Securities regulators and operators are enthusiastic about a recent government decision to continue granting tax incentives for companies that list locally over the next three years, in a bid to stimulate development in the local market.

A sub-decree endorsed by Prime Minister Hun Sen on February 24 stipulates that eligible companies that issue debt securities representing more than 20 per cent of total assets on a local stock exchange – currently only the Cambodia Securities Exchange (CSX) – will receive a 50 per cent cut in corporate income tax or eight billion riel ($2 million) until February 23, 2025, whichever is less.

Similarly, eligible firms that list stocks locally representing more than 20 per cent of voting share will get a 50 per cent reduction in corporate income tax or 20 billion riel until February 23, 2025, whichever is less.

Securities and Exchange Regulator of Cambodia (SERC) director-general Sou Socheat said this was the third subsequent legal instrument granting tax incentives in the interest of developing the capital market, providing eligible firms a better opportunity to raise funds through the stock market.

Prakas No 471 issued by the Ministry of Economy and Finance on May 5, 2020 provided similar incentives for the period from January 1, 2019 to December 31, 2021.

Socheat voiced concern over promising private businesses’ apparent lacklustre resolve to issue securities on the market – whether stocks or corporate bonds.

Socheat believes that given the tough circumstances linked to the ongoing Covid-19 pandemic, the tax incentives would entice companies seeking to ensure their sustainability to list on the bourse, which may otherwise not have chosen to go through the process.

CSX Market Operations Department director Kim Sophanita agreed that the sub-decree’s provisions would encourage more companies to list, draw investors to the market and provide other support.

“Companies looking for sustainable growth, credibility and long-term cheap financing [which includes tax incentives] should wait no more to go IPO [offer an initial public offering],” she said.

“The incentives are up to $2 million for bond issuance and up to $5 million for stock issuance.”

As of February 9, the CSX’s 15 listed companies have raised a total of $281 million in funding, according to CEO Hong Sok Hour. Nine of the firms have listed stocks, while six have issued corporate bonds.

The average daily trading volume and value reached all-time highs last year, at 234,628 shares and $269,169, respectively, or up by 400 per cent and 127 per cent over 2020. A total of 4,000 new trading accounts were opened at the CSX last year, bringing the total to over 30,000, Sok Hour said.