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Overview of Capital Gains Tax in Cambodia
Overview of Capital Gains Tax in Cambodia
September 19, 2023, 3:14 a.m.
Realestate.com.khTV
Comparisons
What is the Capital Gains Tax in Cambodia?The Capital Gains Tax (CGT) in Cambodia is a flat 20% rate from selling a capital asset. Contrary to what most people perceive. The Capital Gains Tax in Cambodia is not exactly new; businesses in the Kingdom have always paid capital gains. The material difference now is that it applies to individuals, especially those looking to sell immovable property a.k.a. real estate.The CGT was introduced into law through Prakas 346 from the Ministry of Economy and Finance back in April 2020 and was originally intended to be implemented a few months later in July 2020.Due to COVID-19, the law was delayed to January 2021 to reduce the pandemicโ€™s impact on the real estate market. The implementation of the Capital Gains Tax in Cambodia was further delayed to January 2022 as the country saw its first major local community outbreak in Q1 2021. As of September 2023, the Capital Gains Tax is to take effect on January 1st 2024.ย Who has to pay Capital Gains Tax in Cambodia?Capital Gains Tax in Cambodia applies to both resident taxpayers and non-resident taxpayers. Taxpayers are obligated to pay their Capital Gains Tax within 3 months of realising their gains.Resident taxpayers are defined as physical persons who meet one or more of the Kingdomโ€™s residential criteria.Non-resident taxpayers are defined as either legal entities or physical persons who are not considered residents.How is โ€œCapitalโ€ defined in Capital Gains Tax?Capital Gains Tax covers capital gained from selling: Immovable Properties, Leases, Investment/Financial Assets, Goods (Licenses and branding), Intellectual Property, and Foreign Currency.That may sound all-encompassing, but much like other tax laws, there are exemptions to Capital Gains Tax, especially when it comes to immovable property a.k.a. Real estate:The principal residence of the taxpayer - in the event that the taxpayer (or their spouse) has more than one place of residence, only one of them can be exempted from the CGTTransfer of immovable properties between family members as stated in the regulations around Registration TaxAssets of the Cambodian governmentImmovable properties a.k.a. Real estate properties sold for public purposes based on Cambodiaโ€™s Expropriation LawsAssets of foreign embassies/consulatesAssets of international organizations or cooperation agencies of foreign governmentsHow is Capital Gains Tax calculated in Cambodia?Capital Gains Tax in Cambodia is a flat 20% rate on gains made after selling a capital asset. At face value, that is a significant portion of sales proceeds but there are 2 methods taxpayers can use that allow for a bit more consideration of their expenses:Actual Expense Deduction MethodThis method takes the sales proceeds and subtracts the expenses the seller made on that property to get the actual Capital Gains Tax to be paid. These deductibles can be the purchase cost, consulting fees, registration tax, commissions, and even advertising. These actual expenses are deducted from the sales proceeds and 20% of the difference will be the Capital Gains Tax to be paid.This method is beneficial for property sellers who spend a lot on overhead/operational costs and who might be looking at more humble margins.Example:Mrs. Phan is looking to sell her home for $250,000 which she originally bought for $100,000 a couple of years ago. She was diligent in keeping essential documents detailing her expenses in the acquisition/renovation of her property, which are the following:Registration Tax: $4,000Loan interest: $3,000Loan administrative fee: $500Renovation: $35,000Now that we have the relevant values, letโ€™s do a sample calculation:ย Actual Expenses Deduction MethodSale Price$250,000ย Actual Expenses (Deductibles)Original Price$100,000Registration Tax$4,000Loan interest$3,000Loan administrative fee$500Renovation$35,000TOTAL EXPENSES$142,500ย Capital Gains TaxSale Price$250,000Total Expenses$142,500Capital Gains (Sales Price - Total Expenses)$107,500Capital Gains Tax (20%)$21,500ย Mrs. Phan will have to pay $21,500 in Capital Gains Tax once she sells her property via the Actual Expenses Deduction Method.There are more applicable deductibles so we strongly suggest you keep tabs on the expenses you made for your property if you are planning to sell in the future.Determination-Based Deduction MethodThis method takes 80% of the sales proceeds and subtracts it from the entire sales value. The result will be the Capital Gains and 20% of it will be the Capital Gains Tax to be paid. This method is highly beneficial for property owners who buy low and are planning to sell high.Example:Mrs Phan is aware thereโ€™s another way of calculating Capital Gains Tax. And being a discerning homeowner, she explored the other method of getting the capital gains tax for her $100,000 property she plans to sell for $250,000.Determination-Based Deduction MethodSale Price$250,00080% of the Sale Price$200,000Capital Gain (Sale Price - 80%)$50,000ย ย Capital Gains TaxCapital Gain$50,000Capital Gain Tax (20%)$10,000ย Mrs Phan will have to pay $10,000 in Capital Gains Tax once she sells her property via the Determination Based Deduction Method.Itโ€™s quite obvious which method Mrs. Phan will be using and thatโ€™s intended as taxpayers in Cambodia are free to choose which method of Capital Gains Tax calculation to use for their tax obligation.ย As mentioned above, the Capital Gains Tax is planned to finally be implemented in January 2023. This creates a third method of Capital Gains Tax: selling your property before January 2024 so you donโ€™t have to pay this tax!Kidding aside, we highly recommend that you keep any relevant expenses related to your property and do your due diligence in finding the method that gives you the best tax rate.ย Looking to buy OR sell property? Click here
Matthew Rendall at Expo 2018
Legal aspects of co-owned buildings
June 6, 2022, 5:07 p.m.
Realestate.com.khTV
Special Reports
Like any other business enterprise, real estate development is governed by a legal framework. These set of laws and regulations, though complicated, ensure operations and activities related to the sector are done legally without ill effects on people and the environment.ย ย Co-owned buildings are covered by most existing real estate laws in Cambodia but there are a few regulations exclusive to this type of property. Developers can be heavily penalised if they donโ€™t follow these regulations in the Kingdom.We will guide you on the legal frameworks of co-owned buildings. Additionally, you will learn what is required if you are a developer in Cambodia.Keep in mind that you can browse hundreds of co-owned buildings on our site and you should always consult with a qualified legal team if you have doubts.What is a co-owned building?When people say โ€œcondominiumโ€ they are usually referring to a co-owned residential building. Under a co-ownership arrangement in Cambodia, several owners live in the same building.ย A co-owned building consists of units that are exclusively owned, with common areas whose use and benefits are shared among the co-owners.There are several types of co-owned buildings:Detached buildingsSemi-detached buildingsAttached housesIn the past, foreigners werenโ€™t allowed to buy condos in Cambodia. In 2010, however, the law changed. Anything from the first floor and up can be owned by a foreigner. Also, foreigner ownership cannot exceed 70% in a single building.Find out more about buying a condo in Cambodia as a foreigner.Legal aspects for developers:Project licenceBefore work begins, a developer is required to obtain a project licence from the Ministry of Finance and Economy (MEF).This requirement was set forth in Prakas 965 and there are two types of licences:Type 1 licence is for developers who finance their projects by themselves.ย Type 2 license is issued to developers who raise money from their buyers.Holders of a Type 1 licence can only sell units within the development once the project is complete. Developers having a Type 2 licence can pre-sell, but only after obtaining a construction permit and a project permit from the MEF.Developers must make a deposit of 2% of the total value of the project into an account with the National Bank of Cambodia (NBC). This measure is meant to protect investors and their money in the event the project is not completed.The government has the right to revoke the licence if the developer fails to finish the project on time or if the developer fails to follow the legal obligations required under the law.Construction permitsSave for a few exemptions, a construction permit is required for any construction work or development in Cambodia.Applicants must complete forms and submit them to the Ministry of Land Management, Urban Planning and Construction (MLMUPC). Supporting documents must also be filed at the commune, district and municipal levels. All submissions must be made in Khmer.The application must bear the signature of the landowner and a licensed project designer or architect.The authority to issue construction permits mostly falls within the jurisdiction of municipal or provincial officials. For big projects like airports and seaports, it is the National Committee of Land Management, Urban Planning and Construction that issues the necessary permits.Under Cambodian law, a construction permit is only issued if the applicant follows or is compliant with the master plan, land use plan, and other governing rules and regulations.Other relevant permits in CambodiaIn addition to the permits mentioned above, there are others that will be required throughout the process of development:A site opening permit is required to open a building site. This is issued by the MLMUPC. The ground cannot be broken before obtaining this permit.A site closing permit is required once the construction is finished. This is a key component in the process.ย A certificate of compliance is also required before the project is considered finished.ย Keeping to codeItโ€™s important to follow the letter of the law when it comes to real estate in Cambodia. If problems occur, court cases can be long and painful affairs.ย Itโ€™s important to do all your research before beginning the process. Realestate.com.kh urges everyone to enlist the help of qualified legal professionals.Note: This is a general guide and does not constitute definitive legal advice. Always do your own research and invest at your own risk.Looking for property investments in Cambodia? Let us help!
Sky Tree Condominium: More Than Just A Residence
Sky Tree Condominium: More Than Just A Residence
June 6, 2022, 5:04 p.m.
Realestate.com.khTV
Located in Russey Keo district of Phnom Penh City, Sky Tree Condominium is a freehold mixed-use development project developed to respond to the needs and lifestyles of modern people. A luxury residence project, Sky Tree offers luxury condominiums, serviced apartments with full hotel management services, and comprehensive amenities for a premier and convenient lifestyle.ย In order to know more details of the project, Realestate.com.kh interviewed A.Ganesan, assistant to CEO at Sky Tree showroom.Mr. Ganesan said: โ€œSky Tree Condominium, developed by J&L Development, is more than just a residence and is suitable for both living and investment. With over 20 years of local experience. The developer wants people to enjoy a great and diverse environment with comfortable lifeโ€He added: โ€œthe project is in the development zone with the price of land increasing about 10% annually. The developer asserts that when you buy a residential home in this project, the value of a home can increase up to 20%.โ€Sky Tree targets local buyers and buyers from Asia and Europe. 40% of the total complex will be dedicated to exclusive public facilities such as rooftop gardens, a helipad, a medical clinic, a sky bar, gym, spa, international retail outlets, car parking, business facilities, and much more.Built with Singaporean standards, Sky Tree project will be a high-rise complex with a total of 1,104 residential units. These units will range from one to three bedrooms. The unit size will start anywhere from 61.75 square meters to 140.93 square meters. They also sell Studio units for a starting price of only $ 55,611.For more information, visit the Sky tree Project Office directly or visit Realestate.com.kh
Co-working Office Space Gaining Popularity in Cambodia
Co-working Office Space Gaining Popularity in Cambodia
June 6, 2022, 5:04 p.m.
Realestate.com.khTV
The concept of a co-working office space has been around for quite some time and is finally increasing ย in popularity in Cambodia to satisfy the countryโ€™s short-term rental space demand. Most of co-working spaces offered are foreign companies that have progressed tremendously in just a span of a few years. Those shared spaces have become very popular among individual or groups of entrepreneurs, startups, and small businesses.ย Co-working space is a new trend entailing a shared working environment, often similar to an office. Unlike in a typical office environment, these co-working spaces are usually not occupied by the same organization or company. There has been an increase in working space of this type both in Phnom Penh City and Siem Reap province. Some of the co-working spaces in Phnom Penh are Impact Hub Phnom Penh, Small world, Colap and a lot more. Meanwhile, Siem Reap has The 1961 Co-working & Art Space, and Angkor Hub. ย Although co-working is still quite a new concept in Cambodia which begun in 2015, Olivia Hough, Chief Operations Officer (COO) at Impact Hub, stresses it has proven very popular for two years, saying: โ€œwe have expanded three times. It is likely to continue to grow as a trend as the startup scene continues to grow in Cambodia. We wanted to support and enable Cambodians to start their own social businesses.โ€ย Ms. Olivia explains Co-working is like an open plan office, with the difference that anyone can join. Our community at Impact Hub is made up of techies, creatives, NGO workers, entrepreneurs, freelancers, or writers, etc. It's very diverse, meaning you can work in a quiet environment with fast internet and like-minded people for a membership fee. It's also a great place to network and meet new people.ย Meanwhile, Mr. Ham Kimhoun, training director of Wecreate Cambodia, said: โ€œAlthough new a ย trend, co-working space is the office for everyone who is working long-distance, individuals, or small groups of people. Co-working office space offers a special and flexible environment as usually they include training, networking, referrals, and a venue for open discussions.โ€ย In fact, Co-working spaces in Cambodia are offering a good opportunity for Cambodians to meet people from different fields, allowing them to learn and exchange different business ideas. ย Siem Reap, a multi-national melting pot, offers great opportunities for co-working spaces with a lot of encouragement and motivation. Mr. Loven Lamon, managing director of The 1961 Co-working and Art Space based in Siem Reap, said: โ€œThere is great potential for co-working office space in the Cambodian market. And Siem Reap comes second after Phnom Penh since it has many tourists, foreigners and young people in the area. with The 1961, members are also able to access more services and facilities such as meeting rooms, private skype rooms, and other wide range of rooms that can be used as needed.โ€ ย Mr. Loven added that The 1961 was converted in 2014 from a hotel to a co-working space. This was because they saw this growing trend, noticing many of business ideas from young people and didnโ€™t have sufficient resource to rent an office space.ย Regarding rental price, Olivia said price for full-time membership is $60 a month, and part time (access to the space three times a week) $35. Members can also choose to have their own fixed desk with a locker for $150.ย For Mr. Loven, the price depends on the need of members: if a member needs to use the place for a day is $5, three-days $10, one week $20 and one month $100. This is the price for low season but it can go up during the high season. However, this price is still cheaper than working in their own office, or coffee shop, which wonโ€™t offer high internet speed and flexible environment.ย Co-working space is not a 100% real estate commitment, but it is a place where people can first prepare their business before theyโ€™re ready to occupy the actual office building for establishing the company. So, co-working space prepares the real estate market to accept actual business, according to Mr. Loven.ย Co-working spaces is not just a shared office, is more of a new community of like minded entrepreneurs and young business people. It offers a great opportunity to learn and grow connections. As the startup environment is not likely to stop any time soon, we can only foresee a further increase of co-working spaces. ย Looking for office for rent in Cambodia? Find it on Realestate.com.kh!
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