Cambodian law requires that any foreign national working in Cambodia, including in a director capacity, obtains a work permit from the Ministry of Labour and Vocational Training (“MLVT“). In 2021, the MLVT introduced a new requirement subjecting a foreign director, although not physically working in Cambodia, appearing on a company’s patent tax certificate to hold a work permit. The underlying relationship in which that individual is engaged by the company will have significant legal and tax considerations.
There are two principal routes available: engagement as an employee or engagement as an independent consultant. Each carries distinct obligations and entitlements, and the appropriate choice will depend on the director’s roles and the company’s operational needs.
(1) Option 1: Employee Status
(a) Overview
If a foreign director becomes an employee of the company, both she or he and the company must satisfy and comply with several conditions.
(b) Employment Contract and Declaration
The director must have an employment contract (which must also be prepared in Khmer language for the purpose of work permit application), be declared as an employee, and receive a salary from the company. This formalises the relationship under Cambodian labour law and creates a clear evidentiary basis for the work permit application.
(c) Quota for Hiring Foreign Employees
Companies employing or intending to employ foreign directors as employees must also apply for a foreign employee quota from the MLVT. Under the quota system, foreign nationals may comprise a maximum of 10% of an employer’s total local workforce, allocated as follows: office employees (3%); skilled labour employees (6%); and unskilled labour employees (1%). However, enterprises that are unable to find suitably qualified Cambodian nationals may request MLVT approval to hire foreign nationals in excess of the 10% cap.
Companies must secure sufficient quota before proceeding with applying for a work permit for the foreign director as an employee.
(d) Visa Requirements
The director must hold a valid visa, including a regular visa type E (“Visa E“) with the appropriate sub-category types including Visa EB or a special visa type K, and for such purpose, she or he must travel to Cambodia. This is a practical consideration of some importance: the director cannot simply remain overseas and hold this status without physically entering Cambodia.
Of note, the MLVT imposes a 90-day entry rule pursuant to which a foreign director must apply for a work permit (whether in a capacity as an employee or an independent consultant) within 90 days of first entry into Cambodia.
(e) Employment Rights and Benefits
The director will be entitled to rights and benefits attached to her or his employee status including, but not limited to, annual leave, seniority pay (if hired under unfixed duration contracts) and termination compensation. Where the employee option is selected for a director to apply for a work permit in the current year, an unfixed duration contract is recommended, which can be mutually terminated by the director and the company once there is a replacement on the patent tax certificate, without the need for the mutual termination agreement to be signed before a labour inspector as would be required in the case of a fixed duration contract.
(f) Tax on Salary
The director’s salary will be subject to applicable tax on salary and must be declared to the tax authority by the company. Companies must therefore ensure they have appropriate payroll infrastructure in place to meet this obligation.
(g) National Social Security Fund (“NSSF”) Contributions
The company must pay monthly contributions to the NSSF covering occupational risk, healthcare, and pension schemes. The director will also need to pay a contribution to the NSSF on the pension scheme at 2% of the contributable wage. The specific rates of contribution are as follows:
- Occupational Risk Scheme: The enterprise must pay a monthly contribution equivalent to 0.8% of an employee’s contributable wage, ranging from USD 0.80 to USD 2.40 per month per employee, to the NSSF.
- Healthcare Scheme: The enterprise must pay a monthly contribution equivalent to 2.6% of an employee’s contributable wage, ranging from USD 2.60 to USD 7.80 per month per employee, to the NSSF.
- Pension Scheme: Contribution to the compulsory pension scheme will be jointly paid by the employer and the employee at the same rate of 2% each (total of 4%) of the contributable wage for the first five years counting from the implementation date of the pension scheme (i.e., October 2022) ranging from USD 4 to USD 12 per month per employee.
(2) Option 2: Independent Consultant
(a) Overview
A foreign individual may opt for the status of independent consultant in Cambodia. An independent consultant does not need to provide a visa and employment contract as supporting documents to apply for a work permit.
This option is administratively lighter and particularly well-suited to foreign directors who do not reside in or regularly work from Cambodia.
(b) Tax Treatment and Consulting Fee
From a tax perspective, this option would require the director to receive a consulting fee from the company. The amount of such fee should be determined at an arm’s length level in accordance with Cambodian transfer pricing principles.
The director would have to submit the name of the business and the patent tax certificate of the business in the MLVT’s online system (in this instance the name and the patent tax certificate of the company). The company will have to withhold either 14% or 15% of the consulting fee, depending on the director’s tax residency status.
Please refer to our client alert regarding tax obligations applicable to directors under Instruction No. 19116 dated 20 June 2025, as set out in this link.
(3) Risk of Non-Renewal: Financial Penalty
Companies and directors should be mindful of the consequences of failing to renew a work permit. Where a director fails to renew her or his work permit while still appearing on the patent tax certificate, a fine of USD 3,150 will have to be paid by the company to the MLVT.
This is a significant financial exposure that companies must actively manage particularly where the directorship is temporary or transitional in nature.
(4) Practical Considerations and Recommendations
Many foreign directors who do not reside or work in Cambodia have opted for the independent consultant option, since the process is quicker compared to the employee option.
Where the directorship is expected to be transitional, while the company searches for a local or resident replacement, an unfixed duration contract (if the director is hired as an employee) or an independent consultant contract is recommended, as it can be mutually terminated by the director and the company once there is a replacement on the patent tax certificate.
Companies should therefore weigh the following key factors when deciding between the two options:
- whether the director will physically be present in and working from Cambodia;
- the expected duration of the directorship;
- the administrative capacity of the company to manage payroll, NSSF contributions, and tax declarations; and
- the importance of providing the director with full statutory employment rights and social security coverage.
(5) Final Remarks
Engaging a foreign director in Cambodia requires careful navigation of immigration, labour, and tax obligations. The choice between employee and independent consultant status is not merely administrative; it has meaningful financial, legal, and practical consequences for both the company and the director. Companies are strongly advised to seek specialist advice before making this election, to ensure full compliance with Cambodian law and to structure the engagement in a manner that best serves the company’s operational and commercial objectives.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
