Chapter 10 : Real Estate, Zoning, and Construction
The 2001 Land Law, the 2007 Civil Code and the 2011 Law on the Implementation of the Civil Code constitute the main framework applicable to real estate transactions.
In November 2001, a new Land Law was enacted which considerably improved the legal infrastructure for land-related investments in Cambodia. The 2001 Land Law clarified various types of rights relating to land, including ownership, easement, usufructs, security interest, state and private land concessions and leases. It also clarified the process by which land is transferred by sale or succession and registration of the transfer.
In implementing the 2001 Land Law, the government established cadastral commissions at the local and national levels in 2002. These are vested with the power to settle disputes over unregistered immovable property and recognition of lawful possession. Regulations also detail the structure and mission of the cadastral commissions. Cambodia has now put in place mechanisms for registering land throughout the country, both systematically and sporadically.
In 2007, the new Civil Code helped consolidate the regulatory framework, previously implemented in the 2001 Land law through a series of provisions regarding leases, ownership and land securities amongst others.
In accordance with the Law on the Implementation of the Civil Code (Implementation Law), the new Civil Code, promulgated in December 2007, came into force on 21 December 2011.
The purpose of the Implementation Law is to ensure continuity in the legislation governing civil matters, and to guarantee proper enforcement of Civil Code provisions and of any matter related to the implementation of the Civil Code. As a result, a number of provisions in the existing Cambodian laws have been abrogated or amended.
The Implementation Law revoked certain provisions of the 2001 Land Law. Specifically, it revoked provisions dealing with:
- means of acquisition of ownership, including acquisition through the sale of immovable property;
- acquisition by exchange of immovable property;
- acquisition by succession;
- and acquisition by gift;
- rights and obligations of owners, including the enjoyment of ownership benefits;
- accession to fruits and products of ownership, accretion of ownership, and leases on immovable property;
- limited proprietary rights, including usufructs , the rights to use, habitation and easements;
- undivided ownership;
- joint ownership; and
- immovable property used as surety, including mortgage, antichrèse, and gage.
For the purposes of harmonization with the Implementation Law, the Ministry of Justice and the Ministry of Land Management Urban Planning and Construction issued Prakas 30 introducing new procedures to register real property rights in conformity with the provisions of the Civil Code.
1. Watching Brief
Key developments expected in 2016:
- Sub-Decree on the development of coastal areas
- New investment law
- Commercial contracts law
- SEZ law
- Construction law
2. The 2010 Law on Foreign Ownership
There is a general restriction against foreigners owning land in Cambodia. However, regarding foreign ownership of co-owned buildings, a major step forward was achieved with the promulgation of the Law on Provision of Ownership Rights over Private Units in Co-Owned Buildings to Foreigners. Since the promulgation of this law and the adoption of Sub-Decree No. 82, dated 29 July 2010, on the Determination of the Proportion and Methods for Calculating Private Units that Can Be Owned by Foreigners in Co-Owned Buildings, foreigners are allowed to own up to 70 percent of private units in co-owned buildings or condominiums, excluding ground and underground ﬂoors. Specific formalities have to be undertaken in order to apply for co-ownership titles in order to register foreigners’ rights to co-owned buildings or condominiums. This law may be applied to both newly constructed co-owned buildings or existing buildings which are to be converted into co-owned buildings. Most private units in Cambodia are not registered as “co-owned” property at the Land Registry, therefore, according to the laws of Cambodia, only Cambodian citizens or Cambodian entities can legally own them. Cambodian entities are defined as having 51 percent or more of the voting shares held by Cambodian citizens or Cambodian entities with the registered address located in Cambodia. As a result, for foreigners to purchase land in Cambodia, it is often necessary to set up a landholding company in which the foreigner owns 49 percent of the voting shares. In addition, foreigners may register a security interest in land by way of a hypothec (mortgage).
3. Land Investment Structuring
Cambodia is rich in land for development. Land may be privately owned by individuals with Cambodian citizenship or legal entities having Cambodian nationality, without limitation by time or interest.
Nearly all investments in Cambodia involve some sort of investment in immovable property. For foreign investors, such investment is usually in the form of a long term lease, also known as a perpetual lease, (15 years or more), a concession from the state, or as noted above, a minority interest (up to 49 percent) in a Cambodian-owned company that owns the land, coupled with secured lending against the land.
As to perpetual leases, a major improvement made by the 2001 Land Law was the creation of perpetual lease rights as interests in rem (imposing a general liability) on land. This means that the leaseholder should have much stronger rights than under the previous system which treated all leases as contractual rights without creating an interest in the land.
A perpetual lease can be assigned, sub-leased, mortgaged or transferred through succession and is renewable. Perpetual leases can also be pledged as security for financing. These leases must be for a term of at least 15 years up to a maximum of 50 years and are renewable.
A perpetual lease may be registered against the title to the land being leased. However, registration of the perpetual lease with the relevant Land Office is not a condition of lease validity and there is no legal requirement to register the lease. Nonetheless, to help enforceability against third parties, perpetual leases should be registered against title to the land with the relevant Land Office. Once so registered, the relevant Land Office will issue a perpetual lease certificate to the lessee.
Foreign ownership of buildings located on land leased perpetually by the foreign entity is permitted by law. However, the means by which such ownership can be registered have not yet been established other than for rights concerning usufructs.
Land is protected from expropriation by the Constitution and the 2001 Land Law, which permit expropriation of land only if such expropriation is in the “public interest” and if “fair and just compensation” is given to the owner in advance. The new Law on Expropriation was promulgated on 26 February 2010. This Law provides Cambodia’s first regulatory framework for state confiscation of private property. Notably, it empowers the state to expropriate property for the development of public infrastructure that serves the public or state interest with advance payment of fair and just compensation.
If an investor intends to take a perpetual lease interest in land, or an ownership interest through a 51-percent Cambodian-owned company, it is very important that clear, unencumbered ownership of the land owned by the landlord or land-holding company is verified. Given Cambodia’s recent history, this can sometimes be time-consuming and may lead to uncertain results. However, a thorough title search should reveal any registered encumbrances or other problems that could aﬀect legal transfer of the land.
4. Overview of Land Ownership History
Cambodia’s recent land-ownership history makes it crucial for the investor to conduct a proper land title search before purchasing an interest in land. At present, there are a number of diﬀerent documents in use in Cambodia that may be presented as evidence of valid ownership of the land or to possessory rights. Not all of these documents represent unencumbered, indefeasible ownership of land. Some are only claims of ownership, while others allow the government to repossess the land without compensation. An understanding of Cambodia’s land ownership history is thus essential to guide and protect the new investor.
5. Land Ownership Reform
The status of private immovable property ownership in Cambodia has been as tumultuous as Cambodia’s modern history. Before 1975, private land-ownership was protected by law. During the Khmer Rouge period, all private interests in land were abolished. Beginning in 1979, after the fall of the Khmer Rouge, a typical communist-style ownership structure was put in place with the state as owner of all immovable property. During this period, occupation of land and buildings by an individual or family was enough to give the occupants certain “usufruct” rights to the structure. This “ownership by occupation” was particularly pronounced in the urban areas where many families, upon return to the cities after the period of civil conﬂict, simply occupied whatever available structure they desired. This right of use was informally recognized through the “family card,” which was issued by the State of Cambodia (“SOC”) Government for various population control purposes, and which named the family and its address.
In 1989, the SOC promulgated and implemented a number of legal measures aimed at facilitating the transfer of state land into private hands. Any Cambodian occupying land or buildings could file a claim at the local agricultural or land oﬃce requesting ownership of the occupied property. Following an investigation process that identified and measured the plot’s boundaries and any adverse claims, the state recognized that the applicant was the true owner-occupant by issuing a certificate of land use and possession.
6. Family Issues
Cambodia’s land privatization scheme provided for privatization to families based on their “family card” and their perpetual occupation of the land in question. Land, therefore, is usually owned by the entire family, as represented by the husband and wife. In order for valid title to pass, the signature of both husband and wife, as well as those of all their children aged 18 years and older, is mandatory on all transfer documents. Innumerable land cases have ended up in court because this rule has often not been followed.
7. Current Land-Ownership Situation
Cambodia’s current system and rules for land registration, titling, ownership, and transfer of land are in a state of transition. The 1992 Land Law and various regulations issued from 1989 set in place a procedure for the transfer and registration of land. The 2001 Land Law and its implementing decrees and Prakas further clarified this process.
Oﬃcial certificates of title which evidence ownership of immovable property are currently available, with the number of landowners in Phnom Penh and other urban centers who have obtained such titles continually increasing. Landowners can obtain a certificate of title through either sporadic registration or systematic registration conducted by the Ministry of Land Management, Urban Planning and Construction (“MLMUPC”).
Before an investor deposits any money toward the purchase of land, he should ensure that the landowner has a valid certificate of title registered with the relevant authorities. If there is no certificate of title, the investor should confirm that the purported owner of the land is the true owner by conducting due diligence at the relevant local village and commune oﬃces, as well as at the Land Registry and review any available supporting documents that reﬂect ownership and possession of the land concerned.
8. Real Security Rights Involving Real Property
The 2011 Implementation Law revokes certain provisions of the 2001 Land Law, including Part 5, which dealt with immovable property used as surety. Under the Land Law, immovable property could be put up as surety by its owner to secure the payment of a debt by way of mortgage, antichrèse or gage.
Under the Civil Code, foreign investors have real security rights. The new code establishes five types of real security rights, including pledge and hypothec. A real security right is established in order to secure an existing debt or a debt to be incurred in the future, if it can be specified. Where the holder of a real security right does not receive satisfaction of the secured claim, the holder may enforce the real security right in accordance with procedure established by law.
The registration mechanisms for the aforementioned security rights have been put in place by Prakas 30.
Under a pledge, a pledgee is entitled to hold possession of the item he has received from the debtor or a third party as security for his claim and to obtain satisfaction of the pledge’s claim from such an item in preference to other creditors.
Unless otherwise provided, the pledgee of an immovable asset; may use and receive the profits of the immovable asset in accordance with its ordinary use; pay the costs of management thereof, and will bear all other charges pertaining to such an asset; and may not demand interest on the secured claim. The pledge of an immovable asset cannot exceed five years and is renewable.
With regard to the legal regime governing hypothecs, a hypothee is entitled to obtain satisfaction of its claim in preference to other creditors out of the immovable property offered as security by the debtor or a third party. A perpetual lease or usufruct may also be the object of a hypothec.
A hypothee may not assert the hypothec against a third party who is not the hypothecator unless the creating instrument is notarized or made by a competent official and registered in the Land Registry. A hypothec extends to all things attached to and that form part of the land comprising the object of the hypothec when the hypothec was created, including buildings and things attached to the land after the hypothec was created. In the event of a failure to perform on a debt, a hypothee may apply to the court for compulsory sale of all the hypothecated land. There is an exception to this rule though, in cases where buildings attached to the hypothecated land are subject to a perpetual lease, usufruct, or leasehold agreement registered in the land registry. In such cases, the hypothee may not demand the compulsory sale of the building together with the hypothecated land. Under the Civil Code, multiple hypothecs over immovable property are permissible.
11. Hypothec and Transfer of Rights over a Perpetual Lease or an Economic Land Concession
11.1 Economic Land Concessions
On 29 August 2007, the Council of Ministers adopted the Sub-Decree on the Mortgaging and Transfer of Rights over a Perpetual Lease or an Economic Land Concession (State Land Sub-Decree).
A perpetual lease has a term of at least 15 years. In line with the State Land Sub-Decree, a land concession or perpetual lease shall be registered on the original land title certificate by the MLMUPC. This Ministry will then issue individual certificates of perpetual lease and certificates of economic land concessions.
Immovable property subject to a concession or perpetual lease must be registered in the Land Registry of the MLMUPC. Where the lease or land concession is for immovable property that is not titled but belongs to the government, such a lease or concession shall be signed by the Minister of Economy and Finance (“MEF”) together with the relevant ministers or heads of provincial/municipal governmental entities acting as the trustee authorities of the immovable property.
Hypothecs and other liens may be taken over perpetual leases or concessions. Furthermore, such rights can be transferred to other parties. However, the hypothec or transfer of a perpetual lease or concession shall not be considered as a hypothec of the actual land subject to such agreement, and the hypothec term cannot exceed the terms of the lease or concession agreement for the individual plot of land. The lessee or concessionaire may further hypothec or transfer the buildings and other immovable properties it constructed on the land unless otherwise stated in the lease or concession agreement.
11.2 State Land
State land refers to all land belonging to the state, under the control of ministries or national institutions or which has been allocated by the government to a public entity or public enterprise for occupancy. Under the 2001 Land Law, state land is divided into two categories: state public land and state private land.
State public land refers to land of interest to the public, and is specifically placed under public interest property including natural forest land, natural lakes or ponds, railways, ports, national parks and public schools etc.
State private land refers to all land not considered to be state public land and not legally possessed or owned by individuals or communities in accordance with the 2001 Land Law.
State public land cannot be sold to the private sector, although under limited circumstances, it can be acquired by someone through leasehold possession for a period no longer than 15 years. Additionally, such land can be reclassified as private land after it loses its public interest nature. State private land can be exchanged, leased, granted on concession or sold to private individuals or legal entities. These transactions are governed by special laws and regulations.
11.3 Sale, Lease, and Exchange of State Property
On 27 November 2006 the Council of Ministers adopted Sub-Decree 129 on Leasing and Transferring State Properties (Sub-Decree 129). Sub-Decree 129 sets out the rules and procedures for leasing, purchasing and exchanging state private property. It states the relevant Ministry, department or provincial or municipal authorities that have control and duties of care over certain state properties. These are considered the trustee authorities over such properties and the MEF is named as the centralized state property control authority for all state property (which is owned by the government).
The trustee authorities report to the MEF as the state property control authority, with regard to all state property under their trusteeship so that the MEF can compile a centralized index of such property. The trustee authorities must annually update their individual records of state property under their control and report the inventory to the MEF. The reporting procedures will be set out in a MEF Prakas.
11.4 Lease of State Public Property
No state property including that belonging to a public legal entity may be sold, exchanged, leased or granted as a concession. The trustee authorities will prepare documents concerning the state’s properties available for lease and submit proposals to the State Property Management Authority (SPMA) for examination and approval by the government.
Leasing of state public property may only occur under the following conditions;
- the lessee of state public property will not modify or damage the property; and
- the lessee of the state’s public properties will not aﬀect or modify the function of the property serving the public interest.
In addition, the lease of state public property may not exceed 15 years.
11.5 Lease and Sale of State Private Property
There will be a bidding process for the sale or lease of state private property where there is more than one bidder, unless otherwise requested by the trustee authority and approved by the SPMA. The rules and procedures for the bidding process will be set out in a Prakas issued by the MEF.
Negotiation of the lease or sale price may also occur where:
- bidding has failed;
- the property has special characteristics requiring the lessee or purchaser to fulfill certain conditions on the property; or
- there is only one interested lessee or purchaser of a specific plot of state private land.
11.6 Exchange of State Private Property
State private property may also be exchanged for other property, to allow for private development and that the relevant authority for the land can have alternative locations for headquarters etc. needed for operations. Exchange of all state private property is under the government’s authority. Conditions of payment for the exchange and land prices will be determined in a schedule prepared by the trustee authority and submitted to the SPMA for review then forwarded for the government’s approval.
Any lease, purchase or exchange of state property not in compliance with Sub-Decree 129 will be considered void. Investors may inquire for information related to state land at the MLMUPC or the State Property Department of the MEF. Investors are strongly encouraged to exercise thorough due diligence regarding the sale, concession or lease of any land that appears to be used or occupied by a state entity.
11.7 Legal Framework for Land Concessions
Under the 2001 Land Law, three types of concessions can be granted; social concession, economic concession, and use, development and exploitation concession.
11.8 Social Concessions
In 2003, the government issued the Sub-Decree on Social Land Concessions providing the basis for rules and procedures granting social land concessions on state private land. A social land concession allows the beneficiaries to build residential constructions and/or to cultivate land belonging to the state for their subsistence. In other words, social land concessions are granted for residential and farming purposes. It is important to note that social concessions are only granted to Cambodian citizens at the head of their family and that have a legal capacity to own the land.
11.9 Economic Concessions and Use, Development and Exploitation Concessions
Investors may have interests in state private property through economic concessions. The 2001 Land Law defines an economic land concession as a land concession responding to an economic purpose that allows the concessionaire to clear the land for industrial or agricultural exploitation.
On 16 December 2005, the Council of Ministers adopted the Sub-Decree on Economic Land Concessions, which established the criteria, procedures, mechanisms, and institutional arrangements for the initiating, granting and monitoring of economic land concessions. The purpose of granting economic land concessions is primarily to develop intensive agricultural and industrial-agricultural activities with a high level of capital and to increase employment opportunities in rural areas.
Formerly, economic land concessions with a value of less than KHR 10 million and a total concession area of less than 1,000 hectares could be granted by the relevant provincial or municipal governor. The Council of Ministers removed this authority in 2008 and now all economic land concessions must be granted by the Ministry of Agriculture, Forestry, and Fisheries (“MAFF”).
Economic land concessions can only be granted on land registered and classified as state private land, and for uses consistent with a land-use plan adopted by the Provincial/ Municipal State Land Management Committee. The size of the concession is generally limited to 10,000 hectares with some exceptions available. Furthermore, environmental and social impact assessments must be completed for the anticipated project. There must be a resettlement plan if the land is occupied and there must be consultation with the local authorities and residents regarding the project.
According to the Sub-Decree on Economic Land Concessions, there are two permissible ways to initiate economic land concession projects: through a solicited proposal where a contracting authority proposes a project for solicitation purposes from investors; or through an unsolicited proposal where an investor proposes a project to the state. Proposals must include specific information including but not limited to; a business and investment plan for use of the land, a description of employment requirements and source of the labour, information about the equipment and environmental and social impact.
Solicited proposals are the preferred method of initiating an economic land concession. However, if the investor can demonstrate exceptional advantages to achieving the purposes of economic land concessions, such as introduction of new technology, exceptional linkages between social land concessions and economic land concessions and access to processing or export markets, unsolicited proposals may be considered by the contracting authority.
The government issued a moratorium on 7 May 2012 suspending the issuance of economic land concessions and revoking any existing economic land concession not in compliance with obligations detailed under the Economic Land Concession Agreement (Moratorium).
Companies that obtained approvals from the government already but failed to develop the land under concession or failed to comply with the concession contracts or the legal procedures in force will also have their approvals revoked. The revoked concessions will be put under the direct management of the state.
Furthermore, economic land concessions already approved in principle by the government will continue to be implemented in accordance with established legal principles and procedures. However, the Moratorium stipulates that the relevant ministries, institutions and authorities rigorously monitor economic land concession contracts to avoid negatively aﬀecting the lands and livelihoods of communities. The authorities have not given any indication on how long the Moratorium will last and we note that a number of economic land concessions have been revoked accordingly. In 2015 the government announced that the duration of all economic land concessions would be reduced to a maximum of 50 years.
12. Legal Framework for Infrastructure Concessions
12.1 Law on Concession
The Law on Concession, passed on 19 October 2007 is meant to facilitate the implementation of privately financed infrastructure projects in Cambodia. Following the promulgation of the Law on Concession, an implementing Sub-Decree also needs to be issued.
12.2 Infrastructure Projects Eligible for Concession
Infrastructure facilities providing services (whether directly or indirectly) to the general public in the following sectors are eligible to be granted as concession;
- power generation, power transmission, and power distribution;
- transportation facilities and systems such as roads, bridges, airports, ports, railways, and canals;
- water supply and water treatment facilities;
- infrastructure for telecommunications and information technology;
- infrastructure facilities for tourism projects such as tourism sites and museums;
- infrastructure for the gas and oil sectors, such as oil and gas pipelines;
- sewerage, drainage, and dredging;
- solid waste management and treatment;
- public infrastructure related to health, education and sports;
- infrastructure related to special economic zones (“SEZs”) and social housing;
- irrigation and agriculture-related infrastructure; and
- other sectors for which a specific law allows the granting of concessions.
The infrastructure project must be approved as a concession project in accordance with the procedures to be outlined in the implementing Sub-Decree before the concession contract on a given infrastructure project can be entered into.
12.3 Selection of Concessionaire
Depending on the circumstances, the contracting authority will select the concessionaire through a international or national bidding process or through a negotiated process. The process for selecting the concessionaire will be set forth in the implementing Sub-Decree.
When the selection process is completed and the contracting authority is ready to accept a final bid or a negotiated proposal, the contracting authority will obtain in-principle approval of final terms of the concession contract as required by the procedures set out in the implementing Sub-Decree.
After obtaining this in-principle approval, the contracting authority shall issue notification of award to the selected candidate before entering into the concession contract.
12.4 Concession Contract
A concession contract between the contracting authority and the concessionaire is required for the grant of concession. The contracting authority and the concessionaire are required to sign the concession contract within six months of notification of the award, although this period can be extended by written agreement between the contracting authority and the concessionaire. Failure by the contracting authority to sign the concession contract within this required timeframe entitles the concessionaire to withdraw its bid or proposal without forfeiting its bid bond.
The ministries, public institutions, state-owned legal entities and territorial authorities that have been delegated the power under Cambodian laws are entitled to enter into a concession contract with a private party on infrastructure projects within their areas of authority. These government authorities also have the right to execute the relevant ancillary agreements.
A concession contract may take any of the following forms;
- build, operate, and transfer (BOT);
- build, lease, and transfer (BLT);
- build, transfer, and operate (BTO);
- build, own, and operate (BOO);
- build, own, operate, and transfer (BOOT);
- build, co-operate, and transfer (BCT);
- expand, operate, and transfer (EOT);
- modernize, operate, and transfer (MOT);
- modernize, own, and operate (MOO);
- lease and operate (LO); or
- undertake management or a management agreement, or any variant of these forms, or similar forms including the implementation of infrastructure projects by public-private joint venture.
The Concession Law requires the following issues to be included in the concession contract;
- the nature, scope and standard of work to be performed and services to be provided by the concessionaire;
- any incentives to be granted to promote cost-eﬃciency, accelerate construction and increase the quality of operations and maintenance of public interest concern;
- any fees, tolls, rentals or other charges to be applied by the concessionaire must be approved by the appropriate regulatory agency;
- agreed risk allocation or risk sharing;
- service levels and standards required from the concessionaire in the operation and management of the infrastructure facility and consequences of non-compliance with the service levels and standards;
- payment mechanisms;
- required commitment and cooperation of the contracting authority and other public authorities to support the implementation of the infrastructure project throughout the concession period; and
- other matters as the parties deem appropriate.
The Concession Law also calls for the establishment of methods to determine and adjust any tariﬀs or fees the concessionaire is entitled to collect with respect to the infrastructure project.
As to the concession period, the Concession Law sets the maximum term of 30 years from the date of signing the concession contract but allows the government to grant a longer period if the nature of the project so requires
13. Special Economic Zones (“SEZs”)
The government has established a number of export processing zones. The framework for SEZs is now governed by a Sub-Decree on Special Economic Zones (SEZ Sub-Decree), described below.
13.1 Sub-Decree on Special Economic Zones
The main purpose of the SEZ Sub-Decree is to set forth “procedures and provisions related to the establishment and the management” of SEZs in Cambodia. It provides for two types of SEZ: general industrial zones and export processing zones (which are wholly dedicated to exports).
13.2 Establishment of Special Economic Zones
All SEZs must be approved for establishment by the Council for the Development of Cambodia (“CDC”). Basic terms are detailed in the SEZ Sub-Decree as follows:
- must be 50 hectares or more in size;
- must fenced;
- anti-ﬂooding system, clean water system, electricity, telecommunications and postal systems must be provided;
- a residential center must be built for employees and employers with a large road system, public parks and fire protection systems; and
- sewage systems, recycling systems for liquid wastes, environmental protection measures and other related infrastructure must be provided.
13.3 Procedure for Establishment
The procedure to establish a SEZ is envisaged as follows:
|Relevant Steps or Procedures
|Application by the zone developer to register as a Qualified Investment Project and pay application fee.
|At any time
|One-Stop Service Committee at CDC
|Decision to approve or reject the application.
|Within 28 days from application.
|Inform investor of decision of the One-Stop Service Committee and issue the conditional registration certificate.
|No later than 28 days from application.
|The zone developer shall provide: the planning and detailed feasibility studies (notably the master plan) of all infrastructure, commercial registration documents, Articles of incorporation, and other certified letters required in the conditional registration certificate.
|Within 180 days after the issuance of the conditional registration certificate.
|CDC and Other Relevant Institutions
|The CDC will obtain, on behalf of the zone developer, all governmental authorizations required from the relevant competent authorities, and will issue the final registration certificate.
|Within 100 days from the submission by the zone developer of the detailed planning.
|Council of Ministers (i.e. Prime Minister)
|Promulgation of a Sub-Decree specifically on the establishment of the SEZ and its border.
|Same time as issuance of the final registration certificate.
13.4 Registration Procedure for Zone Investors
Zone investors must register with the SEZ Administration by providing all required documentation. The SEZ Administration will then register the project and provide incentives as provided by the Law on Investment and other regulations.
13.5 Management Structure
The CDC is the main authority for the government on all strategic and regulatory aspects for the development of SEZs in Cambodia. Notably, the CDC will resolve disputes in relation to SEZs and nominate oﬃcials for the administration of an SEZ.
Each SEZ will have an administration that will act as the “One-Stop Service” mechanism for that SEZ. The administration will be structured as follows:
13.6 Organization Relevant Provisions
|Administration will be headed by a chairman with, if necessary, one or more vice-chairmen. Minimum qualifications are detailed in the draft Sub-Decree.
|Situated in the SEZ. The zone developer must provide necessary infrastructure and equipment for functioning.
|Appointed by relevant line ministries.
|Suﬃcient power to all assigned oﬃcials to make relevant decisions for the SEZ.
|Designated oﬃcials shall be nominated for a three-year period with the possibility of extension.
|Examine import or export of goods and persons in the SEZ. Ensure implementation by the zone developer and zone investors of the agreement between the zone developer and CDC.
|Provide customs forms for import-export and facilitate the process. Collect customs duties and taxes.
|Register zone investors and provide relevant documentation and incentives.
|File monthly, quarterly, half-yearly, and annual reports with CDC.
The SEZ Sub-Decree provides detailed provisions on the duties of the zone developer, notably;
13.7 Duties Relevant Provisions
|Providing capital for the development and operation of the SEZ without guarantees from the government.
|Must own the land or necessary interest in the land (i.e. long-term lease).
|Undertake the construction of all necessary infrastructure in the SEZ.
|Rent land space and provide services to zone investors.
|Management and Marketing
|Prepare internal regulations in relation to various aspects of the SEZ. Actively advertise and attract investors to the SEZ. Ensure security services on the SEZ.
|File reports with the CDC and other reporting obligations towards the government.
The incentives that can be granted by the CDC to zone developers are detailed in the SEZ Sub-Decree. The process to obtain these incentives is explained and the main incentives are listed as follows;
|Tax, Duty or Others
|Tax on Profit
|Exemption of nine years.
|The import of equipment, construction equipment, means of transportation to be used in the infrastructure construction, and transportation in the SEZ shall be exempted. This exemption will also apply for the import of machinery, and equipment for construction of connecting roads and other infrastructure for public services.
|Zero percent rate for the zone developer and the zone investors as follows: VAT recorded for every import by zone investors and cancelled if the output materials of production are exported.
|The zone developer, zone investor, and foreign employees will have the right to transfer oﬀshore all income from the investment and salary received from the SEZ after payment of tax.
|Protection against nationalization, price fixing, and all FOREX transactions.
The SEZ Sub-Decree sets forth additional provisions for export processing zones (“EPZs”).
The import or export of goods to and from the EPZ shall be considered as the import or export of goods to or from Cambodia, which firstly requires the owner of the goods to complete the relevant customs paperwork with the customs authority at the EPZ.
No retail business can be located in the EPZ. Additionally, zone investors cannot remove output materials from the EPZ without permission from the SEZ Administration. Zone investors must seek approval from the SEZ Administration for any domestic purchase or disposal of products from the EPZ.
14. Real Estate Licensing
On 14 February 2007, the MEF issued the Prakas on Granting Professional Certificates and Licenses for Valuation Services and Immovable Property/Real Estate Services (Real Estate Prakas). The Real Estate Prakas was followed up by two instructional circulars from the MEF, the most significant being the Instructional Circular on the Implementation of the Real Estate Prakas, issued on 3 August 2007 (Circular 002).
The purpose of the Real Estate Prakas is to regulate the operations of companies providing real estate services and property evaluation services in Cambodia. Its objectives are to establish a code of professional standards for companies and individuals providing real estate services and property evaluation services; to facilitate the sale, transfer, leasing and hypothec of immovable property by investors; to ensure the national economic sustainability and development of the real estate sector in line with international standards and to increase national revenue through taxation and other service fee payments.
The Real Estate Prakas defines “real estate services” as services related to the purchase, sale, leasing, and pledging of immovable property.
15. Management of Real Estate Businesses
Prakas No. 1222 on the Management of Real Estate Development Businesses (Prakas 1222) was issued on 15 December 2009 by the MEF as a mechanism to control the management, inspection and licensing of real estate projects in Cambodia.
Prakas 1222 supersedes Prakas No. 548, dated 30 July 2008, on the Management, Inspection and Granting of Licenses for Real Estate Developers (Prakas 548). The significant changes introduced by Prakas 1222 include;
- abolition of a requirement that 3 percent of a real estate project be implemented before a developer is allowed to advertise it for sale.
- abolition of oﬃcial fees for the advertising of real estate projects.
- abolition of restrictions upon when such advertising could occur.
Project bank accounts are now clearly controlled by the developer. However, the withdrawal of money from a project-related account is subject to some regulatory control and in some instances is tied to the actual progress of a project, which must be assessed by a licensed independent engineering company.
The minimum terms and conditions fixed by Prakas 1222 must be stated in a relevant lease or sales and purchase agreement (to which the minimum terms apply).
The roles and duties of the Inter-Ministerial Working Group are expanded.
The existing rule (required as a licensing condition) that real estate developers post security of 2 percent of a project’s expected cost has been maintained. This only applies to the third category of real estate developer mentioned below. Such a deposit has to be provided either in the form of a cash deposit (to be remitted into a bank account opened by the real estate developer) or in the form of a bank guarantee.
Under Prakas 1222, three categories of real estate developer are established:
- developers who have their own capital and can complete projects without the need for customer finance;
- developers who have received finance from foreign shareholders and who can complete their projects without the need for customer finance; and
- developers who require customer finance to complete their projects or any other developer who does not fall within the above two categories.
License fees for real estate developers are determined in accordance with the category of the developer and the size of the developer’s projects. Additional requirements are to be imposed by the Inter-Ministerial Working Group.
16. Land Use Zoning
The Law on Land Management, Urban Planning, and Construction regulates both local and national land use. The purpose of this law is to establish a national framework for the development, administration and implementation of land use policies and regulations in Cambodia. The government has focused its eﬀorts in three areas – Siem Reap province, Sihanoukville province and the greater Phnom Penh region in an attempt to create a comprehensive land use plan. However, these plans are general in nature and require detailed Sub-Decrees in order to be fully implemented. Investors intending to undertake projects in any of these three areas should familiarize themselves with the various land use permits and committees that exist both at the local and national level. For example, in Siem Reap, the Apsara Authority has been established by law to regulate the use of land around the Angkor Wat temple complex. Various use zones have been established to conserve and protect the temples and surrounding areas.
In 2015 the government adopted regulations on land use planning and zoning. The Urbanization Sub-Decree aims to define urbanization of the capital, cities and provincial towns in Cambodia by outlining land development, construction and land use. This will include a master plan on land use or a master plan, land use plan and a detailed plan. Land is divided into two types –areas where development is permitted and controlled areas. Various restrictions are imposed on developments such as minimum number of car parking spaces, building height and the requirement to obtain a certificate of accuracy of urban planning and construction before obtaining a construction site closing permit.
In short every construction must be in accordance with the provisions of the Urbanization Sub-Decree. There are penalties such as revocation of construction permits, reconstruction and fines for persons failing to comply with a construction permit and the requirements of the Urbanization Sub-Decree. Use of land or buildings that occurred before the Urbanization Sub-Decree came into force are allowed to continue according to existing conditions provided they are not dangerous or hazardous to public well-being, safety, the environment, history and culture. A number of sub-regulations will be issued to provide further details in respect of various elements such as permitted building height.
Foreign investors should familiarize themselves with the applicable zoning rules and regulations before moving forward with acquiring an interest in land.
17. Construction Permits
Before building any structure on land or substantially remodeling a building, the owner of the land or building must obtain a construction permit signed by either the government delegate of the city, if construction is occurring in an urban area, or in rural areas by the provincial governor.
For any building larger than 3,000 square meters, the permit must also be approved by the MLMUPC.
In order to apply for this permit, various specified documents must be submitted, in Khmer, detailing the planned construction. These documents are compiled and reviewed by the Land Management, Urbanization, and Construction Oﬃce or the municipal or provincial/district authorities where construction is planned. Proposed industrial buildings must include information on remedying possible environmental pollution resulting from operation of the industry. The construction plans must be signed by the landowner and drawn by an architect or construction company registered with the MLMUPC.
The construction oﬃce reviewing the documents has 45 days in which to issue a decision after all supporting documents have been submitted. Construction must begin within one year after the permit is issued, although one extension is allowed. Additionally, a permit for opening a construction site is required before commencing construction. Upon completion, and prior to the building being opened to the public, its construction must be approved by issuance of a certificate attesting that the construction was properly accomplished according to the approved plans (known as a permit for closing the construction site).
18. Regulations Applicable to Residential Development Projects
The Law on Provision of Ownership Rights over Private Units of Co-Owned Buildings to Foreigners (the Foreign Ownership Law) was promulgated on 24 May 2010.
The main purpose of this law is to “determine the management and use of co-owned buildings” as well as mechanisms and procedures for registering “private units of co-owned buildings.” The law aims to ensure the protection of legal ownership rights for possessors of “private units of co-owned buildings”. This is to facilitate management activities and co-owners living in co-owned buildings. The law also provides regulations for the co-owners in the sale, exchange, donation, succession, perpetual lease and creation of hypothecs for their private units.
Only legal persons or individual persons of Khmer nationality can own private units of a co-owned building unless there are specific provisions to the contrary.
The registration procedures for private units of a co-owned building have been specifically designed to be straightforward, transparent and in line with the principles of decentralization and good governance. The immovable property developer will create internal regulations that do not contradict public order or applicable laws before announcing the sale or rent of units in the co-owned building.
A co-owner of a private unit of a co-owned building has the right to dispose of their private unit if it does not aﬀect the common area or its uses by other co-owners and does not aﬀect the solidity and original appearance of the building. In the case that the developer has constructed the co-owned building on land leased from a third party, the duration of perpetual lease allowed on the private unit and the right of use of the common areas is equal to the duration of the perpetual rent agreement as agreed between the developer and the landowner.
The MLMUPC has the authority to register and issue certificates acknowledging ownership of private units of a co-owned building, to all co-owners, following the procedure determined in this law. The registration of units of a co-owned building will be implemented according to the following procedure:
An owner of a private unit applies for cadastral registration at the municipal/district/khan cadastral administration oﬃce. The application will be submitted to the local municipal/district/khan oﬃce of Land Management Urban Planning, Construction and Geography where the co-owned building is located for review.
When the process is approved, the concerned municipal/district/khan oﬃce of Land Management Urban Planning, Construction and Geography will give one week’s notice before field data collection. When the field data collection related to the private unit of the co-owned building is complete, the oﬃcers shall submit the file with all documents to the Capital/Provincial Department of Land Management Urban Planning, Construction and Cadastral for review and decision. This will allow information about the unit will be displayed on the site of the property, as well as in the local commune/sangkat hall where the co-owned building is located.
When the public display is complete with no claims having been made and disputes (if any) having been resolved, the Capital/Provincial Department of Land Management Urban Planning, Construction and Cadastral shall register the private unit of the co-owned building.
The new co-owners shall enjoy the same rights and bear the same responsibilities as the previous owners. In the case of creation of a hypothec or perpetual lease over a private unit, the co-owner and concerned persons will request the cadastral administration to make corresponding inscriptions on the certificate acknowledging the unit’s owner.
The Foreign Ownership Law allows foreigners (individuals or corporate entities) to own up to 70% of the units in a co-owned building and enjoy common areas within a co-owned building provided that the building is registered as a co-owned building at the Land Oﬃce and those units are on a floor which is above the ground floor. Management of Borey (Management of Villa, Apartment, and Condo), Sub-Decree 39.
A borey is the Cambodian equivalent of a compound or residential community that has restricted access to its residents only. A borey is defined as “…one location consisting of parcels of land, homes, other buildings, public space and other infrastructure on one same plot of land in accordance with the formally approved overall plan of the borey…” (Article 4 of Sub-Decree 39).
A borey is distinguished from an apartment complex, villa, condominium or SEZ. Lots within the borey may be subdivided and co-ownership is possible within the walls of a borey (Article 18 of Sub-Decree 39). Sub-Decree 39’s objective is to define categories of ownership within the borey, management within the borey (including the treatment of public spaces or common areas) and provide guidelines on how owners and developers of land within the boundaries of the borey can deal with, dispose of or secure their lots.
The MLMUPC is the authority in charge of the registration and issuance of a borey’s land lot ownership certificates. Sub-Decree 39 confirms that all residences in the form of private units of co-owned buildings shall be registered in accordance with Sub-Decree 126 on the Management and Use of Co-Owned Buildings dated 12 August 2009.
Sub-Decree 39 also provides that borey developers must obtain a confirmation letter from the MEF in relation to their solvency in addition to the real estate developers’ license governed by Prakas 1222, issued on 15 December 2009.
Chapter 11 : Telecommunications
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