Phnom Penh, the capital and largest city of Cambodia, is a fast-growing and dynamic place that offers many opportunities for entrepreneurs and investors. Whether you are interested in setting up a digital business, a social enterprise, or a green business, Phnom Penh has something to suit your needs and preferences. However, before you dive into the market, you need to know some of the most important things to know before starting a business in Phnom Penh. Here are some tips and insights to help you make informed decisions.
Legal Requirements
The first thing to know before starting a business in Phnom Penh is the legal requirements that you need to comply with. According to the World Bank, Cambodia ranks 171st out of 183 economies in terms of ease of doing business. This means that there are many procedures, fees, and delays that you need to deal with when registering and operating your business.
The main authority that you need to register your business with is the Ministry of Commerce. You need to submit your company statutes, which are the documents that state the name, purpose, ownership, and governance of your company. You also need to provide various supporting documents, such as a lease agreement for your office premises, passport copies and photos of your directors, and a bank letter confirming that you have deposited your registered capital. The registered capital is the minimum amount of money that you need to invest in your company, which varies depending on the type and size of your business.
The Ministry of Commerce will issue you a license and a certificate of registration for your company after reviewing and approving your application. The whole process can take up to 85 days and cost around $1,500 USD. However, you can hire a local agent or lawyer to help you with this process and speed it up.
Besides the Ministry of Commerce, you may also need to register your business with other relevant ministries or authorities depending on the nature and scope of your business. For example, if you want to start a digital business, you need to register with the Ministry of Posts and Telecommunications. If you want to start a social enterprise, you need to register with the Ministry of Interior as an association or non-governmental organization. If you want to start a green business, you may need to obtain an environmental impact assessment from the Ministry of Environment.
Taxation
The second thing to know before starting a business in Phnom Penh is the taxation system that you need to follow. Cambodia has a high tax burden for businesses compared to other countries in the region. The standard corporate income tax rate is 20%, but there are also other taxes that you need to pay, such as value-added tax (10%), withholding tax (14%), payroll tax (20%), property tax (0.1%), patent tax ($100-$1,000), specific tax (varies), minimum tax (1%), registration tax (0.1%), stamp duty (0.1%), capital gains tax (20%), dividend tax (14%), etc.
The tax administration is complex and cumbersome. You need to register with the General Department of Taxation within 15 days after obtaining your license from the Ministry of Commerce. You also need to file monthly and annual tax returns and pay taxes accordingly. The tax compliance time is estimated at 173 hours per year. You may also face audits, inspections, penalties, or disputes from the tax authorities.
You can hire an accountant or a tax consultant to help you with your tax obligations and optimize your tax planning. You can also apply for an investment license from the Council for the Development of Cambodia if you want to enjoy some tax incentives, such as a tax holiday and lower corporate profit taxes.
Market Conditions
The third thing to know before starting a business in Phnom Penh is the market conditions that you need to understand and adapt to. Cambodia has a fast-growing economy, with an average growth rate of 8% from 1998 to 2018. The economy is expected to recover from the impact of the COVID-19 pandemic and grow further in the coming years, driven by factors such as infrastructure development, foreign investment, tourism revival, and urbanization. Phnom Penh is the economic hub of the country, accounting for about 40% of the GDP.
Cambodia also has a young and emerging market, with a population of about 16 million people, with more than 60% under the age of 30. The country has a growing middle class, an increasing urbanization rate, and a rising demand for consumer goods and services. Phnom Penh has a population of about 2 million people, with a high concentration of educated and skilled workers, as well as potential customers.
However, Cambodia also faces some challenges and risks that may affect your business. The country has a weak rule of law, a poor infrastructure, a low human capital, and a high exposure to natural disasters and climate change. The country also has a volatile political and social environment, with frequent protests, strikes, and conflicts. The country also has a high dependence on external factors, such as foreign aid, trade, and tourism.
Therefore, you need to do your market research and analysis before starting your business in Phnom Penh. You need to identify your target market, your competitors, your suppliers, your customers, and your unique value proposition. You also need to monitor the market trends, the customer preferences, the legal changes, and the economic indicators. You also need to be flexible and adaptable to the changing market conditions and customer needs.
Ecosystem Support
The fourth thing to know before starting a business in Phnom Penh is the ecosystem support that you can access and leverage. Phnom Penh has a supportive and vibrant ecosystem for startups and entrepreneurs, with various initiatives, programs, events, and organizations that provide mentorship, training, networking, funding, and exposure. Some examples are:
- Startup Cambodia: A platform that connects startups, entrepreneurs, investors, mentors, and service providers in Cambodia. It also provides resources, tools, news, and events for the startup community.
- Impact Hub Phnom Penh: A co-working space and innovation lab that supports social entrepreneurs and innovators in Cambodia. It also offers programs, workshops, incubators, accelerators, and competitions for startups.
- BarCamp Phnom Penh: An annual event that brings together tech enthusiasts, developers, designers, entrepreneurs, and students to share their knowledge and experience in various topics related to technology and innovation.
- Startup Weekend Phnom Penh: A 54-hour event that challenges participants to pitch their ideas, form teams, build prototypes, and present their solutions to a panel of judges.
- Smart Axiata Digital Innovation Fund: A venture capital fund that invests in digital startups in Cambodia. It also provides mentorship, technical support, and access to Smart’s network of partners.
- Mekong Strategic Partners: A financial advisory firm that provides capital raising, mergers and acquisitions, strategic advisory, and investment management services for businesses in Cambodia and the Mekong region.
- SHE Investments: A social enterprise that supports women entrepreneurs in Cambodia through training, mentoring, coaching, and networking.
These are some of the ecosystem support that you can find in Phnom Penh. You can also join online communities such as Facebook groups or LinkedIn groups that are relevant to your industry or niche. You can also attend offline events such as meetups or seminars that are organized by various organizations or associations. You can also reach out to other entrepreneurs or mentors who can offer you advice or feedback.
List of references:
- [1]: Doing Business 2020 by World Bank
- [2]: Starting a business in Cambodia by Phnom Penh Post
- [3]: Guide to starting a business in Cambodia by Realestate.com.kh
- [4]: Cambodia Economic Outlook 2021 by Asian Development Bank
- [5]: Starting a business in Cambodia by Move to Cambodia
- [6]: Taxation in Cambodia by DFDL
- [7]: Taxation Guide 2020 by KPMG
- [8]: Cambodia Investment Guidebook 2020 by Council for the Development of Cambodia
- [9]: Startup Cambodia Website
- [10]: Impact Hub Phnom Penh Website
- [11]: BarCamp Phnom Penh Website
- [12]: Startup Weekend Phnom Penh Website
- [13]: Smart Axiata Digital Innovation Fund Website
- [14]: Mekong Strategic Partners Website
- [15]: SHE Investments Website
