DFDL
  June 1, 2020 - United States of America

Cambodia Update: Additional Measures to Further Support Private Sector & Workers Affected by COVID-19 Outbreak & to Revive the Post-COVID-19 Economy
  by Segolene Leffy

On 26 May 2020, the Royal Government of Cambodia (“RGC”) issued a press release and rolled out round 4 of measures aimed at mitigating the impact of COVID-19 on the businesses and workers in Cambodia. These latest measures consist of a combination of new measures and extension of those measures already in place. In addition to providing relief to the businesses and workers amidst the current Covid-19 outbreak, this round of measures are also intended to promote economic growth and help businesses rebound post-COVID-19 crisis.

Round 4 of the RGC’s measures are summarized below:

1. Further Measures to Support Tourism & Aviation Sectors

The tax exemption that had been provided on the payment of all monthly taxes to hotels, guesthouses, restaurants and travel agents that are registered with the General Department of Taxation Cambodia (“GDT”) that have their business activities in Phnom Penh, Siem Reap, Preah Sihanouk, Kep, Kampot, Bavet and Poi Pet will be extended for a period of two (2) months from June 2020 to July 2020.

Further, for those enterprises in the tourism sector who have suspended their operations, the suspension of monthly contribution to the National Social Security Fund (“NSSF”) will be allowed to continue. The renewal fees for all types of tourism licenses for year 2021 will be exempted.

The Minimum Tax exemption provided to all airline entities operating in Cambodia will be extended for a period of two (2) months from June 2020 to July 2020.

Please refer to our earlier update here for further details on the exemptions outlined above.

2. Revision of the Conditions Attached to the Low-interest Loans

Low-interest loans have previously been made available through: (1) the RGC’s USD 50 million special fund and extended via the Agriculture Rural Development Bank (ARDB); and (2) the USD100 million special financing scheme to small and medium enterprises by the participating financial institutions. Some conditions attached to these loans have been revised, making them more favorable.

For the loans from ARDB, the interest rate for working capital loans will be reduced from 6% to 5% and for investment capital loans, from 6.5% to 5%. The tenure of the investment capital loans will be extended from five (5) years to seven (7) years. Those small and medium enterprises which have not yet been officially registered will also be able to apply for the loans, provided that the registration is completed within one (1) month after obtaining the loans. The requirement to create five (5) job opportunities have also been replaced with a more general condition to encourage those who have obtained the loan to create new job opportunities.

For the loans granted under the USD100 million special financing scheme, restructuring of existing loans will be permitted. The maximum tenure of the loans are extended from four (4) years to seven (7) years, and payment of principal and interest can occur either monthly, quarterly or semi-annual repayments with intervals of not more than twelve (12) months. The loans may now be extended to the enterprises in the medical equipment and medicine production sectors in addition to the priority sectors stated in Sub-decree No. 124 S.E., dated October 2, 2018, on “Tax Incentives for Small and Medium Enterprises in Priority Sectors”.  Similar to the loans from ARDB, the requirement to create five (5) job opportunities have also been replaced with a more general condition to encourage those who have obtained the loan to create new job opportunities.

3. Measures to Increase Cash Flow & Withholding Tax Rate Reduction

The Ministry and Economy and Finance (“MEF”) and the National Bank Cambodia will jointly consider the possibility of relaxing and adjusting certain conditions applicable to the banking sector in order to increase cash flow within the banking system.

Additionally, the MEF will establish a USD 200 million credit guarantee fund to provide loan guarantees to ease the cash flow and working capital pressures of businesses in all sectors, which is expected to generate liquidity of at least USD2,000 million. The MEF will also provide additional financing of up to USD300 million to promote the growth in key sectors during and after the Covid-19 crisis.

For financial institutions obtaining financing whether domestically or offshore, the applicable withholding tax rate (“WHT”) on interest payments will be revised. For new loans, the WHT rate in respect of loans from both domestic and offshores sources (including those from both DTA countries and non-DTA countries) will be reduced to 5% for 2020 and 10% for 2021 respectively. The standard WHT rates will apply from 2022 onwards; for existing loans, the WHT rate will be reduced to 10% for 2020 only.

4. Social Assistance Measures

The RGC will increase the budget for the “Cash for Work Program” for year 2020 to USD 100 million to provide assistance to unemployed factory/enterprise workers and workers returning home from abroad. The RGC will also be introducing a social protection program to provide support to poor and vulnerable families across the country holding equity cards, prioritizing children below the age of 5, people living with disabilities, old people aged 60 or above and people living with HIV.

5. Introduction of the IT Business Registration Platform

To facilitate and promote business registration on-line, Phase 1 of the IT business registration platform will be introduced in early June 2020 which will make the registration process easier for those enterprises wishing to be registered in order to apply for loans under the RGC’s special financing scheme.

It is expected that further instructions and guidelines will be published by the relevant ministries in Cambodia to implement RGC’s 4th round of measures above.

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.


Contacts

Clint O’Connell

Partner, Cambodia Deputy Managing Director & Head of the Cambodia Tax Practice

[email protected]

Lai Kooi Thong

Lai Kooi Thong

Co-Head of Cambodia Banking & Finance Practice Group

[email protected]

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