Small- and Medium Enterprises (SMEs) in Cambodia will receive tax incentives as the government intends to promote their development to create jobs and increase domestic production capacity.
The sub-decree on tax incentives for SMEs in priority sectors, signed by Prime Minister Hun Sen on October 2, identifies six priority sectors – agro-industry and food production and processing – which will receive an income tax exemption for three to five years from the date of tax registration for newly registered enterprises, or from the date of tax registration update for enterprises already registered.
The remaining four priority sectors are manufacturers of products used in waste processing and tourism, manufacturers of parts and equipment supplied to other manufacturers, research and development of information technology – including innovative equipment-management services and enterprises developing SME commercial districts.
The new sub-decree defines small enterprises as businesses with an annual turnover from 250 million riel ($62,500) to 700 million riel or with 10 to 50 employees while medium enterprises are defined as businesses with annual turnover from 700 million riel to 4,000 billion riel or with 51 to 100 employees.
The sub-decree states that any SME intending to receive a five-year SME tax exemption must use at least 60 per cent domestic raw materials, increase the number of employees by at least 20 per cent or be located in SME districts.
Federation of Associations for Small and Medium Enterprises in Cambodia president Te Taingpor, said the tax incentive for SMEs is important because Cambodia has a lot of raw materials supporting production.
“SMEs are the foundation or backbone of the national economy, so if we promote SMEs through manufacturing and exports, it will bring in profits for Cambodia and create jobs as well as curtail outward migration,” Taingpor said.
The new sub-decree has hugely benefited the current economic development of Cambodia, said Young Entrepreneurs Association of Cambodia advisory council chairman Sok Piseth.
“This is the first step in bringing relief to SME owners in Cambodia where in the past they used to complain of paying a lot of taxes,” he said.
B Scientific Instrument Co Ltd managing director Chum Saborith said startups, in general, need a reasonable time to recuperate costs, and tax exemptions are attractive for companies and enterprises to register.
“Not registering makes them difficult for authorities to control and they would not get tax payments either,” he said.
World Bank senior economist in Cambodia Miguel Eduardo Sanchez Martin said it is a good sign for Cambodia – full of small enterprises.
“Passing this tax exemption by introducing an entrepreneurship support programme is a positive measure to help domestic Cambodian companies grow and launch internationally,” he said.