Cambodia Extends Incentives to Support Private Sector and Economy
- Cambodia’s government issued its sixth round of incentives on September 30, 2020, to support the economy and the private sector.
- These incentives are mainly extensions of existing ones, such as providing financial support to garment and textile workers, who have been suspended from their employment.
- The government has also extended tax exemptions for the tourism and aviation industries.
- The Asian Development Bank expects the country’s economy to shrink by four percent in 2020.
On September 30, 2020, Cambodia’s government issued its sixth round of incentives aimed at supporting private sector workers and the economy.
The latest incentives are an extension of existing ones, in particular those providing financial support for the country’s garment, textile, and footwear industries. The government has also extended the payment of Minimum Tax for the aviation industry in addition to the payment of aviation fees by airlines.Cambodia’s textile and garment industry plays a key role in the economy, contributing to 80 percent of the country’s total exports and 16 percent of total GDP. The tourism sector contributes to 12 percent of GDP.
More than 400 factories have already suspended operations this year, impacting more than 150,000 workers. The Asian Development Bank expects the economy to shrink by four percent in 2020. In addition to the impact caused by the pandemic, Cambodia-based exports to the EU will now have to pay full tariffs for more than 30 products since the EU withdrew Cambodia’s of ‘Everything but Arms’ (EBA) status in February 2020. This is set to affect one-fifth of the country’s exports, totaling US$1.1 billion.
Support for private sector employees
Private sector employees suspended from their employment will continue to receive financial support of up to US$40 per month until December 2020. Employers must submit an application to the Ministry of Labor and Vocational Training (MLVT) if they intend to suspend their employees’ employment contracts.
Suspended employees are entitled to the following monthly subsidies:
- US$15 for 7-10 days of employment suspension;
- US$30 for 11-20 days of employment suspension; and
- US$40 for 21 days to one month of employment suspension.
Suspended workers in the garment, textile, and footwear industries will receive extended additional financial support of up to US$30, totaling up to US$70 in total per month until December 2020. The subsidies are of the following amounts:
- US$10 for 7-10 days of employment suspension;
- US$20 for 11-20 days of employment suspension; and
- US$30 for 21 days to one month of employment suspension.
Measures to support the aviation industry
To support the aviation industry, airlines operating in Cambodia will be exempt from paying the minimum tax until December 2020. The minimum tax due is equal to one percent of total turnover, except value-added tax (VAT), and is irrespective of whether the taxpayer is in a profit or loss situation.
In addition, the government has suspended the payment of aviation fees until the end of December. After this period, airlines can pay these fees in installments.
Extended support for the tourism industry
Hotels, guesthouses, restaurants, and travel agents (registered with the General Department of Taxation) operating in Phnom Penh, Siem Reap, Preah Sihanouk, Kep, Kampot, Bavet or Poi Pet, will continue to benefit from monthly tax exemptions until December of this year.
Suspension of NSSF payments
The National Security Fund (NSSF) is a government body responsible for providing social security for workers in the private sector. These monthly contributions will be extended until the end of December 2020.