Legal and Tax Updates

Issue: No. 003P/24 – 24 January 2024

On 26 September 2023, the Non-Banking Financial Services Authority (the “FSA”) issued Prakas No. 047 on the Rules and Procedures for Granting Real Estate Development Business License/Permit, which aims to determine the rules and procedures for granting real estate development business license/permit to ensure the effectiveness of management of real estate development business in Cambodia (the “Prakas 047”).

This Prakas contains of 8 chapters and 66 articles which plays an important role in clarifying certain points that were mentioned in Sub-Decree No. 50 dated 02 March 2023 on the Management of Real Estate Development Business (the “Sub-Decree 50”) including but limited to the competent authority, conditions to apply for the license/permit, the amendment, renewal and suspension of license/permit, and the penalties.

Competent Authority

Similar to Sub-Decree 50, this Prakas 047 provides the competent in managing and controlling the real estate development business to Real Estate Business and Pawnshop Regulator (the “RPR”) of the Non-Banking Financial Services Authority (the “FSA”) and Provincial/Municipal Department of Economy and Finance (the “PDEF”).

Conditions to apply for the license/permit

Any developer who wishes to operate residential or co-owned building development business of more than 30 houses, villas, or units, or land lot development business of more than 10.000 square meters shall apply for a license from RPR. And, for any developer who wishes to operate residential or co-owned building development business from 03 to 30 houses, villas, or units or a development of land lot under 10.000 square meters shall apply for a permit from PDEF. In order to apply for such license/permit, the developer shall fulfill the conditions as follows:

• Residential or Co-owned Building Development Business:
• Having a minimum capital of 20% of construction cost for license Type 2 and 100% of construction cost for license Type 1;
• Making business guarantee deposit at least 2% of total construction cost or construction cost in each phase;
• Opening a real estate development account at any commercial bank in Cambodia;
• Preparing project development business plan; and
• Other conditions determined by the RPR.
• Land Lot Development Business:
• Having a minimum capital of 40% of the total infrastructure cost;
• Making business guarantee deposit at least 5% of total​ value of the investment land or value of the investment land in each phase;
• Opening a real estate development account at any commercial bank in Cambodia;
• Preparing project development business plan; and
• Other conditions determined by the RPR.

The renewal or the modification of license/permit

The licensed or permitted developer shall request to RPR or PDER to renew its license or permit 2 weeks before the expiration date. The renewal for license or permit will be granted for 1 year and can be renewed until the completion of the project.

Plus, under the provision of this Prakas 047, the licensed or permitted developer shall request for a prior approval from RPR or PDEF if there is any modification on the company name, company address, shareholder, project name, member of board of director, license/permit representative, residential or co-owned building type, or land lot size.

The suspension of license/permit

The licensed or permitted developer may request to RPR or PDEF to suspend or cease the business activities by fulfilling the requirements as determined in Prakas 047 and shall return the original license or permit to RPR and PDER.

The RPR or PDEF is also entitle to suspend the license or permit if the business activities are suspended or revoke the license or permit if the business activities are ceased.

Penalties

Any developer who violate the provisions of this Prakas 047 is subject to various administrative penalties such as written notice or warning, restricting certain activities, temporary suspension of the license or permit, revocation of license or permit or principal approval, freezing the real estate development account, freezing business guarantee deposit, public announcement of the violation of the provisions of this Prakas No. 047, fines, or taking other appropriate measures in accordance to applicable law.

Beside the abovementioned points, this Prakas 047 also set out the amount of license/permit fee, administrative fee as well as the contribution in which the developer shall pay to RPR.

Despite the issuance of Prakas 047, Prakas No. 089 dated 20 January 2020 on the Management of Real Estate Development Business (the “Prakas 089”) remains applicable. The provision of Prakas 089 which are contrary to this Prakas 047 shall be abrogate.

Disclaimer

The article is merely for general information purposes. It does not constitute a legal advice on the subject matter. If you have any questions or need any assistance, please feel free to contact us:

	NOEUM Sokvichhai, Partner, Managing Director sokvichhai.noeum@sithisak-lawoffice.com +855 12 826 785	Mr. Sokvichhai has more than 8 years of experiences in labour, corporate, commercial and investment advisory in Cambodia. He actively advices and assists various businesses in commercial, tax, and labour registration, business licensing, products registration & distribution, business recapitalization & restructuring, and mergers & acquisitions transaction. He also has particular experiences in advising collective investment fund and trust business, initial public offering, bond issuance, investment incentives & qualified investment project, and labour & employment related issues. Sokvichhai also assists major business in preparing various complex commercial agreements.
	Dr. CHHAK Limchheang, Partner, Head of Real Estate and Construction Practice Group limchheang.chhak@sithisak-lawoffice.com +855 89 813 160	He has several years of professional experiences in real estate-related transaction and construction sector in Cambodia. He has advised local and foreign clients on acquisition and disposal of residential, industrial and commercial properties, on commercial lease, factory perpetual lease, real estate joint venture development and FIDIC agreements. Recently, he led counsel to advise on both real estate and tax issues of real estate development project with an approximate investment portfolio of USD 40 million in Kampot Province. He is currently leading a legal counsel to advise a major domestic company in their joint venture property development with an investment portfolio nearly USD 200 million in Phnom Penh.

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