Tax incentives for businesses in Cambodia.

Cambodia offers some of the most attractive investment opportunities in Southeast Asia, backed by a range of tax incentives that help businesses grow, attract foreign capital and support key industries. The country’s fiscal policies are designed to give companies a competitive edge, from broad investment programs to sector-specific benefits.

Through initiatives like the Qualified Investment Project (QIP) framework, Special Economic Zones (SEZs) and targeted support for small and medium enterprises, investors can significantly reduce their tax burden while contributing to Cambodia’s economic development.

This article explores tax incentives and eligible sectors for companies in Cambodia.

Qualified Investment Project tax incentives

A Qualified Investment Project (QIP) is a project approved and registered by the Council for Development of Cambodia (CDC) and granted tax incentives under the Law on Investment. Once a project receives QIP status, it is entitled to a range of legal and financial incentives. To access these benefits, companies must receive a Final Registration Certificate issued by the CDC, confirming their QIP status.

Eligible and non-eligible activities

Under Article 24 of the Law on Investment, the following sectors and activities are eligible for full or partial tax and/or customs duty incentives upon obtaining a Registration Certificate confirming QIP status:

• Agriculture, agro-industry, agro-processing industry and food processing industries serving the domestic market or export
• Digital industries
• Education, vocational training and productivity promotion
• Electrical and electronic industries
• Environmental management and protection, biodiversity conservation and the circular economy
• Green energy, technology contributing to climate change adaptation and mitigation
• Health
• High-tech industries involving innovation or research and development
• Industries supplying regional and global production chains
• Industries supporting agriculture, tourism, manufacturing, regional and global production chains and supply chains
• Innovative or highly competitive new industries or manufacturing with high added value
• Logistics
• Mechanical and machinery industries
• Physical infrastructure
• Small and medium-sized enterprises (SMEs) in priority sectors and SME cluster development, industrial parks and science, technology and innovation parks
• Spare parts, assembly and installation industries
• SEZs
• Tourism and tourism-related activities
• Other sectors and investment activities not listed by this Law deemed by the Royal Government of Cambodia to have potential for socio-economic development

Incentives do not apply to activities and sectors on the Negative list as stated in Sub-Decree 139, which excluded many activities (in agriculture, services, industry, infrastructure) based on minimum investment capital, land area, or other specific criteria. If a project does not meet the set thresholds, it is not eligible for QIP and investment incentives.

Available incentives

According to the Law on Investment, companies registered as QIPs must choose incentives under the following two options:

Option 1: Income tax exemption

QIPs are exempt from Tax on Income (TOI) for three to nine years, depending on the groups prescribed in the list of Investment Activity Category in Annex 2 of the Sub-Decree 139 starting from the first income earned.

The eligible activities under the Investment Activity Categories include but are not limited to the following:

Once the income tax exemption period has expired, the QIP must pay income tax at a progressive rate proportionate to the total tax payable as follows:

• 25% for the first two years
• 50% for the next two years
• 75% for the last two years

The QIP is also entitled to:

• Prepayment tax exemption during the tax holiday period (three to nine years depending on the Investment Activity Category)
• Minimum tax exemption if there is an independent audit report
• Export tax exemption, unless stated otherwise in other laws

Option 2: Special depreciation

• Special depreciation on capital expenditure (per current tax regulations)
• Deduction up to 200% on specific expenses up to nine years according to the exemption period for the Investment Activity Category

• Prepayment tax exemption for a specific period according to the exemption period for the Investment Activity Category
• Minimum tax exemption if there is an independent audit report
• Export tax exemption, unless stated otherwise in other laws

Additional incentives

In addition to the above incentives, a QIP is also eligible for the other basic incentives as below:

• Export QIPs and supporting industry QIPs are eligible for exemptions from customs duties, special taxes and value-added taxes (VAT) on the importation of construction materials, construction equipment, production equipment and production inputs.

• Domestically oriented QIPs are eligible for exemptions from customs duty, special taxes and VAT for the importation of construction material, construction equipment and production equipment. The incentives for production inputs are determined in the Law on Financial Management and/or the Sub-Decree.

Under article 27, QIP registered companies can also receive the following incentives:

• VAT exemption for the purchase of production input, which is locally produced, for the implementation of the QIP

• 150% deduction from the tax base for activities such as
  • Research, development and innovation
  • Human resource development through the provision of vocational training and skills to Cambodian workers/employees
  • Machinery upgrade for the production line
  • Construction of worker facilities such as accommodation, affordable canteens, nurseries and other amenities
  • Provision of worker welfare such as transport, accommodation, affordable meals, childcare and other facilities
• Income tax exemption may be granted for QIP expansions, as specified in the Sub-Decree

SME tax incentives

An SME is an entity that has an annual turnover of between USD 62,500 and USD 1 million and fewer than 100 employees.

The incentives apply to SMEs that operate in priority sectors of the economy which include:

• Agriculture or agricultural products
• Food manufacturing and processing
• Manufacturing of local consumable goods, waste recycling and production of goods for the tourism sector
• Manufacturing of products or parts to supply other manufacturers
• R&D associated with IT or the supply of IT-based services

In addition, any enterprises that are located in an SME Cluster Zone or any enterprises developing a Cluster Zone shall be automatically eligible for the incentives.

The tax incentives provided to qualifying SMEs include:

• An exemption from TOI for three years for newly registered enterprises or from the date of tax registration update for existing enterprises
• An exemption from TOI for five years for newly registered enterprises or from the date of tax registration update for existing enterprises, that meet one of the following criteria:
  • The enterprise uses at least 60% local raw material
  • The enterprise increases its number of employees by 20%
  • The enterprise is located in the SME Cluster zone
• An exemption from the monthly 1% prepayment of TOI and annual MT during the Tax on Income exemption period

There are further incentives for deductible expenditure include:

• A 200% weighted tax-deductible expense for IT-based accounting software and training and staff technical training
• A 150% weighted tax deductible expense for equipment or new technology that increases productivity

Tax incentives for micro, small and medium enterprises

On 20 May 2024, the General Department of Taxation (GDT) issued Instruction No. 18412, detailing tax incentives and exemptions available to all Micro, Small and Medium Enterprises (MSMEs) that voluntarily register with the GDT and operate in qualified priority sectors:

• Wholesale, retail and repair
• Accommodation and food service
• Handicrafts
• Agricultural community

The tax incentives and reporting obligations include:

Incentives for the securities market

The Royal Government of Cambodia issued Sub-Decree No. 42 dated 24 February 2022 to provide tax incentives to the securities sector. In March 2025, Sub-Decree No. 39 amended certain provisions, notably the duration of incentives.

This Sub-Decree applies to:

• Companies issuing equity and/or debt securities that are approved by the Securities and Exchange Commission of Cambodia (SECC), currently known as Securities and Exchange Regulator of Cambodia (SERC) and listed on an authorised securities market.
• Public investors, both residents and non-residents, who hold or trade government securities, or equity and/or debt securities issued and listed on an authorised securities market.

Companies approved by the SERC and listed on an authorised securities market are eligible for a 10% reduction in profit tax for a period of two years (previously three years). To receive this incentive, companies must complete the required form and submit it to the General Department of Taxation through the SERC.

The three-year incentive period is determined as follows:

• If the securities are issued within the first six months of the taxable year, the incentive starts from that same taxable year.
• If the securities are issued within the last six months of the taxable year, the incentive starts from the following taxable year.

Public investors are entitled to a 50% reduction in withholding tax on interest and/or dividends earned from holding or trading government securities, equity securities, or debt securities for a period of three years from the opening of the securities market.

Withholding agents responsible for disbursing interest and/or dividends must calculate the reduced withholding tax accordingly and submit the withholding tax declaration to the tax administration, using the prescribed form, no later than the 15th day of the month following the withholding.

Tax incentives for rice cultivation, paddy rice purchase and of milled rice exporters

The MEF has approved Prakas to provide additional tax incentives to any rice cultivation, paddy rice purchase and milled rice exporting businesses within the tax holiday period (valid till end of 2025), as follows:

VAT:

• Domestic paddy rice supply: 0%
• Domestic milled rice supply: 10%
• Milled rice export: 0%
• Milled rice supply or production services to rice exporters (subject to certain conditions): 0%
• Milled rice supply or production services to the local market: 10%
• Input VAT on rice cultivation, paddy rice purchase and milled rice export can be creditable or refundable
• Input VAT on the import of production inputs and equipment used in milled rice production for export is provided by the government (subject to certain conditions)
• Local purchases of production inputs, with the exception of paddy rice: 10%

TOI:

• Income tax exemption
• Exempt from 1% prepayment of corporate income tax during the tax holiday period

Conclusion

Cambodia’s tax incentive framework is designed to promote investment in strategic sectors, support industrial growth and promote innovation. Whether through the broad-ranging QIP programme, targeted SME support, SEZ benefits or specialised incentives for capital markets and agriculture, the government offers multiple pathways to reduce tax burdens and enhance operational efficiency. However, eligibility criteria and compliance requirements vary depending on the investment type and sector. Businesses considering investment in Cambodia should assess the available options carefully and ensure they meet all regulatory thresholds to fully benefit from the available incentives.

How Acclime can help with securing tax incentives in Cambodia

Acclime helps businesses identify and apply for the right tax incentives in Cambodia, including QIP registration under the Law on Investment. Our experts provide tailored advice, assist with preparing documentation and liaise with the CDC and GDT to ensure a smooth application process.

We also offer ongoing support to help you maintain compliance with incentive conditions, monitor reporting obligations and avoid penalties, ensuring you continue to benefit from the incentives granted.