5 March 2020
CAMBODIA: Government Looks to Tackle Coronavirus and Loss of Preferential EU Trade Terms
The government has announced a number of measures aimed at supporting enterprises in view of the ongoing coronavirus outbreak, as well as the 12 August partial withdrawal of duty-free export access to the European Union (EU). As a direct consequence of the coronavirus outbreak, the country is expected to record a 60% decline in tourist arrivals for February, with the number of visitors from China dropping by as much as 90%. In addition, the country’s garment sector, which employs the majority of the its workforce, has suffered from a severe shortage of raw materials, many of which are imported from China. The challenges facing the garment sector are expected to be only exacerbated should the relevant EU preferential tariffs be withdrawn as planned.
Among the mitigating measures announced by the country’s Prime Minister is a move to offer corporate income tax (CIT) exemptions (ranging from six months to a year) to affected companies. Furthermore, any enterprise obliged to suspend operations due to a lack of raw materials or on account of higher import tariffs will be exempt from making employer contributions to the country’s National Social Security Fund. In addition, they will be permitted to pay only 40% of existing workers’ salaries with the state contributing a further 20%. Any workers laid off by struggling companies will also be entitled to participate in a four-month state-sponsored re-skilling programme, during the course of which they will receive a sum equal to about 60% of the country’s existing US$190 minimum wage.
With regard to the tourism sector, all hotels and guest houses in the Siem Reap province – home to the Angkor Archaeological Park, the country’s leading visitor attraction and a UNESCO World Heritage Site – are to be exempt from CIT for four months. In other measures, the 4% stamp duty on the sale/transfer of real estate will be waived until January 2021 in the case of all residential property valued at less than US$70,000. The prime minister also called upon China, one of the country’s most significant trading partners, to accelerate the negotiations for a Free Trade Agreement between the two parties as a means of mitigating any possible economic downturn.