If you have plans to buy property in Cambodia, there are a few ways to do this.
First of all, some questions te be answered
Can foreigners own real estate in Cambodia?
Yes. Since the passing of legislation in April 2010, the foreign ownership property law allows foreigners to own property in Cambodia, however with certain restrictions.
Foreigners are only allow to own properties on the 1st floor or higher to a maximum of 70% of any one apartment building, provided that the building has obtained a ‘strata title’, which generally applies to new condominiums buildings.
Foreigners are not allow to own properties on the ground floor of a building as owning land outright remains prohibited under the foreign ownership property law.
Hence, foreigners are 100% eligible to own a freehold condominium in Cambodia.
But if your intention is to invest in real property such as buying ground floor apartments or land in Cambodia, please read the information below.
if your intention is to invest in real property such as buying grounded apartments or buying land in Cambodia, the following options will show you how it is possible to buy almost anything in Cambodia.
Buying Real Property in Cambodia
Under Cambodian Land Law, foreign nationals cannot hold a 100% stake in real property within the Kingdom (except for this case mentioned).
However, legal mechanisms and documentation may allow foreigners to fully control the purchase, sale and use of real property in which they have invested, and benefit fully from any profits they make.
There are basically 5 Options for buying real estate.
Option 1: Forming a Company with a Cambodian Citizen
The safest method by which foreign nationals can purchase real property within Cambodia is to form a limited company in partnership with a Cambodian citizen. Any real property purchased for investment is then registered in the name of the company. The company must have a minimum 51% Cambodian shareholding.
However, careful allocation of shares, and careful drafting of the rights attached to share certificates can ensure the foreigner’s full control of the company and its assets.
Additional mortgage, security and Power of Attorney documents can also be created to accompany ownership documentation. Following this procedure ensures security for the foreigner’s investment.
Under this Option, the foreigner is expected to pay 100% of the purchase cost of real property plus any construction costs. If the real property is later sold, 100% of the sale price goes directly to the foreigner.
This includes any profit accrued as a result of the property increasing in value. This issue should be detailed carefully in any company and/or sales documentation.
Of course the choice of your partners is of prime importance.
Option 2: Purchase plus long-term Rental
This method allows foreign nationals to purchase real property and register the Title Deed in the name of a Cambodian citizen.
The foreigner and the Cambodian then enter into a long-term rental agreement by which the Cambodian citizen leases the property back to the foreigner. Lease periods can last up to 99 years.
The problem with this method, and why it has few takers, is the psychological attachment to freehold ‘ownership’. Most foreign investors expect full ‘ownership’ of something they buy. The principal of renting back property that has already been purchased is an anathema to most foreigners.
However, correct drafting of the terms of the property holding and lease arrangements make this a reasonably secure method of controlling real property in Cambodia. Under this method, the foreigner may sell the property at any time and keep 100% of the revenue from the sale.
The Cambodian citizen is not permitted to disagree with or obstruct the sale. The foreigner retains the original copy of the new Title Deed as a security precaution: sale of real property is impossible without the original copy of the Title Deed.
Though the foreigner can sell the property at any time, the Cambodian citizen’s signature or thumbprint is generally required before any sale can take place. A good working relationship between both parties is therefore very important.
Option 3: Registering Real Property with a Cambodian Citizen
This method is very similar to Option 2 but requires 100% trust in the Cambodian citizen.
Foreign nationals have rights, under the Kingdom’s Statutes, to choose a Cambodian in whose name their Title Deed is registered. That is, a foreign national can purchase property and register the purchased property in the name of the Cambodian citizen.
Once the Title Deed is transferred to the Cambodian citizen, the foreigner retains possession of the new Title Deed. This is a security precaution that protects the foreigner’s interests by preventing the Cambodian citizen selling the land or property: sales are impossible without the Title Deed. Transferring the Cambodian’s rights to the foreigner via a Mortgage or Lease Agreement provides additional security for the foreigner’s investment.
Copies of the Title Deed and any Mortgage or Lease Agreements must be registered with the Department of Provincial Land Management, Urban Planning and Construction, as well as the appropriate District and central government departments that handle land registry. Most importantly, a copy of the Land Title and any Mortgage or Lease Agreements must be lodged with the Cadastral Land Registry Office.
The Cambodian citizen in whose name the Title is registered does not need to be resident in Cambodia. For example, the Title can be registered with a Cambodian citizen living in the USA or Australia. The Cambodian citizen must be able to prove Cambodian nationality.
Option 4: Marriage to a Cambodian National
Foreign buyers who are married to a Cambodian national can register real property using the name of their wife/husband on the Title Deed. It is also possible for a foreign national married to a Cambodian citizen and resident in the country for a long period to apply for Cambodian citizenship.
In the event of citizenship being granted, Cambodian Law holds that land can be registered in the names of both parties. Neither partner can subsequently sell the land or property without mutual agreement.
In the event of divorce or separation, division of the land or property is dependent on the conditions under which divorce or separation takes place, and the decision of any court ruling or arbitration relating to the divorce. It is often source of conflict between the divorcees.
Option 5: Acquisition of Honorary Cambodian Citizenship
A foreigner may be granted honorary Cambodian citizenship if he or she donates a significant sum of money to the Royal Government of Cambodia for the purposes of benefiting the people of Cambodia.
Foreigners who have made a special impact or rendered exceptional help to the Kingdom may also be granted this honor in recognition of their expertise or altruism.
One consequence of being granted honorary citizenship is that it becomes possible for a foreign national to acquire a 100% right of ownership over real property purchased within the Kingdom.
This arrangement is recognized by the Ministry of Land Management, Urban Planning and Construction for the Kingdom of Cambodia, and by the Royal Government.
Honorary citizenship is recognized by the Royal Government of Cambodia as a legitimate means of purchasing real property within the Kingdom but it does not affect the foreigner’s original nationality or citizenship in any way.
What are the taxes involve to own a property in Cambodia?
Below is a list of taxes and fees that the owner or landlord should take note of when planning to purchase or sell real estate in Cambodia.
- Rental Tax : 10% (locals) or 14% (foreigners) per annum on gross rent
- Property Tax : 0.1% per annum (value determined by Immovable Property Assessment Committee)
- Transfer Tax : 4% of property value levied on all ‘hard title’ property transfers (transfer of title)
- VAT : 10% VAT is applied on sales of buildings
- Capital Gain Tax : Not implemented for individuals at the moment.If you would like to know more, please don’t hesitate to contact us.