Its not secret that foreigners can own high rise properties via strata in title in Cambodia. But what is not widely known is that foreigners have additional options to legally own land in the kingdom.
In order to clarify any doubts, here is a simple guide on what are the options for those foreigners who wish to invest in real estate in Cambodia.
Invest by forming a company with a Cambodian citizen.
One way to go is by forming a limited liability company or a private limited company with a Cambodian citizen/s. By law foreigners aren’t allowed to buy land directly, however when a Cambodian citizen owns 51% of the company, that company is then entitled to purchase land under its name and can do anything with the land within the legal bounds of the law in Cambodia.
For those concerned about being a minority stake, careful allocation of shares and an appropriate draft of the rights that are attatched to the share certificates should guarantee full control for the foreigner involved.
Foreigners are expected to pay 100% of real property purchase costs and construction costs. If a decision is made to sell the property 100% of what it was sold for goes to the foreigner. It is advised to detail this on the company and sales documentation.
Invest in land in Cambodia through a long-term lease.
Purchasing land isn’t exactly the same as leading it but it’s easier and less expensive than setting up a company to buy land. This method allows foreigners to “purchase” real property if the registered title deed remains under a Cambodian citizens name. Both parties formally enter a long-term rental agreement; land leases upto 50 years are usually common for foreigners – however cases of 75 and 99 years are not unheard of.
Pros and Cons
The only downside to this method is that you still do not hold full ownership over the land – meaning that some uncertainty remains over security of the asset and, if you wish to sell the property, you will need to first get the thumbprint and signature of the Cambodian national owner.
Fortunately, accurate drafting of property holding and lease arrangement terms help make this a secure means of gaining control over the property. Foreigners can also hold on to the original copy of the title deed as an additional safety measure – Since the Cambodian national would not be able to sell the property without it. A long-term lease provides lessors the rights to develop the land they’re leasing, since they will be able to obtain construction permission under their own names. This also entails the foreigners are able to sell the property and keep all of the sales revenue.
Invest in Cambodian land via a Cambodian citizen (nominee)
This is otherwise known as the nominee structure. This structure lets foreign investors enter a trust agreement with the land holder. The land is put up for mortgage after that. It is leased out to the foreign investor involved. You need to secure 4 documents first. These are the mortgage agreement, the lease agreement, the loan agreement, and the security agreement.
Documents required for nominee structure.
The mortgage agreement is registered at the Sangkat. It transforms the buyer into a bank. This prevents further activity by the Cambodian national without the permission of the foreign national. Further activities would require approval from the foreign national.
The loan agreement is a paper loan that’s made between the nominee and the foreign national. It accrues interest over time. The lease agreement gives the right to legally reside in the property. The security agreement lays out the necessary limitations and obligations of each party with regards to the property. Foreigners are allowed to own any type of property through this structure.
Note that this is in violation of the constitutional prohibition on the direct ownership of property by foreigners. It is a loophole that the government is trying to regulate. Costs for the whole process also varies depending on the agreement of both parties involved and the agreement of the buyer and their lawyer.
How to invest in land through concessions in Cambodia
There are three types of land concessions available in Cambodia. These are the Use, Development or Exploitation Concession, the Economic Concession, and the Social Concession.
Social Concession allows beneficiaries to construct residential projects and cultivate state land. Economic Concessions allow beneficiaries to clear land for purposes of industrial or agricultural exploitation. Use, Development or Exploitation Concessions are not regulated under the 2001 land law – specifically, Article 49 and 50. But this type of concession includes port concessions, airport concessions and fishing concessions.
The land concession must be based on a specific legal document, issued prior to the occupation of the land by the competent authority, such as the State or a public territorial collectives or a public institution that is the owner of the land on which the concession is being granted.
The concession must be registered with the Ministry of Land Management, Urban Planning and Construction.
Land concessions cannot have more than 10,000 hectares and is limited to 50 years buy may be revoked by a government decision if there is a problem with the compliance. The most common concession type foreigners go for is the Economic Land concession.
An investor cannot apply for a economic land concession from abroad, they are required to have a registered company in the country, a valid tax identification number, and an active local bank account. Once this is in place and a piece of land is located the investors must apply through the Ministry of Agriculture which will then review the land details listed on their database and decide whether it can be made available for a concession based on the review. If the application passes all the bureaucratic steps, the investor will then be tasked to create a master plan or a five-year business plan. The CDC will provide special tax status for the investor’s company such as exemptions and reductions. The company is then going to be noted in the investment register through the CDC. The approximate duration to complete the process will be 6 to 9 months.
Investing in Cambodian land by marriage.
Foreigners married to a Cambodian national are allowed to register real property using the name of their spouse on the title deed. In case a citizenship has been granted to the foreigner, the Cambodian law states that the land can be registered under then names of both husband and wife.
In case of divorce, the land and property division will depend upon the conditions of any court ruling that refers to the divorce. Interracial marriages require the participation of the embassy of the foreigners citizenship country and different local government agencies such as the legal and consular department o the ministry of foreign affairs and international cooperation, ministry of interior, and province officials.
Obtain Cambodian citizenship to invest in Cambodian land.
Some foreign nationals obtain honorary Cambodian citizenship. This can be obtained in two ways. Either by donating at least $312,500 for the Cambodian people through the Cambodian Government or by making a significant impact to the country.
Being granted an honorary citizenship allows foreigners to obtain 100% of the rights to real property. But it is important to note that the foreigners original nationality is not affected in any way. Individuals may also gain residential status in the country by living here for 7 years.