Ministry of Commerce and registration
Ministry of Commerce and registration
The Ministry of Commerce is the governmental organization that regulates all commercial activities, including all economic and production activities. One of its roles is to provide services to support business development in Cambodia. So it’s naturally the first institution you have to deal with for your business registration.
There are 9 different departments at the Ministry of Commerce :
What is registration?
On this website, you will find the term “registration” used a lot, but what does it mean? When you “register” your business to the Ministry of Commerce, you will be part of the government’s list of companies in Cambodia. You trade your “informal” business status to a “formal” status. These two expressions are widely used, “formal” means that you are declared, in agreement with the law, and recognized as a business by the institutions of Cambodia.
Practically speaking, you will have to provide some information about your business so as to get a certificate of incorporation. This is the official document which proves that you are now a formal business.
Being registered includes some rights but also some duties. One of the main reasons you’re required to register a business is to be part of the tax system. Paying tax as a registered business is a requirement of all countries, as this is how countries generate income to finance public services, such as hospitals, infrastructure (roads, railways), schools etc. In return for paying taxes, the business will be able to access larger local markets, international markets, and also be able to forge partnerships with other businesses.
The Ministry of Commerce is the governmental organization that regulates all commercial activities, including all economic and production activities. One of its roles is to provide services to support business development in Cambodia. So it’s naturally the first institution you have to deal with for your business registration.
There are 9 different departments at the Ministry of Commerce :
- General Inspectorate
- Provincial Departments of Commerce
- Department of Internal Audit
- General department of Administration and Finance
- General Department of International Trade
- General Department of Trade Services
- General Department of Domestic Trade
- General Department of Trade Promotion
- General Department of CamControl
- The Business Registration Department is under the general department of trade services. This is where you need to go to register your business.
- For any physically payment you will have to make related to your business registration, you should go to the General Department of Administration and Finance, where you can find the Department of Accounting and Finance (second building ground floor of the Ministry of Commerce).
What is registration?
On this website, you will find the term “registration” used a lot, but what does it mean? When you “register” your business to the Ministry of Commerce, you will be part of the government’s list of companies in Cambodia. You trade your “informal” business status to a “formal” status. These two expressions are widely used, “formal” means that you are declared, in agreement with the law, and recognized as a business by the institutions of Cambodia.
Practically speaking, you will have to provide some information about your business so as to get a certificate of incorporation. This is the official document which proves that you are now a formal business.
Being registered includes some rights but also some duties. One of the main reasons you’re required to register a business is to be part of the tax system. Paying tax as a registered business is a requirement of all countries, as this is how countries generate income to finance public services, such as hospitals, infrastructure (roads, railways), schools etc. In return for paying taxes, the business will be able to access larger local markets, international markets, and also be able to forge partnerships with other businesses.
Why should I register?
The rate of unregistered businesses is very high in Cambodia. The
Cambodian government has been addressing this issue in recent years and
working to make the registration process easier and cheaper. The
primary reason why you should register is to eliminate the risk of fees
and penalties that come with operating an unregistered business. These fees and penalties vary from fines to the closing down of your business.
There are also some big advantages about registration:
There are also some big advantages about registration:
- Improved access to finance – as a registered business, banks, investors will be more likely to provide more financing to your business.
- Access to larger markets – as a registered business you will be more likely to be able to access more customers, create partnerships with other organisations and expand your business. Example – some businesses will only sign contracts with registered businesses.
- Legal Protection – if you register as a company you will be personally protected, and will not be held personally accountable for the business’ liabilities.
- Improved ability to sell the business – if and when you decide you want to sell your business, having a registered business will make this process much easier and will increase the amount you can sell it for.
- Name and Brand protection – as a registered business your name and brand will be protected.
- Having a business bank account – this will make it easier to separate your personal and business finances
Cambodia has a unique private business sector characterised by a lot
of very small businesses, from street food to bike repair. From a legal
aspect, the government does not necessarily require very small
businesses to register as they understand that it would be impractical
due to the requirements needed for a registered business. For instance,
you need to have a proper accounting system to report your income to the
Department of Tax, and many small businesses do not have the adequate
knowledge or resources to do this. However, you can incorporate your
business at anytime whatever its size might be.
Many entrepreneurs are waiting for their businesses to be sustainable enough or large enough before registering. However, under the real tax regime this may not be necessary. Although, there are fees for registration, if you are a very small business you are not required to pay income tax. If your business revenue is less than $62,500 per year, then your business will not have to pay tax on profit. This is a very strong incentive for businesses to register as it means that as a small business you can enjoy the benefits of registration with reduced tax liabilities. If you plan on growing your business, then we would recommend registering sooner rather than later, as this can lead to faster growth and access to larger markets.
The business registration process in Cambodia also allows for different sized businesses, which means that not only can you register a limited liability company, you can also register as a sole proprietorship or a partnership. As a sole proprietorship or partnership, registration fees and taxes are lower. Note also that currently there is a tax exemption (tax on profit) in 2017 and 2018 for SMEs (small -medium sized enterprises) registration.
On the contrary, if you make enough profit to be taxable and you are not registered, you are taking a significant risk. At any moment, anyone can report your situation to the Cambodian authorities. This could be an angry client or a supplier you are not able to pay yet which could result in court proceedings, fees and penalties or potentially result in the closure of your business. Registering with Cambodian authorities would avoid these kinds of problems.
In the end, whether to register or not is a decision you have to make for yourself. You have to consider the benefits and the risks. However, if you want to grow your business, access larger markets and have some legal protection then it is best to register your business.
Many entrepreneurs are waiting for their businesses to be sustainable enough or large enough before registering. However, under the real tax regime this may not be necessary. Although, there are fees for registration, if you are a very small business you are not required to pay income tax. If your business revenue is less than $62,500 per year, then your business will not have to pay tax on profit. This is a very strong incentive for businesses to register as it means that as a small business you can enjoy the benefits of registration with reduced tax liabilities. If you plan on growing your business, then we would recommend registering sooner rather than later, as this can lead to faster growth and access to larger markets.
The business registration process in Cambodia also allows for different sized businesses, which means that not only can you register a limited liability company, you can also register as a sole proprietorship or a partnership. As a sole proprietorship or partnership, registration fees and taxes are lower. Note also that currently there is a tax exemption (tax on profit) in 2017 and 2018 for SMEs (small -medium sized enterprises) registration.
On the contrary, if you make enough profit to be taxable and you are not registered, you are taking a significant risk. At any moment, anyone can report your situation to the Cambodian authorities. This could be an angry client or a supplier you are not able to pay yet which could result in court proceedings, fees and penalties or potentially result in the closure of your business. Registering with Cambodian authorities would avoid these kinds of problems.
In the end, whether to register or not is a decision you have to make for yourself. You have to consider the benefits and the risks. However, if you want to grow your business, access larger markets and have some legal protection then it is best to register your business.
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