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Deadline for e-commerce licensing set for 1 July 2022
Cambodia’s digital economy has undergone many changes recently, with the development of the e-commerce industry being an excellent illustration of this trend. Generating around USD 320 million in 2017, these figures have risen to USD 971 million by 2021 and is expected to grow further.
The Cambodian government has anticipated this coming increase and has adopted a series of regulations to structure this emerging industry. The legal framework for e-commerce in Cambodia currently consists of three instruments: an initial 2019 Law on E-Commerce, implemented by a sub-decree in August 2020 and further refined by a Ministerial Decision (Prakas) in October 2020.
The essence of this regulation is to classify the different forms of activities considered as e-commerce, to define who is considered an e-commerce provider and who has to apply for a licence.
While almost 2 years have passed since the adoption of the e-commerce regulation, it appears that many companies have not complied with the requirements. The Ministry of Commerce, which is responsible for licensing, has issued a warning about the requirement to apply for a licence and has set a deadline of 1 July 2022.
Differences between e-commerce licences and permits
The regulations in force concerning the e-commerce sector define 4 categories of service providers who will have to apply for licences or permits to carry out their activity.
These are natural persons and sole proprietorships who must apply for an e-commerce permit and legal persons and branches of foreign companies who must apply for an e-commerce licence.
Other differences between permits and licences are the duration of validity, which is 3 years for a licence and 2 years for a permit, and the type of activities carried out by the owner of the licence or permit.
- Licensees can engage in e-commerce web services, e-commerce platforms, online shop services, online auction services and all similar activities provided by software or smart devices.
- Commercial activities that may be carried out by permit owners are set out in more general terms. It is understood that they may engage in commercial activities through an electronic platform or the use of social media for the provision, sale and purchase of goods and services.
It should be noted that the Cambodian law on e-commerce regulates both domestic and cross-border activities which means that Cambodian-based businesses selling overseas and foreign-based businesses selling in Cambodia must also comply with the licensing requirements.
Application requirements
While the competent authority for the e-commerce sector is the Ministry of Posts and Telecommunications (MPTC), the licensing authority is the Ministry of Commerce. Therefore, all matters relating to applications must go through the latter.
According to the latest Prakas on the issuance of e-commerce permits and licences, the documents required to submit an application are not exactly the same for permits and licences.
E-commerce permits application
In current practice, companies and individuals engaged in e-commerce activities and subject to the licensing (or permits) requirement will have to provide the following documents to the Ministry of Commerce in order to submit the application:
- A copy of the certificate of incorporation together with a clear description of the e-commerce activities concerned and identified as one of the company’s objectives
- A patent tax certificate (to be dealt with the Ministry of Tax prior to the application)
- Bank account details
- A business model and consumer protection form for conducting e-commerce activities
- MPTC online service certificate and domain name (to be dealt with the MPTC prior to the application)
- Identity card and photos of the applicant
E-commerce licence application
Legal entities and branches of foreign companies engaged in e-commerce activities and subject to the licensing requirement will have to provide all the documents required for the permit application mentioned above, plus the following two documents
- Certified documents confirming that the payment mechanism will be provided by a payment service provider licensed and approved by the National Bank of Cambodia;
- A copy of the model contract between an intermediary and the provider of commercial services concerning minimum information requirements for consumer protection.
Exemptions:
Cambodian e-commerce laws provide for certain exemptions from licensing requirements for specific activities such as the sale of personal art, the sale of goods or services with a turnover of less than USD 62,500, educational support provided by NGOs, but also private tuition or the sale of goods or services through family/seasonal businesses.
Although they are exempted from licensing requirements, businesses and individuals engaging in such activities still must report their activities to the Ministry of Commerce.
Sanctions
In May 2021, the MOC issued a Prakas on penalties associated with e-commerce activities. With a deadline of 1 July 2022, these penalties are expected to be imposed after that date on companies that have not complied with the regulations.
The main penalty is a fine of USD 2,500 for companies and individuals who engage in e-commerce activities without a licence.
The Prakas also provides for other fines, such as failure to file certain documents or providing incorrect documents. These fines range from USD 250 to USD 500.
Applications should therefore be made with care to avoid delays and additional costs.
In conclusion
In an effort to modernise the law in light of the growth of the digital sector, the Cambodian government has developed relatively comprehensive e-commerce legislation. As mentioned above, applying for a licence or permit requires the collection of a number of documents from several ministries, which can make the task time-consuming.
The deadline for the sanctions to come into effect is 1 July, it is therefore imperative that all businesses that have not yet started the process get up to speed as soon as possible.
To find out more about obtaining e-commerce licences and permits and how to submit your application on time, feel free to book a consultation with one of our experts.
Please note that this article is for information purposes only and does not constitute legal advice.
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