Cambodia is one of the smallest countries in Southeast Asia but gains much attention thanks to the growing tourism industry, the manufacturing sector, and its young urbanizing population.
It’s comparatively easy to do business here and the government allows foreigners to own companies outright. At the same time, visa regulations are generous and foreigners can own as many as 70% of the units in condominium buildings.
With that said, investing in commercial real estate, such as hotels, requires a bit more due diligence and planning.
In this article, we cover the following topics:
- Can foreigners buy hotels in Cambodia?
- Purchasing Hotels Through a Cambodian Company
- Tax Registration
- Hotel Licensing and Approvals
- The Hotel Market in Cambodia
- Best Cities for Hotel Investments in Cambodia
Can foreigners buy hotels in Cambodia?
The same as it goes in most other Southeast Asian countries, with an exception for Singapore and Malaysia, you cannot buy hotels as a foreign individual in Cambodia.
Foreigners can only get hold of strata-titled units which are typically located in condominiums.
From time to time, we also see foreign investors that buy strata-titled commercial units and in projects such as The Peak.
If you’re serious about investing in large-sized hotel projects in Cambodia, setting up a local company is your first choice. Let’s review this in greater detail.
Purchasing Hotels Through a Cambodian Company
As said, if you want to acquire hotels and resorts in Cambodia, your best option is to use a local company as an investment vehicle.
You can set up a limited liability company (LLC) or a private limited company together with local Cambodian citizens.
This is the safest option and the investor can be an individual or a legal entity.
To make the setup as waterproof as possible, foreigners often add three layers of security:
- Different classes of shares
- Minority control document
- Land Security
Different Classes of Shares
As foreigners can only own 49% of the shares in a land-holding company, you can structure the company with 2 different classes of shares. One class will be held by the Cambodian shareholders while the other shares are held by the foreign shareholders.
The Cambodian persons or entities can have lesser rights to nominate directors or transfer shares, for example. Besides, decisions taken by the company can require a two-third majority.
Minority Control Document
In addition to the different classes of shares, you can issue private agreements that add a layer of security. The Cambodian shareholders of the company give you additional rights, including:
- A permanent majority on the board
- Different powers of attorney, or;
- Blank shareholder transfer forms
The final layer is the land security. Here, you register a mortgage on the property, thus, it cannot be transferred without the acceptance of the foreigners.
You have to register with the tax authorities within 15 days after the Ministry of Commerce (MOC) has duly signed and approved the business registration certificate and the principle approval of registration.
The documents are filed with the tax authority where your principal office is located and registered. You can only get the VAT and patent certificate once you have submitted the hotel license and the approval.
For more information, contact a credible lawyer that is well-versed in Cambodian real estate regulations.
Hotel Licensing and Approvals
Before accepting the license application, the Ministry of Tourism (MOT) will require preliminary approvals such as:
- Letter of security, safety, and fire control certification
- Sanitation certificate
- Construction or repair approval
- Approval for the company location
The approval for the company location generally takes the longest. Before you can receive this, the Commune (Sangkat), District (Khan), and local Commerce departments have to sign and stamp the document.
Besides, your corporate documents, lease agreement, and more should be submitted to the same authorities.
The Hotel Market in Cambodia
According to local experts, Cambodia is one of the most interesting destinations for hotel-investments in Southeast Asia at the moment.
With a growing tourism industry and an increased demand for hotel nights among business travelers, Cambodia’s hotel industry will be very interesting in the coming decade.
At the moment, few international brands have set up hotels here, including Rosewood Hotels & Resorts, Park Hyatt, Raffles, Ibis, Marriott, and Le Meridien, for example.
We see increasingly more tourists from countries like China that look for more luxurious travel experiences. Cambodia is no longer a country that only attracts backpackers with restricted budgets.
The Tourism Ministry has claimed that as many as 100,000 extra hotel rooms will be needed in the coming decade. This is thanks to the massive growth we’ve seen in the tourism industry.
Even if the market was impacted hard by the COVID-19 pandemic, around 3.3 million tourists visited the country during the first half of 2019. Worth mentioning is that around a third of the tourists came from China.
China’s Importance to Cambodia’s Hotel Industry
The Chinese remain important to local tourism, a sector that has grown by double digits year on year. The Tourism Ministry estimates that 10 million tourists will visit the country annually by 2025, which is not a modest number for a frontier market.
In addition to China, many travelers come from Vietnam, Laos, Thailand, South Korea, Japan, Singapore, Malaysia, Europe, and the United States.
Development in the Kingdom’s tourism industry has largely been attributed to economic progress, more flights, and the development of new and existing tourist attractions.
Best Cities for Hotel Investments in Cambodia
Cambodia is a comparably small country with almost 17 million people. As such, business activities are focused on a few cities.
Below I have listed the most interesting.
With a bit more than 1.5 million people, Phnom Penh serves as the capital and it receives the most business and leisure travelers.
Here, you’ll find most of the renowned hotel brands mentioned above, including Le Meridien, Park Hyatt, Marriott, and more.
Most of the tourists who visit Phnom Penh come from China and engage in local business activities, visit casinos, and other leisure activities.
Due to many new hotels in the pipeline, there are growing concerns about how these will manage to enter the current market. Ten new branded hotels are planned until 2022.
Phnom Penh still mainly attracts business travelers, the future goal will be to attract more MICE (Meetings, incentives, conferencing, exhibitions) and tourists.
Sihanoukville has transformed from being a laidback and somewhat sleepy backpacker-destination to becoming unrecognizable.
We mainly see large investments from Chinese firms, in late 2019, the Council for the Development Cambodia (CDC) reported that two Chinese companies will invest over USD 1.5 billion in commercial centers and hotel developments.
The same as it goes with the capital, we see an increased demand for luxury hotel nights in Sihanoukville. The Association of Travel Agents in Cambodia reported that the demand for 4-star hotels and more will continue to increase.
With more 5-star hotels, we will hopefully see a greater interest among high-income tourists and investors.
Interestingly, Phnom Penh will be surpassed by Sihanoukville in terms of available hotel rooms by 2021. It’s expected that the city will have as many as 13,000 hotel rooms by that year.
Siem Reap was the most visited city in Cambodia until recently. Every year, tourists from all over the world go on a pilgrim to visit the biggest religious monument in the world, Angkor Wat.
With that said, we don’t see as many luxury establishments here compared to Phnom Penh and Sihanoukville. The market is mainly dominated by boutique hotels in the mid-tier segment.
As more Chinese tourists visit Cambodia, we have started to see an increased demand for more luxurious travel experiences here too.
Compared to Phnom Penh, the hotel market is more competitive than the capital’s and additional supply is in the pipeline. The upcoming demand will primarily be in the high-end (58%) but also the mid-tier (42%) segment.
Below I have included some commonly asked questions and our replies.
What are the biggest commercial property agents in Cambodia?
Cambodia is the home to both foreign-owned and local real estate agencies. Most of the agencies are located in Phnom Penh. Examples of real estate agencies available include CBRE Cambodia, IPS, Cambodia Properties Limited (CPL), Knight Frank, and Century 21 Cambodia.
How much do I need to pay in property taxes?
- Transfer tax: 4% (paid when buying the property)
- Property tax: 0.1% (paid annually)
- Rental income tax: 14% (paid annually)
- Capital gains tax: 20% (paid by corporations (when selling property)