CAMBODIA – WHEN A FOREIGNER WISHES TO PURCHASE LAND IN THE KINGDOM
This is a frequently asked question, and the legal provisions on the matter are clear. Whilst foreigners are not permitted to own land directly in Cambodia, there are, however, legal and recognised ways of acquiring land, subject to certain conditions
The Kingdom of Cambodia is particularly appealing for a high-quality, promising life abroad
High-quality, because the natural environment is unspoilt and magnificent.
Promising, because the country is a sort of ‘blank slate’ where almost anything is possible and which is progressing at great speed, without the administrative and political delays found in Western countries
Foreigners are, moreover, welcome and are very warmly received by a gentle, curious and friendly population
In terms of everyday life, there are far fewer restrictions or obligations than in Europe or Switzerland; you feel freer, and people are warm and smiling!
Of course, foreigners will be expected to respect local customs, and learning the Khmer language will prove an essential asset for successful integration
In this article, we will look at a few options for acquiring property, setting up companies and obtaining Khmer citizenship.
Alain Farrugia
Kep countryside | Copyright ©Alain Farrugia
Land ownership in Cambodia
1) Direct ownership of land by foreigners is prohibited under Cambodian law.
2) However, there are mechanisms that allow expatriates to indirectly own and use land in the Kingdom.
Private land ownership only became possible in 1992, when the Cambodian government adopted the Land Law. Local Sangkats issue ‘Soft Title’ deeds to Cambodians, which do not constitute a full guarantee of ownership and have therefore been replaced by nationally recognised ‘Hard Title’ deeds.
In 2001, the new Land Law came into force, further strengthening the individual right to property. Since then, numerous changes have been made to make the market more dynamic.
Since the land redistribution in 1992, land ownership in Cambodia can now be held through various types of title deeds. These deeds serve as official proof of ownership in the Kingdom. However, what is interesting about Cambodian land titles is that whilst some are recognised at the national level, others are recognised only at the local administrative level.
Mechanisms for foreign ownership of land in Cambodia
Cambodian land law prohibits foreigners from directly owning property in the country, except through a co-ownership title. However, co-ownership titles for residential units generally apply only to buildings and not to land. There are, however, ways for foreigners to acquire land in Cambodia.
Through a Cambodian nominee or an approved trust company
This method requires foreign investors to ‘designate’ a person of Cambodian nationality as the legal owner of the land to be purchased. A “trust agreement” will be drawn up between the two parties, in which the designated person agrees to hold the property on their behalf. This method is arguably the most common form of land ownership for foreigners due to its straightforward approach and low associated costs. However, it is not a recommended method if the investor has no one they can trust to hold their investment.
Investors wishing to take this route may do so through a licensed trust company in Cambodia.
In January 2019, the Royal Government of Cambodia enacted the Trust Law, strengthening this framework within the legal system that was established in 2013. Trust companies enable foreigners to legally own land in Cambodia on their behalf. This method is recommended for investors seeking a licensed service provider who is accountable to the legal authorities.
Setting up a land holding company
A Land Holding Company (LHC) may be established by a foreigner wishing to purchase land as part of a joint venture with a Cambodian. Under the law, the foreigner must hold a minority stake of 49%, whilst the Cambodian partner must hold at least 51%. This may seem restrictive for a foreigner seeking to take this route, but control of the land holding company can be entirely granted to the minority shareholder (the foreigner) through the company’s articles of association, a special power of attorney or other legal instruments.
The only real drawback of this approach is the cost of registration fees, administrative charges and tax liabilities levied on the company and its assets.
Government concession
Land concessions are a means for a foreigner to own property under an agreement with the government authorities. This allows foreigners to occupy, use and legally exercise rights over the land in question.
The Cambodian government generally grants these rights through economic land concessions, which are usually allocated for agricultural and industrial developments. These concessions may be extended through a long-term lease.
Investors must consult the Ministry of Agriculture, the Council for the Development of Cambodia (CDC), and local provincial authorities, who will then approve the application after assessing the social and environmental impacts of the concession.
Once the initial approvals have been obtained, the application will be forwarded to the Prime Minister’s Office, where it will be endorsed by the Ministry of Agriculture and become an official concession agreement. This process can take between 6 and 9 months.
Marrying a Cambodian
This is another straightforward way to own land, which is not very different from the nominee structure mentioned earlier. Foreigners married to a Cambodian are permitted to purchase land in the Kingdom, but the name on the land title will be that of the Cambodian spouse only.
Becoming a Cambodian citizen
Cambodian land ownership laws reserve the right to own land in one’s own name for Cambodian citizens. Fortunately, as in most countries, it is possible for a foreigner to acquire Cambodian nationality, which is undoubtedly the most direct and, consequently, the safest way to own land in Cambodia. Full details on obtaining citizenship through investment here...
What type of title?
Soft Titles are the most commonly issued titles in Cambodia
They are registered and recognised solely at local government level and are issued by the district office. These titles generally refer to three documents that may prove ownership. These are the application for land occupation, a letter of transfer recognised by the local authorities, or a simple private sale and purchase agreement. The application for land occupation is the application made by the landholder to the local authorities. A letter of transfer recognised by the local authorities is a document that the local official has recognised and signed. Whereas a simple private sale and purchase agreement is an agreement concluded solely between the buyer and the seller.
Hard Title is the most robust form of proof of ownership
It is issued by the Land Management and Planning Office. It contains information recognised by the Ministry of Land and the national Land Registry. A 4% transfer tax is payable upon the sale of a property.
A Strata Title is also a form of Hard Title
However, it is most commonly granted for newer developments. The Strata Title stipulates that foreigners are not permitted to acquire an entire building and that foreign ownership is limited to 70% of the units in any strata-titled building.
Hard Titles also refer to three types of certificates. These are the certificate of land use and occupation rights, the certificate of real property ownership, and the certificate of real property title. Certificates of land use and occupation rights are known as ‘chicken feather titles’ because an image of a feather is printed on them. These are the titles issued to owners prior to the enactment of the Land Act.
The certificate of possession of immovable property is issued if land registration has been initiated by an owner in an area where systematic land registration has not yet been carried out by the government. This is known as ‘sporadic land registration’. This document does not usually include a plan of the property.
The property title deed is issued following systematic land registration by the government. Unlike the certificate of possession of immovable property, it includes a map showing the location and boundaries of the land.
Should you obtain a Hard Title for security?
Soft Titles can be converted into Hard Titles through ‘sporadic land registration’. The cost of this process depends on the location and size of the property.
How do foreigners legally protect their land ownership?
When a property is held by a Cambodian nominee, foreigners must enter into a nominee agreement with the Cambodian citizen. Khmer nominees must also grant foreigners a long-term lease. A mortgage must be registered on the title deed. Foreigners must also hold the original title deed. To avoid any misunderstandings in the event of an accident or death, the nominee should also draw up a will or supporting documents.
If the property is held by a property company, it is important to draw up documents to protect the ‘nominee’.
The company should be required to grant the foreigner a long-term lease. As in the first scenario, a mortgage must be taken out and registered on the title deed, and a will or supporting documents must also be prepared.
As in most countries, Cambodian laws continue to evolve to meet the demands of local and international investors.
Therefore, keeping up to date – preferably with recognised professionals – can save a great deal of trouble and even yield a decent return on investment.
Keeping the identity of property owners confidential
It may be possible to keep the identity of property owners in Cambodia confidential. According to current practices at the Ministry of Land Management, Urban Planning and Construction, the landowner’s consent is required to carry out an official land title search at the Ministry.
Consequently, if the owner refuses to give their consent, it will not be possible to carry out an official search.
However, if a person has a copy of a new title certificate form bearing a QR code, anyone can verify the landowner by scanning the QR code and confirming the land details via the Ministry’s online platform, which is accessible to the public.
Explanation: Cambodian citizenship by investment
Obtaining Cambodian citizenship by investment is a subject that may raise certain questions or concerns if one is unfamiliar with the country’s intricacies, but this option is frequently used as it is particularly practical and quick.
Let’s look at how to go about obtaining this citizenship.
Alain Farrugia
How does Cambodian citizenship by investment work?
The standard way to obtain citizenship of the Kingdom is to have at least one Cambodian parent, whether or not you were born in the country.
The second route is naturalisation. This takes between three and seven years if you are married to a Cambodian national.
In both cases, you must be able to speak and write in Khmer, and pass a test on local history.
Of course, the quickest route is to become a Cambodian through investment. A status also known as honorary citizenship. In this case, there are theoretically two routes to obtaining a Cambodian passport.
One of the most attractive features — from an investment perspective — is that the foreigner will be able to own land and property in their own name. They will also have the right to apply for government concessions and licences that are only available to Cambodian nationals.
Cambodian citizenship through commercial investment
Technically, a foreigner must invest at least 1.25 billion riels (approximately USD 312,500) to be eligible for citizenship through investment, but the following conditions must be met:
They must have received a letter of investment authorisation from the Cambodian Development Council (CDC) and have actually implemented a real project or, failing that, they must obtain a legal investment authorisation from the Royal Government.
They must also meet the following criteria:
- The applicant must be aged 18 or over
- Hold a valid passport
- Hold a valid entry visa for Cambodia
- Be of sound mind and in good health
It is therefore much more than a simple capital investment, for which government authorisation is required. Technically, applicants must also be of good character and able to speak Khmer, although the rigour with which these last two criteria are applied is open to debate.
A Cambodian passport allows visa-free travel to most ASEAN countries
In addition to owning property, land or a company with 100% ownership, being able to travel freely within ASEAN countries highlights just how attractive the Cambodian passport can be for those living in Asia who wish to expand their business activities there.
Especially as Cambodia allows dual nationality.
Alain Farrugia
Cambodian citizenship by donation
Foreign nationals may also acquire Cambodian nationality by donating one billion riels (approximately USD 250,000) or more to the national budget. Again, this does not guarantee citizenship, and there is no upper limit on the amount of the donation.
Those who acquire citizenship through donation must also be of good character and speak Khmer.
What is the value of Cambodian citizenship?
By global standards, the Cambodian passport is considered rather weak, ranking as the 88th most attractive passport in the world in 2019 (for context, it is tied with Turkmenistan and Equatorial Guinea).
Consequently, people do not generally seek citizenship of the Kingdom for the travel opportunities it offers.
Cambodia does, however, allow dual nationality, meaning that wealthy investors can retain their previous nationality whilst enjoying the benefits of being Cambodian, primarily the right to buy and sell land in the country.
As such, the citizenship-by-investment programme is said to have been used by some of the biggest players and landowners in the Cambodian property sector.
Honorary citizenship has also been granted to individuals such as Angelina Jolie, although this is awarded on the basis of merit, regardless of any investment in the country.
How does the cost of the Cambodian programme compare to international standards?
At just over $300,000, the cost of Cambodian citizenship is actually relatively low by international standards, with citizenship in European destinations such as Cyprus or Malta costing between one and two million dollars.
According to the Offshore Protection website, at the lower end of the scale, countries such as Dominica in the Caribbean and Vanuatu in the Pacific offer citizenship for just $100,000.
The cost of Cambodian citizenship is therefore similar to that of a number of Caribbean countries, such as Saint Lucia and Saint Kitts and Nevis, but without the tax-exempt status that these two jurisdictions offer to prospective citizens.
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