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Andi Refandi
Andi serves as a Senior Account Executive on Emerhub’s global team.
For many international companies, a Branch Office is a preferred choice for a quick market entry in Cambodia. It is an extension of your home company rather than a separate legal entity. Furthermore, it is easy to incorporate and can use their parent company’s established reputation to market products or services.
But because a branch office is merely an extension of an organization, the parent company remains liable if the branch office incurs debts or legal disputes. So, if you were to start a company in Cambodia as a foreigner, what are the reasons you should consider a branch office? What are the advantages and disadvantages?
In this article, we will cover what you need to know about how to start a branch office in Cambodia. We will compare this business structure to a subsidiary and define its pros and cons. We will also cover what are the requirements and the incorporation process for starting a branch office in Cambodia.
Branch Office vs Subsidiary
Two of the most common ways a foreign investor can start a legal business in Cambodia is through a Branch Office or a Subsidiary. While they serve similar operational purposes, the two structures can differ in legal and tax implications.
What is a Branch Office?
A branch office is a type of legal entity considered as an “arm” of a parent company. It does not possess a separate legal personality. For example, if a branch office in Cambodia signs a contract, the parent company is the party that’s legally responsible for all obligations.
Branch offices can engage in revenue-generating activities like buying/selling goods, providing services, manufacturing, processing, and construction. It is also easier to establish, requiring no minimum capital requirements, and allows you to hire foreign staff. Branch offices also receive the same tax treatment as Cambodian limited companies but cannot participate in Qualified Investment Projects (QIPs) eligible for special incentives.
What is a Subsidiary?
A subsidiary is a separate Cambodian legal entity, even if 100% of the shares are owned by a foreign organization. It possesses independent legal personality, distinct assets and limited liability for the parent. This means that the parent company’s risk is confined to its invested capital.
Subsidiaries can conduct most business activities allowed to local firms (e.g., sales, services), except those restricted to foreigners like land ownership.
Unlike a branch office, a subsidiary offers better protection and autonomy but requires more setup steps like share capital and full incorporation. Subsidiaries are also eligible for Qualified Investment Project (QIP) incentives.
A Summary of Branch Office vs Subsidiary in Cambodia
| Feature | Branch Office | Subsidiary (Private Limited Co.) |
|---|---|---|
| Legal Status | Extension of parent company | Separate legal entity |
| Liability | Parent company is 100% liable | Limited to the subsidiary’s assets |
| Setup Timeline | Fast (approx. 3-4 weeks) | Moderate (4-8 weeks) |
| Incentives (QIP) | Generally ineligible for tax holidays | Eligible for significant tax incentives |
| Ownership | 100% Parent owned | 100% Foreign or Local ownership |
| Governance | Managed by Branch Manager | Board of Directors |
| Ideal for | Professional services, short-term projects, trading and distribution | Manufacturing and garment industry, high-risk operations, real estate and hospitality |
A Branch Office is ideal for companies who want to establish a company as quickly as possible. It’s ideal for consulting firms or agencies who can leverage their parent company’s existing reputation. It’s also ideal for short-term projects and for testing the local market before transitioning into a subsidiary.
On the other hand, subsidiaries are for companies who want to establish medium to large factories or high-risk operations in Cambodia. They can establish an entity within the country’s SEZs and take advantage of tax incentives from QIP status.
During the initial phases of our company incorporation services, Emerhub can provide you advice on what kind of company structure is appropriate for your sector and business plan.
Requirements for Starting a Branch Office in Cambodia
To establish a branch office in Cambodia, you need to submit all the required documents to the Ministry of Commerce (MoC) via the Cambodia Data Exchange (CamDX) online platform. You need to compile incorporation documents from your parent company as well as information about your branch manager and physical office.
Documents From the Parent Company
Since the branch is an extension of an existing company, the MOC needs to see that the parent company is in good legal standing and properly registered in its home country. The parent company needs to be active, has filed all necessary annual returns, and isn’t currently facing liquidation or being struck off. You will need:
- The Articles of Association (Charter) of the parent company.
- The Certificate of Incorporation of the parent company.
- A “Certificate of Good Standing” (if available in your jurisdiction).
Critical Note: These documents must be notarized and then legalized by the Cambodian Embassy in your home country. Cambodia is not a party to the Hague Apostille Convention, so a standard “Apostille” stamp is usually not enough.
The Board Resolution and Power of Attorney
You must prove that the parent company’s directors have officially authorized the expansion. This requires a formal Board Resolution stating the intent to open a branch in Cambodia and appointing a specific person as the “Branch Manager.”
The branch manager must have the following:
- Passport Copy: A clear, scanned copy.
- Photographs: Passport-sized (4×6 cm) with a white background.
- Visa & Work Permit: Copy of the E-class (Business) visa. If the manager is a foreigner, they must apply for a Cambodian work permit immediately upon registration.
Accompanying this is the Power of Attorney (POA). This document gives the Branch Manager the legal right to sign documents, open bank accounts, and deal with the GDT on behalf of the parent company.
Local Physical Address
Under the Law on Commercial Enterprises, a physical address in Cambodia is needed for all business registrations (including Branch Offices). It serves as the official location for all legal notices and operations. Residential addresses or P.O. boxes are not accepted.
- Lease Agreement: A signed contract for a physical office space (virtual offices are generally not accepted for tax registration).
- Property Proof: A copy of the owner’s land title or latest property tax receipt.
- Location Data: Photos of the office exterior and a precise map of the location.
The Branch Office Registration Process in Cambodia
Cambodia has modernized its business registration through the CamDx portal. This “Single Window” system allows you to register with the Ministry of Commerce, the Tax Department, and the Ministry of Labour simultaneously.
Phase 1: MOC Business Registration
To start the incorporation process, you need to register your Branch Office with the Ministry of Commerce. You need to choose a business name that matches your parent company (usually “Name of Parent Company – Cambodia Branch”). The name must be in both Khmer and English. The MOC will review your parent company’s background and your proposed activities. Once approved, you’ll receive your Business Registration Certificate.
Phase 2: Tax Registration with the GDT
Within 15 days of receiving your MOC certificate, you must register with the General Department of Taxation (GDT). This step requires a physical presence from the branch manager and get their photos taken and fingerprints scanned.
This step is often the most time-consuming because it requires the “Physical Presence” of the branch manager. They must go to the tax office in person to have their photos taken and fingerprints scanned. During this phase, you must do the following:
- VAT & Patent Tax: You will be registered for Value Added Tax (VAT) and must pay the “Patent Tax.”
- Updated Patent Tax Rates: This is an annual business operation tax based on your revenue. Most foreign branches fall into the “Large” or “Medium” taxpayer category:
- Medium Taxpayers: approx. $300 (1,200,000 KHR).
- Large Taxpayers: $750 to $1,250 (3,000,000 to 5,000,000 KHR) depending on turnover.
Phase 3: Ministry of Labour and Vocational Training (MLVT)
Part of the incorporation process is to register your business with the MLVT. Even if your branch office only employs one person, you must do the following:
- Declaration of Opening: Notifies the MLVT that you are active.
- NSSF Registration: The National Social Security Fund is mandatory. You must contribute for health and occupational risk insurance for all employees.
Business registration timeline: The estimated timeline to incorporate a Branch Office in Cambodia within 1-4 weeks. This can be longer depending on the complexity of your organization and the CamDx work load.
Emerhub can help you manage your business registration in Cambodia. We can help cross-reference your business name to ensure it’s unique and file the needed registrations on your behalf.
Contact us using the form below for a free consultation!
Frequently Asked Questions (FAQs) About Starting a Branch Office in Cambodia
A branch office can be 100% foreign-owned. However, remember that branches cannot own land; land ownership requires a company with at least 51% Cambodian ownership.
While the manager can be a foreigner, they must physically visit the GDT office in Phnom Penh for biometrics during the registration. For ongoing compliance, you must also appoint a resident Company Secretary who stays in Cambodia permanently.
Banks require the MOC Certificate and the Tax Patent to open a fully functional corporate account. You should budget 1-2 weeks for the bank’s internal KYC process once your registration is complete.
Even with zero revenue, a branch must file monthly returns for VAT (10%), Prepayment of Income Tax (1%), and Salary Tax. You must also file an Annual Tax on Income (ToI) return by March 31st of the following year.
The GDT often conducts physical inspections or requires detailed photographic evidence of the office. Virtual offices are often rejected during the tax registration phase, so a physical lease is necessary.
Missing the deadline for registering with the GDT after MOC approval can result in a fine of approximately $500 (2,000,000 KHR) and may delay your ability to issue valid VAT invoices to clients.
