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How to fund purchases in Cambodia

CAMBODIA needs foreign investment.  For almost a decade, GDP grew about 10 percent before the blip caused by the global economic crisis. Now the Cambodian economy is recovering and several high-rise residential projects dot the centre of Phnom Penh and its suburbs.

Although it is difficult to predict any future legislative changes to improve the present financial or tax system, there is every reason to believe that the government will continue to enact foreigner-friendly legislation to encourage increased confidence and economic growth.  This may indicate the right climate to invest in Cambodian residential property, not only from an individual perspective, but also from a developer, financier and property agents’ perspective.  

One important advantage for foreigners buying property in Cambodia is that there are no restrictions on foreign exchange operations through authorised banks.

There are also no restrictions on foreigners being eligible for loans in Cambodia. In practice, an individual, either a foreigner or Cambodian, may be granted a long-term loan of up to 10 years (possibly more at the bank’s discretion) to buy freehold residential property.

Generally, Cambodian banks provide loans of up to 60 percent of the market value of the property with an interest rate of 10 percent to 12 percent per annum. However, at the time of writing, a private commercial bank is offering special rates of 6-9 percent for refinancing existing long-term loans granted to individuals or corporate investors.  Also, using immovable property as security is recognised by Cambodian law and usually enforceable in Cambodian courts. Most Cambodian banks now accept the land titles owned by the borrowers as security for both short-term and long-term loans.

Since foreigners can own freehold units in co-owned buildings, mortgages can be obtained on their investment. However, the concept of fractional and timeshare ownership on houses, villas or apartments is not generally accepted as collateral for a loan in Cambodia.

There are, however, several tax implications for buying, selling and holding property:  

  • Registration Tax: Four percent of the assessed value. This tax is payable by the transferee unless the parties agree to the contrary. The certificate of ownership of the transferred property will not be issued in the name of the transferee until the registration tax has been paid.
  • Unused Land Tax:  Two percent of market value of the land per square metre, determined by the Ministry of Economy and Finance. This is an annual charge due on September 20.
  • Tax on Immovable Property:  All owners (with some exceptions not relevant to this article) of property worth more than 100 million Riel (approximately US$25,000) are required to pay an annual tax on immovable property at 0.1 percent of the total value of the property. This was enacted in November 2009, but is likely only to be levied from 2011 as the government is still in the process of establishing a mechanism for tax collection and a property evaluation committee.
  • Profit Tax (on individuals or companies):  Generally 20 percent – this is levied upon the sale of property or the closure of the property holding company. Any sale of company property is required by law to be recorded in the balance sheet as company revenue.
  • VAT:  10 percent: Applicable to both foreign and Cambodian companies, although this could be set off if the company is trading in Cambodia.
  • Tax on house and land rent:  10 percent on rental fees.

Cambodia is set to present many future opportunities and for those looking to invest, take proper legal advice to protect your potential investment as risks remain, particularly regarding obtaining a good registered title.
Peter Mewes is an English solicitor and legal advisor with HBS Law Firm and Consultants in Phnom Penh. For information about legal services for corporate, commercial and private clients he can be contacted at



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