The Cambodia Restaurant Association (CRA) organised a workshop on 'Franchise Management for Cambodia’s Food and Beverage (F&B) Industry' on November 22, 2023 at the Hotel Cambodiana.
The workshop featured a series of presentations by H.E. Ang Pich, Attorney at Law and President of ANG IP & Law Office; Jay Cohen, Partner and Director of Cambodia at Tilleke & Gibbons; Sok Lyhim, Deputy Chief of Post Trademark Registration Bureau; Palawat Palawatvichai, Deputy Managing Director of PTT’s non-oil businesses; and Song Kosal, Deputy Director of the Department of Large Taxpayers of the General Department of Taxation (GDT).
Legal And Contractual Aspects Of Licensing In Cambodia
H.E. Ang Pich delivered a presentation highlighting the main laws and regulations that franchisors should be aware of in the Kingdom, including their relevant articles:
- Mark Law: Art. 11(a), 19, 52
- Patent Law: Art. 41, 105, 115
- Copyright Law: 21, 34, 35, 44
- Sub-decree Mark, Art. 27 (3)
- Prakas No. 36
- Notice MoC 0738, dated March 12, 2015
- Draft Law on Commercial Contracts
While speaking with B2B Cambodia, Pich clarified that the Trademark (Mark) Law and Patent Law are two of the most important to know, while the Copyright Law is generally seen as secondary to the Mark Law. He elaborated further on some of the other legal steps a business should take when licensing. “You also have to register your business if you want to have a local location in Cambodia, so you will have to register your company at the Ministry of Commerce or at the Department of Commerce at the provincial or capital (Phnom Penh) level,” said Pich.
“After that you have to go to the General Department of Taxation to register your company’s taxes.” “Besides this, if your business is involved in something that is relevant to different ministries that have laws or sub-decrees that require authorisation or notice of business activities, then you have to go and register there as well,” added Pich. “For example, if you have a restaurant business, you have to go to the Ministry of Tourism, or if your franchise focuses on medicine or pharmaceuticals, you have to go to the Ministry of Health to notify them of your activities, and they will provide you with a paper [authorisation].”
Things To Consider When Registering Intellectual Property In Cambodia
H.E. Ang Pich speaks at the CRA workshop on franchise management for Cambodia's F&B industry. Pich explained that when registering intellectual property (IP), the first step is to identify exactly what kind of assets you have so you know which ministry to approach.
“First you have to know what kind of IP assets you have, whether it is a trademark, innovation, patent, industrial design or utility model, or if it is copyright,” said Pich. “If it is a trademark, you need to go to the Ministry of Commerce. For a patent, utility model or industrial design you have to go to the Ministry of Industry. If it is a copyright, registration is not required, but you can go to the Ministry of Culture and Fine Arts.”
He stressed that one of the main things to be vigilant about when registering IP assets is the question of infringement. “You should conduct a mark search to see whether someone else has registered a similar or identical mark already,” said Pich. “When you see that no one has registered the same sign or mark that you have, then I recommend finding an agent to help you register at the Ministry of Commerce.”
Franchising In Cambodia
The presentations highlighted a variety of key things to know and remember when franchising in Cambodia, including the list of documents needed to establish a Franchising Agreement:
- Application for registration (to be made within six months from the date of entry into force of the contract);
- Original or certified copy of the contract;
- Original power of attorney if the application is made through an agent;
- Copy of original trademark certificate or trademark application;
- Identification documents of brand owner and recipient.
Palawat Palawatvichai, Deputy Managing Director of PTT’s non-oil businesses, speaking at the CRA workshop. “[Making sure franchisees] understand the franchise business in Cambodia is really something that you need to do before entering the market, because sometimes they don't understand what they're supposed to do,” cautioned Palawat Palawatvichai, while speaking with B2B Cambodia about some of the challenges PTT’s non-oil businesses have faced while franchising in the Kingdom. “The franchisees are sometimes, can I say, powerful people? So, as a franchisor, sometimes you really have to know how to communicate well and how to run a business smoothly and to be able to make mutual compromises with investors in Cambodia,” he added. Regarding what advice he had for other foreign franchisors wishing to enter the Cambodian market, Palawatvichai stressed the virtue of patience and the importance of choosing your franchisees wisely.
“I think you must be patient about franchising out, you will need to open a lot more of your own stores to learn the situation and the market before franchising,” he said. “During the very initial stages, you will have to choose your franchisees carefully, you cannot just give out your franchise to anyone, the very first partner you have will be very important for your brand.”
Tax Obligations Related To Franchises In Cambodia
A presentation delivered by Song Kosal of the GDT highlighted the main tax obligations to be aware of as a franchisor, franchisee and non-resident franchisor supplying franchise to Cambodia. Tax obligations of franchisors include:
- Obligations for tax registration and updates as stated in Article 203 and 205 of the Law on Taxation;
- Value Added Tax (VAT), according to Article 65 of the Law on Taxation;
- Prepayment of Tax on Income (PTOI) 1 per cent, according to Article 28 of the Law on Taxation;
- Annual Tax on Income (20 per cent), according to Article 20 of the Law on Taxation;
- Other obligations like Paid Patent Tax and to act as a withholding agent on Tax on Salary and Withholding Tax (WHT);
Tax obligations of franchisees include:
- Local Purchase of Franchise: including VAT 10 per cent on the supply of franchise, franchise payment subject to 15 per cent WHT;
- Purchase of franchise from non-resident taxpayers, which would be considered as the supply of digital goods: franchisee is obligated to pay VAT 10 per cent by reverse charge for the purchase of a franchise from a non-resident taxpayer, franchisee must withhold and pay WHT at the rate of 14 per cent
Non-resident franchisors supplying franchise to Cambodia are obliged to register for Simplified VAT Registration if they have an annual turnover of 250 million riel (roughly USD $60,600) or more, or if they expect to have a turnover of 60 million riel (roughly USD $14,500) or more during any consecutive three-month period in the current calendar year.
The 'Franchise Management for Cambodia's F&B Industry' workshop was held on November 22, 2023 at Hotel Cambodiana. The workshop concluded with an interactive panel discussion and Q&A session led by Chandavya Ing, Associate at Tilleke & Gibbins, where panellists further discussed challenges and strategies for successful franchise management in Cambodia.
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