is lack of effective
protection on privately owned immovable property, mainly due to the
lack of land ownership records. However, according to the World
Bank, only 1.8% of land plots are reported as having ever been
subject to a conflict, and two-third of which having been resolved
locally within three months. Furthermore, international
organisations such as Asia Development Bank is actively assisting
the Cambodian government improving and reforming the laws.
In terms of Cambodia's fiscal system, it has a low tax rates,
with highest corporate or personal income/profit tax at 20%.
Legal Guide
LAW
The establishment of UNTAC in 1992 resulted fundamental changes
to Cambodia's court system. As a result, a three-tiered court
system was formed, comprising of:
- The Municipal and Provincial Court (jurisdiction of first
instance)
- The Appellate Court, and
- The Supreme Court
Another judicial organ is the Military Court, which handles
cases related to Military offences.2
In respect of the real estate sector, following are some of the
relevant laws:
- Constitution Law and Political Institutions
- Investment Law
- Taxation Law
- Agriculture and Rural Development Law
- Land Law 2001
- Inheritance Law
- Law on the marriage and family
OWNERSHIP & RIGHTS
The new Land Law came into effect in August 2001. In general, it
is prohibited for foreigner, either a natural person or legal
entity, to own land in Cambodia. The Constitution stipulates that
"all persons, individually or collectively, shall have the right to
ownership".
The 2001 Land Law also says that only natural or legal entities
of Khmer nationality have the right to ownership of land in
Cambodia. The legal entities of Cambodian nationality per se mean
the companies of which 51% or more of share are owned by Cambodians
or Cambodian companies.
Different categories of land leases are available in Cambodia
(up to 99 years) – lease for an indefinite time period and a
definite time period. A lease for a definite time period includes a
short-term lease with an option to renew and a long-term lease for
15 years or more. A long-term lease constitutes a right in rem over
immovable property and such right may be assigned for valuable
consideration or transferred by succession.3
Although one of the greatest challenges for the Cambodian
government to implement the land law has been the lack of
landownership records4, according to a World Bank
survey (published April 2008), "[d]ata from the 2004 Cambodian
Socio-Economic Survey, a nationally representative household
survey, indicates that only 1.8% of plots are reported as having
ever been subject to a conflict". The survey further states that
"[o]f these disputes, two-thirds would appear to be minor, having
been resolved (presumably at the local level) in three months or
less. Another relevant statistic is that although only 49.3% of
plots are reported as having any official certification of
ownership, 77% are able to be used as collateral for a
loan."5
In November 2003, The Asia Development Bank (ADB) approved a
US$600,000 technical assistance to further develop Cambodia's legal
framework on land mattes. ADB will assist Cambodian Ministry of
Land Management, Urban Planning and Construction (MLMUPC) with
drafting priority laws, sub-decrees, and implementing regulations
for the country's revised land law, promulgated by the National
Assembly in August 2001.6
In terms of the inheritance related issues, some local sources
claim that according to Cambodian law, foreigners must apply for
citizenship to be able to inherit property. However, such issue may
be avoided if the property is being held through a locally
registered company.7
BUYING PROCEDURE8
The typical buying procedure for an off-plan property is as
follows:
Reservation
Once you have chosen your
ideal property, a reservation agreement is to be signed with the
seller and a reservation deposit needs to be paid (will form part
of the purchase price).
Due Diligence Check
At this stage, buyer
should involve a local legal expert to:
- advice on Cambodia land law
- advice on Cambodia taxation
- verify the Title Certificate with the Land Office, checking for
potential liens or encumbrances
- obtain information on the property from the Commune Council
Official
- obtain the certificate of incorporation of the seller's company
and other documents shows the track record and capacity of the
seller
- assessing the risk of the preliminary sale and purchase
agreement and negotiate some terms (if the seller is flexible of
amending the terms)
Exchange Contract
Once the buyer is
satisfied with the result of the aforesaid due diligence check,
buyer can enter into a preliminary purchase contract with the
seller. At this stage, the first instalment/payment is often
required.
Title Transfer Application
Once the
property is completed and of the satisfaction of buyer's
inspection, the seller and buyer can apply for registration at the
District Land Office of the Ministry of Land Management, Urban
Planning & Construction (MLMUPC).
Paying Tax
The seller and buyer shall then
pay transfer tax to the Tax Collection Office.
Title Registration
The seller and buyer
can then return to the Cadastral Office to complete the
registration process.
Obtain Title Certificate
Once all the
above processes are completed, buyer can finally obtain the Title
Certificate from the Municipal Land Office.
Taxation (for non-residents individuals)9
TAXATION when buying/acquiring property
| category |
tax/fee rate |
scope/remark |
| Stamp Duties |
4% |
Payable on transfer of property or transfer of ownership
of the land without any building under the image of selling,
exchanging, receiving aid, putting share capital in a
company. |
| Legal Stamp Tax |
KHR100
KHR200
KHR500
KHR1,000
KHR2,000
|
levied on all administrative, legal and extra-legal acts,
including posting of public notices. |
TAXATION when owning/holding property
| category |
tax/fee rate |
scope/remark |
| Profit tax |
20% on rental profit |
subject to 10% withholding tax |
| Real Estate Tax |
NIL (unless on unused land, which is taxed at 2% of the market
value of the land) |
Levied on unused land, including unused land with
buildings existing in an abandoned state and is to be paid by the
owner of the land. |
| VAT |
10% applies to all supplies other than exports and
non-taxable supplies. |
Introduced from 1 January 1999. |
TAXATION when selling/disposing property
| category |
tax/fee rate |
scope/remark |
|
Profit tax
|
20% on the profit |
|
| Turnover Tax |
2% flat rate |
|
| Inheritance Tax |
NIL10 |
|
Cambodia has not yet concluded any Double Tax Relief and Double
Tax Treaties with any foreign country. Residents can, however,
obtain tax credit for income taxes paid overseas.
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