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One of the most misunderstood fallacies amongst ex-pats living in Cambodia is the assumption that all Non-Government Organisation (NGO) employees are automatically granted a tax reprieve. Although there are some situations where NGO employees are exempt from Tax on Salary, this requires certain criteria to be met and an application to be processed and approved before NGO employees cease being liable for the tax.

Income Tax

One source of the misunderstanding stems from the fact that NGOs are usually exempt from income tax under Article 9 of the Law on Taxation, which deems organizations “organized and operated exclusively for religious, charitable, scientific, literary or educational purposes” exempt from income tax, provided that no part of the income is used for private benefits. If an NGO is granted income tax exemption under this heading, this exemption does not automatically flow on to employees. This was specifically confirmed in 1997 by Notice No 2672.

Diplomatic and Foreign Government Employees

Another basis for confusion arises from Article 43 of the Law on Taxation, which provides that “diplomatic and foreign officials” are exempt from paying tax on salary. The law goes on to detail that this is limited to those here representing their governments in official capacities or employees in Cambodia on behalf of official international organizations recognized under the Vienna Convention, such as the United Nations or the Red Cross.

The exemption

In 2001, the government considered the case for a salary exemption for NGO workers and issued Notice No 64 on Tax on Salary of NGO employees. The notice clarified the existing law and said that a salary tax exemption would be considered in relation to the following NGOs:

–          Those who implement projects on behalf of a foreign government (subject to agreement between both governments);

–          NGOs recognized by the United Nations;

–          NGOs that are self-sufficient, comply with Cambodian law and implement development and humanitarian projects in Cambodia;

–          NGOs that were granted a tax exemption in 1979;

–          NGOs with a small scope/budget of less than USD$50,000 a year; and

–          Employees who already pay salary tax in their own country.

Once these criteria are met, then the NGO in question must conclude a Memorandum of Understanding with the pertinent Ministry.

Such employees will not automatically receive an exemption, but must apply to the Ministry of Foreign Affairs and International Cooperation (MFAIC) or the Ministry of Economics and Finance (MEF), who will decide whether or not to grant the exemption.

Getting an exemption can be a complex and drawn out procedure. It is wise to assume nothing until the final stage, when a decision has been made by the MEF.

For more information, refer to our publication Labor Law Guide for NGOs

A recent Wall Street Journal article showcases the newly-built home of Belgian photographer John Vink and also demonstrates how complicated property ownership and building construction can be in the Kingdom of Cambodia. In general, foreigners are not allowed to own land in Cambodia, but may hold a minority (49 percent) stake, with a Cambodian national holding the remaining majority stake, in a company that holds ownership rights to the land. Cf. Article 20 of the New Land Law (2001).  The article does not specifically mention whether Mr. Vink pursued this option to preserve some of his ownership rights, but it is a fairly common way for foreign landholders to do so.

Mr. Vink bought the land for his home near Kep from a local religious order that is moving to a new location. Usually, such as transfer would be prohibited by law, as monastery lands may not be sold and may only be rented for religious purposes according to Article 20 of the New Land Law (2001). Perhaps because the order is moving to a new location, the land has been reclassified and is therefore alienable. There are several categories of land and differing rights of ownership for each in Cambodia. Again, the article does not indicate why a variance was permitted in this case, but it’s always a good idea to check out which legal category the land you might be interested in falls under before beginning negotiations.

Also illustrated by this piece is the often confusing regulatory process for construction in the Kingdom, which can endanger projects at almost any stage of completion. From the article:

Building on a hilltop is unusual in Cambodia because of cultural customs and costs, says Mr. Vink, so he faced some challenges in ensuring that he had an experienced contractor and proper permits. At one point a month after construction began, he thought all the permits were in order, until an inspector from the local environmental protection office showed up and ordered a halt to the project. But $300 in “fees” later—a sizeable sum in Cambodia—the necessary permits were obtained and the project moved forward, Mr. Vink says.

Congratulations to Mr. Vink and his wife for their lovely new home, but let their experience be an illustration of the type of pitfalls that anyone can face navigating the legal and regulatory system here in the Kingdom of Wonder.

See here for related BNG reports.


The work of a handful of attorneys at BNG Legal, this blog's mission is to keep the world up-to-date on legal issues in the Kingdom of Cambodia.

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