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Cambodia

Sole Proprietorship in Cambodia

Located in Southeast Asia’s Indochina peninsula, Cambodia is the southernmost nation. One of the region’s fastest-growing economies, this country has a population of 17 million.

Averaging 8% growth between 1998 and 2018, Cambodia’s economy was one of the more rapidly growing in the world. By 2025, Cambodia is predicted to be the fastest-growing economy in Southeast Asia, with a GDP growth of 6.9%, according to the International Monetary Fund (IMF). 

The country has implemented business-friendly policies encouraging entrepreneurship and investment, including tax incentives and streamlined registration processes. Therefore, setting up a sole proprietorship in Cambodia can be an excellent opportunity for entrepreneurs and small business owners looking to tap into a fast-growing market with a favorable business climate.

Now, how can someone register a sole proprietorship in Cambodia? Read on to learn more!

Who Can Be a Sole Proprietor in Cambodia? 

In Cambodia, a sole proprietor is an individual who owns and operates a business on their own. According to Cambodian law, anyone 18 years or older with a valid identification card or passport can register for a sole proprietorship in Cambodia. There are no set restrictions on the nationality of the sole proprietor, and both Cambodian citizens and foreigners can set up a sole proprietorship in Cambodia. 

However, as with any other legal entity, registering a sole proprietorship in Cambodia requires completing the appropriate application forms, providing the necessary documentation, and obtaining relevant approvals.

Benefits of Sole Proprietorship in Cambodia 

Cambodia offers a variety of opportunities to foreign entrepreneurs who want to set up a sole proprietorship in the country.

  • Fast-growing economy: Cambodia has been one of the fastest-growing economies in the world. Between 1998 and 2018, the country experienced an average growth rate of 8%. This makes it an attractive business market, including a sole proprietorship in Cambodia.
  • Easy business registration: Cambodia introduced an online business registration portal, the Ministry of Economy and Finance Cambodia One Portal, allowing easy and convenient business registrations. Setting up a sole proprietorship in Cambodia can be a relatively quick and hassle-free process.
  • Minimal regulatory requirements: Sole proprietorship in Cambodia has relatively few regulatory requirements compared to other business structures. For instance, there is no need for a Memorandum and Articles of Association as required for other types of companies. This can result in lower startup costs and less paperwork.
  • Complete control: As the sole proprietor, one can have complete control over the business and its operations. This means they can make decisions quickly and efficiently without consulting other stakeholders or shareholders.
  • Tax advantages: Sole proprietors in Cambodia may benefit from lower tax rates than other business structures. For instance, they are not required to pay withholding tax on dividends or interest payments.
  • Limited liability: Sole proprietors are personally liable for the debts and obligations of the business. However, as the sole owner, one can limit their liability by keeping their assets separate from business assets.

Documents Required for Registering Your Business in Cambodia 

To register as a sole proprietor in Cambodia, one must complete an application form at the Tax Administration and submit various documents, including:

  • Articles of Association or Memorandum of Understanding
  • Proposed business name, business activities, share par value, and number of employees
  • A Royal Government of Cambodia issued approval letter or certificate 
  • Two photographs
  • Valid ID card or passport 
  • Bank account information (business)
  • Business ownership certificate

Processing a new company registration in Cambodia can take around 30 working days.

How to Register as a Taxpayer in Cambodia?

By eliminating the more shady Estimated Regime, the Law on Financial Management of 2016 dismantled Cambodia’s prior two-tiered tax structure. As a result, the nation now has a unified system that all businesses must register under to operate, expanding the taxation base. Therefore, all businesses must register for tax in Cambodia under the new self-declaration regime.

A sole proprietorship is considered a small taxpayer if it satisfies the following requirements.

  • If the annual turnover ranges from KHR 250 million to KHR 700 million
  • Over the course of three months, turnover totaled about KHR 60 million.
  • Anticipate turnover of at least KHR 60 million during the following three months.

Tax Rules and Regulations

  • The annual patent tax must be paid by the end of May. Small taxpayers start at KHR 400,000 (about USD 100); it can go up to KHR 5 million for large taxpayers.
  • Based on the worldwide income of the taxpayer, the Cambodian government has a fixed profit tax of 20%.
  • Cambodian value-added tax (VAT) is actually paid on the extra value a company generates when selling its goods or services. This is accomplished by mandating that the company charge a 10% VAT rate (the regular rate in most circumstances) of the taxable sales on each invoice, which is subsequently forwarded to the tax authorities.

Here are the steps to register a sole proprietor as a taxpayer in Cambodia:

  • Complete the application form at the Tax Administration on the General Department of Taxation’s (GDT) website.
  • Submit the documents as mentioned earlier.
  • Set up a legal entity for the business operation’s benefits.
  • Process the initial business registration with the Commercial Registration Bureau of the Ministry of Commerce through online registration procedures.
  • Choose “Sole Proprietorships” from the online services, then choose “Incorporate a Sole Proprietorship.” Provide the proposed name, business activities, addresses and contacts, and owner information (private limited company/public limited company/foreign company: branch and representative office).

However, it is important to be aware that the process and requirements for setting up a sole proprietorship in Cambodia may be subject to change, and consulting with local authorities or a professional service provider for the latest information and guidance is advisable.

Other Criteria for Registering a Sole Proprietorship in Cambodia

The following are some additional criteria to start a sole proprietorship in Cambodia:

  • Foreign citizens who intend to operate as sole proprietors must have a current personal identification document (passport or ID card) that authorities can use to verify their identity.
  • They must also choose a proposed name and business activities and incorporate their sole proprietorship through the online services provided by the Ministry of Commerce in Cambodia. Additionally, they must register as a taxpayer by completing an application form at the Tax Administration and submitting the required documents.

How to Register a Sole Proprietorship in Cambodia?

To register a Sole Proprietorship in Cambodia, one can follow the below steps:

  • Step 1: Visit the Ministry of Commerce online services page and choose “Incorporate a Sole Proprietorship”.
  • Step 2: Fill in the General Information section, which includes the proposed name and business activities.
  • Step 3: Fill in the Addresses and Contacts Information section.
  • Step 4: Fill in the Owner Information section, which includes information on the owner and the company structure, such as Private limited company/Public limited company/Foreign company: Branch and Representative office.
  • Step 5: Register as a taxpayer by completing the application form at the Tax Administration and submitting the following documents: Approval letter or certificate issued by the Royal Government of Cambodia, Memorandum of Understanding or Articles of Association, passport or valid ID card, and photographs.
  • Step 6: Create a user account by providing your personal information and contact details. After selecting your desired company type, reserve a company name by entering a proposed name in Khmer.

Conclusion 

Establishing a sole proprietorship in Cambodia may seem easy, but overlooking the finer details of local laws and regulations can be an expensive mistake. That’s why many companies seeking to establish themselves in Cambodia turn to EOR platforms to save time and resources while ensuring full compliance with local laws.

Multiplier is a leading PEO-EOR platform that operates globally in over 150 countries. Our robust SaaS-based infrastructure offers a simplified way of managing employees and payroll. If you want to start or register a sole proprietorship in Cambodia, you can trust Multiplier to handle your company’s payroll processing and management. This way, you can focus your time and resources on core business activities, boosting productivity and efficiency.

Frequently Asked Questions

To get a business license for a sole proprietorship in Cambodia, one must first register the business with the Ministry of Commerce.

Yes, there are limitations to establishing a sole proprietorship in Cambodia. The most prominent limitation is that a sole proprietorship must be registered with the Ministry of Commerce and the Department of Taxation.

Additionally, a sole proprietorship cannot employ more than ten people and cannot undertake certain activities, such as banking and insurance. Finally, a sole proprietorship has limited legal capacity and cannot borrow money from a foreign source.

The rate of income tax levied on businesses in Cambodia is 20%.

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