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24th - February, 2024
by 吉田 重規

Increase in Penalties for Labour Law Violations (Foreign Worker Permit Non-Compliance)

Penalties for labour law violations, particularly related to foreign worker permits, have been substantially increased since 2022. Notably, directors listed as registered tax representatives (holding a Patent Tax Registration Certificate) are required to obtain foreign worker permits, regardless of their residency status. Non-compliance can result in hefty fines of approximately USD 12,600.
Traditionally, the Ministry of Labour and Vocational Training (MLVT) has not been proactive in imposing penalties. However, recent cases indicate an increasing trend in enforcing fines, necessitating vigilance.

1. Increase in Base Fine Amounts

As per the Joint Prakas No. 346 issued by the Ministry of Justice and MLVT on 25th November 2022, the base daily wage rate used for calculating fines has doubled from 40,000 Riels (approximately USD 10) to 80,000 Riels (approximately USD 20). It is essential to note that in cases of multiple violations, fines can be increased up to five times the statutory limit, and for repeat offenses, up to three times the limit.

2. Increased Penalties for Foreign Worker Permit Violations

Regarding foreign worker permit violations, the base daily wage rate for calculating fines has been further increased to 200,000 Riels (approximately USD 50), separate from the increase mentioned in point 1.
Violations subject to fines include: (i) failure to obtain a foreign worker permit by the employee, (ii) failure to apply for a foreign worker quota, and (iii) employing or allowing foreign workers without valid permits to work. Among these, the most significant change is the penalty for violation (i) – failure to obtain a foreign worker permit by the employee – which has been substantially increased to 50,400,000 Riels (approximately USD 12,600). Violations (ii) and (iii) carry fines of 12,800,000 Riels (approximately USD 3,150).

Recent trends indicate an increase in on-site inspections by MLVT and the Ministry of Interior to verify the status of foreign worker and residency permits, necessitating heightened vigilance.

3. Requirement for Tax-Registered Representatives to Obtain Work Permits

Foreign worker permits are mandatory for foreigners working in Cambodia (Article 261, Labour Law).
While non-resident, non-executive directors are generally exempted from obtaining work permits as they are not considered to be working in Cambodia, a peculiar exception applies to directors listed as tax-registered representatives (appearing on the Patent Tax Registration Certificate). Regardless of their residency or executive status, these directors are required to obtain foreign worker permits (per the Instruction No. 110/23 of MLVT). Failure to comply falls under violation (i) mentioned above, subjecting them to fines of approximately USD 12,600.
This requirement is often overlooked, particularly in the case of non-resident directors, necessitating careful attention.

For limited liability companies (local entities), the tax-registered representative is typically the chairperson of the board of directors. However, if the chairperson delegates this responsibility, another director can assume the role. For branch offices or representative offices, the commercial registration representative automatically becomes the tax-registered representative.
In both cases, the tax-registered representative’s name and photograph are displayed on the Patent Tax Registration Certificate, making identification straightforward.

In summary, the recent increase in penalties for labuor law violations, particularly concerning foreign worker permits, underscores the importance of compliance. Businesses should carefully review their employees’ permit status, especially for tax-registered representatives, to avoid substantial fines.