Cambodia Economy Overview

Currency

Cambodian Riel (KHR)

Working hours

40 hours/week

Public/bank holidays

23 public holidays

Capital

Phnom Penh

Languages

Khmer

Population

17.1 million

Minimum hourly salary

No standardized national minimum hourly wage across all sectors

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Misclassification of contractors in Cambodia may lead to fines and penalties for the offending company.

Fun fact

The Khmer are a predominantly agricultural people, subsisting on rice and fish and living in villages of several hundred persons. 

Best known to most of the world as one of Southeast Asia’s biggest tourist destinations, Cambodia’s economy has performed excellently over the last two decades. In 2023, it enjoyed a GDP of $31.77, representing a growth of 5.4% from the previous year.

The late 1990s saw the beginning of a new era for Cambodia as it developed a changed model for the country in the aftermath of ongoing conflicts and the ending of the Khmer Rouge regime. Though the pandemic caused a setback between 2020 and 2022, Cambodia has now regained its feet and is back on the path to development and growth which have made it such an attractive territory for foreign investors and businesses.

This guide covers the current landscape, future potential, and possible advantages of doing business in Cambodia.

Overview of Cambodia's Economy

Between 1995 and 2019, Cambodia was one of the fastest-growing economies in the world.

Agriculture remains the leading industry in Cambodia, with textiles and construction close behind. However, much of the country’s growth has been fueled by tourism, manufacturing, and real estate. Emerging sectors like renewable energy, technology, and financial services are also gaining momentum.

Primary Industries
Emerging Sectors
Agriculture
Tourism
Textiles
Manufacturing
Construction
Real Estate
 
Renewable Energy
 
Technology
 
Financial Services

After 25 years of average annual GDP growth of 7.6%, Cambodia’s economic progress suffered a brief setback during the COVID-19 pandemic before returning to growth in excess of 5% by 2022. Poverty and unemployment are continuing to decline, and the government has set targets to become an upper-middle-income economy by 2030 and a higher-income economy by 2050.

For foreign businesses, Cambodia represents a territory moving forward to create continually increasing opportunities.

Taxes

Employer tax: 5.4%

Health Insurance

2.60%

National Social Security Fund

.80% (Maximum 1,200,000 KHR)

Mandatory Pension Contribution

2% (Maximum 1,200,000 KHR)

Employee tax: 2%

Mandatory Pension Contribution

2% (Maximum 1,200,000 KHR)

Income Tax

There is no personal income tax, per se, in Cambodia. Instead, a monthly salary tax is imposed on individuals who derive income from employment.

Gross Income (KHR)

Up to 1,300,000

1,300,001-2,000,000

2,000,001- 8,500,000

8,500,001- 12,500,000

More than 12,500,000 

Tax Rate

0%

5%

10%

15%

20%

Overview of Cambodia's Business Regulation

Anyone who does business in Cambodia must be compliant with its regulations from the outset. Certain requirements must be met before a foreign party can register a business of any kind.

Registration must then be completed as per legal guidelines. This involves working with a Cambodian agent to submit the articles of incorporation along with details such as the business address, the shareholder and director identities, any required licenses or permits, and a minimum share capital of KHR 4 million (approx. $1000).

Regulations for doing business in Cambodia include:

Business Registration

In 2005. The Law on Commercial Enterprises (LCE) laid out a framework for establishing Sole Proprietorships, General Partnerships, Limited Partnerships, and Limited Liability Companies in Cambodia. This includes registering with the Business Registration Department, which can be done online through the Cambodia Data Exchange (CamDX) system of the Ministry of Economy and Finance.

Companies must pay a fee to receive an official name and prove they can satisfy all requirements of registration. Approval is usually granted within two to three weeks, after which the business must collect its company seals, open a bank account, and register with both the General Department of Taxation and the National Social Security Fund.

Taxation

The standard corporate income tax (CIT) rate in Cambodia is 20%. This rate is reduced for smaller businesses that do not meet certain revenue thresholds.

Foreign businesses pay a 14% withholding tax, while a 10% VAT is also levied on certain sectors. As an incentive for investments, some taxes can be reduced or removed during the early years of operation or as an aid to growth for particular industries.

Labor Laws

The rights of all workers in Cambodia are protected by a framework of regulations established by both the Constitution and the 1997 Labor Law.

These regulations cover many aspects of employment, including rights to equal treatment, anti-discrimination rules, a minimum wage, the need for contracts, standards for working weeks, leave entitlement, overtime pay, termination processes, and more.

Every business operating in Cambodia must ensure full compliance with these regulations.

Benefits of Doing Business in Cambodia

To ensure a sound macro-economy and political and social stability, the government is open to all investors to do business and invest in the Kingdom,’ said Cambodia’s then-Prime Minister in December 2019. The message, which continues to be government policy today, is that Cambodia wishes to attract foreign businesses.

In order to achieve this, the country is working hard to improve its economy and infrastructure, with great progress in both fields. It also offers several incentives and benefits designed to entice investment.

Among the many benefits of doing business in Cambodia today are:

Growing Economy

In addition to being one of the world’s fastest-growing economies for the first two decades of the 21st century. Cambodia has registered a GDP growth every year since 2021 and is projected by some sources to grow by approximately 7% in 2024 and 2025.

Declaring ambitions to become a higher-income economy within the next 25 years, Cambodia is a forward-thinking nation with an eye on diversification and innovation. The advantages to be gained from doing business in Cambodia are expected to increase year on year.

Government Incentives

As part of its drive to attract increased foreign investment, the Cambodian government has created several benefits and incentives for global businesses moving operations into the territory. These include allowing 100% foreign ownership for companies that do not own land, tax exemptions for qualified investment projects, and low corporate tax rates, particularly for low and middle-income enterprises with the potential to grow.

Businesses can also benefit from the introduction of Special Economic Zones which have been built to provide economic and logistical support while also offering 100% tax exemption for up to nine years.

Strong Location and Developing Infrastructure

Positioned at the heart of Southeast Asia, Cambodia is ideally located for access to the region’s wider economy, including Thailand, Laos, and Vietnam. Close transport links also connect Cambodia with much of wider Asia, where demand for the products of several Cambodian industries is high.

Within Cambodia, a concerted effort to improve infrastructure is underway through a $36.68 billion program focused on roads, waterways, ports, airports, and a new state-of-the-art Phnom Penh Logistics Center seeking to improve connectivity throughout the country and beyond.

Increasing Labor Force

Half of Cambodia’s 17 million population are ages 25 or under. More than 80% of the population is in work or available to work and this number is growing at a faster rate than the population as a whole. This means a consistently growing and youthful talent pool is available.

While participation in higher education is low, literacy rates are improving with each generation and young workers are becoming increasingly tech savvy. Growing percentages are now looking for opportunities outside Cambodia’s traditional industries.            

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Business Expansion Options in Cambodia

The best route into the Cambodian market will be different for each business depending on its situation and objectives. Among the many options available, three of the most common pathways are:

Cambodia Employer of Record (EOR)

While the Cambodian government has worked to make the registration of a subsidiary or branch for a foreign company as straightforward as possible, it can still require a significant investment of resources. An alternative that is often quicker and simpler is to work with a professional employer organization (PEO) or Employer of Record (EOR).

Similar to a Professional Employer Organization (PEO), a Cambodia EOR hires employees on behalf of a company, managing all employment-related legalities and compliance.  The Cambodia EOR becomes the official legal employer of your Cambodia team. This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground. 

An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities.

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Recruitment Agencies

Recruitment agencies in Cambodia help businesses expand by connecting them with skilled local talent across various industries.

RemotePeople provides recruitment solutions that simplify hiring and ensure compliance with Cambodian labor laws.

For businesses looking to grow in Cambodia, RemotePeople offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

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Cambodia Professional Employer Organization (PEO)

Partnering with a professional employer organization (PEO) allows companies to employ local staff in Cambodia without the need to establish a legal entity. This approach is quicker and less expensive, making it ideal for businesses testing the Cambodia market or those with limited operations. PEOs handle administrative tasks and ensure that companies comply with Cambodia regulations, reducing the complexity and risk associated with hiring local employees. 

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Subsidiary Incorporation

Any company with at least 51% foreign ownership can establish a subsidiary in Cambodia. This means forming an entity that operates independently within Cambodia and is legally separate from the principal organization. Once registered, a subsidiary can operate just as a locally owned business would, with the exception of the ability to own property.

Branch Registration

A branch office in Cambodia is a separate division of a foreign company created to operate within the country. Unlike a subsidiary, which separates the financial liability of the parent company and local entity, a parent company can be held responsible for any losses or debts created by its branches.

A branch may also find it is restricted from performing certain acts available only to local residents. Establishing a branch in Cambodia is quicker and easier but does not afford the same protections. Branch registration, therefore, is often used for temporary or exploratory expansion.

Business Opportunities in Cambodia

Cambodia presents a wealth of business opportunities for investors and entrepreneurs, thanks to its rapid economic growth, strategic location, and continued improvements in its business climate. As a member of the Association of Southeast Asian Nations (ASEAN), Cambodia offers access to a vast regional market and advantages from various trade agreements. Key sectors with promising investment potential include:

Business Opportunity
Reason
Garment and Footwear Manufacturing
Cambodia’s low labor costs, preferential trade access to key markets, and a growing number of industrial parks make it an attractive destination for garment and footwear production.
Tourism and Hospitality
With its rich cultural heritage, stunning natural landscapes, and increasing number of international visitors, Cambodia presents opportunities for investments in hotels, resorts, restaurants, and tourism services.
Agriculture and Agribusiness
Cambodia’s abundant agricultural land, favorable climate, and untapped potential for value-added processing offer opportunities for investments in crop production, livestock farming, and food processing.
Construction and Real Estate
As Cambodia continues to urbanize and develop its infrastructure, there are growing opportunities for investments in residential and commercial property development, as well as construction materials and services.
Renewable Energy
With its ample solar and biomass resources, and government incentives to promote clean energy, Cambodia offers potential for investments in solar power plants, biogas projects, and energy-efficient solutions.

As one of the fastest-growing economies in the world and a leader in Southeast Asia, Cambodia represents significant opportunities for foreign businesses seeking to do business in the region. Becoming established can be challenging, but many services can help, and the incentives provided by the government can make doing business in Cambodia an attractive proposition.

These opportunities align with Cambodia’s Industrial Development Policy 2015-2025, which aims to diversify the economy, attract foreign investment, and promote sustainable growth.

The government offers various incentives for businesses, such as:

  • Tax holidays
  • Import duty exemptions
  • Simplified business registration processes

As the country’s current series of programs and initiatives continue to make their impact, the benefits of expanding into Cambodia look set to increase even further.