In 2023 it was first suggested that a detailed and comprehensive plan was needed to provide a solution for the property and development situation in Sihanoukville with the unfinished buildings and how general investment would be incentivised to support the key economic Cambodian city’s ongoing growth.
In January 2024, Cambodian Prime Minister Hun Manet unveiled the “Special Investment Promotion Program in Sihanoukville 2024” with a range of measures as part of this proposed comprehensive package, to not only tackle the 350+ unfinished buildings in Sihanoukville which requires an estimated USD $1.161 billion to complete construction, but also the promise of new visas, construction and non construction opportunities for investors.
Investing in Preah Sihanouk Province 2024
The investment program, which is also part of a government initiative called “Invest in Preah Sihanouk Province 2024”, has four main objectives.
- Transforming Preah Sihanouk Province into an economy-based province depending on industry, tourism, and investment
- Solving practical challenges that bring immediate results
- Complementing and being consistent with strategies and plans in various sectors set by the Royal Government
- Accelerating the transformation and industrial development in Preah Sihanouk Province to have more value-added, high productivity, and competitive advantage.
Preah Sihanouk Province Investment Promotion Working Group
There remains some ambiguity about whether the Investment Promotion Working Group in Sihanoukville will monitor this Special Investment Promotion Program in Sihanoukville 2024 plan.
The Prime Minister appointed Hean Sahip, Secretary of State of the Ministry of Economy and Finance, as the Chairman as well as three Vice-Chairmen, and other members to form the working group who will lead, coordinate, and implement the plan and act as a “One Window Service Mechanism,” to review, decide, and issue permits or licenses as a package for investment projects and business activities.
They will also prepare the necessary documents and procedures for the implementation of the work and “has the right to use the seal of the Ministry of Economy and Finance to fulfill its duties both in the original form and electronically” said the report.
The main seven tasks of the Investment Promotion Working Group are:
- Responsible for leading, coordinating, and implementing this special program.
- Will be composed of relevant ministries and institutions (with several listed).
- Will have a secretariat and financial resources under the management of the Ministry of Economy and Finance.
- Need to help publicize and educate on the Invest in Preah Sihanouk Province 2024 plans.
- Develop capacity-building programs to ensure accountability, transparency, and efficiency.
- Offer ongoing monitoring and evaluation of the implementation of this special program.
- Provide quarterly reports and annual reports by the end of 2024.
New 3-Year Investment Visa For Sihanoukville
One of the new announcements is a 3-year visa aimed at long-term purchase or rental of property investors in Sihanoukville with a value of USD $100,000+. Previously in the preparation of planning and researching the program, it was mentioned that a visa policy for long-term investors was under its scope.
More details have to be announced (for example who values the project/property) but the Prime Minister said a separate Sub-decree will outline more information.
It will also need to be clarified how this differs from the Cambodia My 2nd Home (CM2H) Program introduced in 2022, and the already existing options to obtain Cambodian citizenship through investments.
What Is The Special Investment Promotion Program in Sihanoukville?
One of the big changes to the previously announced plans is that the grouping of four categories seems to have been dropped – these had been categorised into four investment groups based on their nature and potential (although this may have been purely for the purpose of data collection).
The program now applies to investment projects or business activities in 2024, located in Preah Sihanouk Province, and focuses on the following three types of projects:
- Investment projects or business activities related to buildings that are stalled and will start implementation in 2024;
- Investment projects or business activities that are not related to the unfinished buildings, but will immediately start in 2024;
- Expansion of existing investment projects or business activities in accordance with the specific criteria and will start in 2024.
The general measures and incentives are to be implemented until 2026 and are hoped will build investor confidence and market demand through a step-by-step approach.
The Cambodian Prime Minister also pledged there needs to be a positive image of the region to encourage investment and told the Preah Sihanouk Provincial Administration to ensure no illegal activities are ongoing and ensure a peaceful and secure business and living environment.
Tax Breaks and Financial Incentives – Unfinished Buildings Sihanoukville
The confirmed financial incentives tax breaks for the unfinished building construction projects are:
- Exemption from income tax, income tax exemption and minimum tax for an additional 3 years;
- Exemption from value-added tax (VAT) at the rate of zero per cent for the completion and improvement of stagnant buildings;
- 5-year withholding tax exemption on real estate lease;
- Exemption of property tax and exemption of administrative sanctions;
- Exemption from payment of public services and fees in excess of the land use index for construction-related permits;
- Provide concessions on inspection fees and other certifications related to construction.
What Are The Non-Financial Incentives?
In addition to the above, the Cambodian government will:
- Facilitate the procedures for applying for a permit from the competent authority related to construction work;
- Help facilitate investment and business procedures, including applying for licenses, certificates and permits;
- Establish policies and facilitation, and provide investor matching services, including reference pricing for real estate in Sihanoukville;
- Promoting the use of out-of-court dispute resolution mechanisms in accordance with legal provisions for investment-related disputes.
Non-Construction Projects & Expansion of Business Investment Incentives – Sihanoukville
Furthermore, for investment projects that are not related to the unfinished buildings or additional investment projects or business activities that can start immediately from 2024 in Preah Sihanouk Province, there are also announced benefits.
- The facilitation of investment and business procedures, including applying for licenses, certificates and permits;
- Special incentives such as import tax, patent tax, billboard tax, withholding tax on real estate rental and registration fee, etc.
- Incentives for income tax exemption, income tax exemption and minimum tax exemption for an additional three years for qualified investment projects and tax-registered small and medium enterprises (SME).
- Can apply for zero per cent value-added tax (VAT) for small and medium enterprises registered for tax purchase of locally produced inputs.
- Three-year income tax exemption incentive based on the ratio of the capital expansion rate and the allowance of 150% multiplied by the income to be received.
Additionally, the government seeks to encourage projects that are currently investing in Cambodia to expand their businesses in Preah Sihanouk Province by:
- Facilitating the processing of procedures, formalities, and other permits intended for the implementation of investment and/or business expansion projects or activities;
- Providing incentives and exemptions, such as on import taxes, patent tax, signboard tax and withholding tax on rental property, to enterprises carrying out investment and/or business expending projects or activities;
- QIPs looking to expand and implement their investment activities can be exempt from income tax for a certain period of time – exemption is dependent on the type of investment activity and the proportion of capital expansion in accordance with the Sub-Decree on the Implementation of the Law on Investment of the Kingdom of Cambodia;
- SMEs that have received incentives under the Sub-Decree on Tax Incentives in Priority Sector and have requested for expansion and implementation of their business activities can receive an additional three year exemption on income tax based on the proportion of expansion capital rate;
- Enterprises applying for expansion and implementation of other investment or business activities can receive a three-year income tax exemption incentive based on the proportion of expansion capital rate.
To receive the stated incentives, QIPs, SMEs, and enterprises must meet the following criteria:
- Capital expansion must be from 30 per cent of the actual investment capital before expansion;
- The enterprise must be officially tax registered and must have fulfilled all its obligations to the state;
- The expansion must take one of the following forms: expansion of existing production, expansion through product line diversification within the same lines, or expansion through the installation of new and modern technologies that enhance productivity or protect the environment.
To encourage further expansion and investment into the infrastructure and Special Economic Zones, the government plans to:
- Turn land into industrial or enterprise cluster zones and/or tourism areas.
- Implement pilot test areas which could be Special Economic Zones, Great Tourism Zones, Free Trade Zones, Industrial Cluster Zones, or Customs Bonded Warehouse.
This program is intended to attract opportunities for businesses looking to invest or expand in Sihanoukville as well as revitalise the region to rid the city of these unfinished construction projects. Furthermore, this is being treated as a “Live Document” that may be revised, so any investors looking into this program should stay on top of any possible changes.
Cambodian Prime Minister Met AmCham Cambodia To Discuss Plans
On February 1, 2024, the American Chamber of Commerce (AmCham) met with Cambodian Prime Minister, Hun Manet, to discuss the state of US business in Cambodia. During the meeting, the Prime Minister welcomed increased US investment and promised to create more favourable investment opportunities for US investors.
In regard to talks on Sihanoukville, Tom O’Sullivan, Director of Realestate.com.kh and Board Member of AmCham Cambodia, told B2B Cambodia that the government expressed it is focused on developing regulations and policies in the real estate market.
“The meeting [with the Prime Minister] revolved around incentivising investors to take over some of the unfinished buildings in Sihanoukville, which is something the Real Estate and Construction committee at AmCham has been advocating for since the end of last year with the Deputy Governor of Sihanoukville,” shared O’Sullivan.
The discussions also aimed to highlight opportunities in Sihanoukville for both local and international companies, providing updates about the deep sea port and the Sihanoukville Special Economic Zone (SSEZ).
O’Sullivan stated that he is optimistic about the province and the new policies being implemented in Sihanoukville in 2024, expressing a firm belief that the new regulations will help improve the situation in the coastal city and make it a more attractive destination for investment and doing business.
“As you add more regulations, it becomes safer, and the bigger multinational companies will start to get more confident in the Cambodian market and we’ll start to see some of that Foreign Direct Investment (FDI) come into the country over the next few years,” he added.
Original article credited to Realestate.com.kh, with an additional quote from Tom O’Sullivan provided by B2B Cambodia.
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