Cambodian Prime Minister Hun Manet has announced a significant reduction in the withholding tax for domestic airlines, lowering it from over 10% to just 2%, in a strategic move to strengthen the aviation sector and support the broader tourism and business environment. The tax cut is expected to reduce operational costs for domestic airlines, encouraging more flights, increased competition, and ultimately lower airfare for travelers.
Government’s Commitment to Strengthening Aviation and Tourism
The announcement was made during the closing ceremony of the 2024 work summary and 2025 work direction conference of the Cambodian Oknha Association on the afternoon of March 14, 2025.
Prime Minister Hun Manet highlighted the importance of supporting the private sector to ensure sustainable growth and economic resilience.
“A few days ago, I reduced the tax rate for domestic airlines from 14% to 2% and will prepare some principles that the state must issue to ease the burden on essential sectors, such as tourism,” he stated.
This tax reduction is part of a broader effort to strengthen Cambodia’s aviation infrastructure and increase the country’s attractiveness as a tourism and business destination. Lower operating costs for airlines are expected to increase flight frequency, enhance competition, and provide more affordable travel options for both domestic and international passengers.
Strong Growth in the Aviation Sector
Cambodia’s aviation sector has shown strong recovery and growth in recent years, supported by increasing demand for both international and domestic travel. To encourage further growth, the Royal Government of Cambodia introduced a series of incentives, including tax relief and financial support for airlines and airport operators. In September 2024, the government extended withholding tax and special tax incentives for airlines until 2027 to provide long-term support for the sector’s growth.
According to the Civil Aviation Authority of Cambodia, the country’s three major international airports in Phnom Penh, Siem Reap, and Sihanoukville handled a total of 6.24 million passengers in 2024, reflecting a 22% increase compared to 2023, when 5.11 million passengers were recorded.
Air cargo transport also recorded positive growth, reaching 77.8 thousand tons in 2024 — a 40% increase from 55.7 thousand tons in 2023. The total number of flights increased to 58,354 in 2024, representing a 14% rise from the 51,149 flights operated in 2023.
Cambodia’s aviation network has also expanded. As of 2024, Cambodia’s airports connect to 34 international destinations across 12 countries as well as Hong Kong and Taiwan. The country’s aviation sector currently supports operations by five national airlines and 26 international airlines.
New Airports to Strengthen Aviation Infrastructure
To further strengthen Cambodia’s position as a regional aviation hub, the government is developing two new major airports in Phnom Penh and Siem Reap, which are expected to enhance capacity, improve connectivity, and support the growing tourism and business sectors.
- Techo International Airport (Phnom Penh):
Located about 30 kilometers south of Phnom Penh, Techo International Airport is designed to be one of Southeast Asia’s largest and most advanced airports. The airport, which is currently under construction and expected to become operational in phases from 2025, will have the capacity to handle up to 50 million passengers annually once fully completed. The facility will feature state-of-the-art infrastructure, including modern terminals, expanded runways, and advanced cargo handling facilities. - Siem Reap–Angkor International Airport:
Siem Reap–Angkor International Airport, which began partial operations in late 2024, replaces the existing Siem Reap airport and is located about 50 kilometers from the Angkor Wat temple complex. The airport is designed to handle increasing tourist arrivals to Siem Reap, one of Cambodia’s top destinations. It has an initial capacity of 7 million passengers per year, with plans to expand to 10 million passengers annually in the future.
These new airports are expected to significantly improve Cambodia’s air connectivity, enhance passenger experience, and boost tourism and trade. The additional capacity will enable Cambodia to host more international visitors and support the growth of both business and leisure travel.
Boosting Domestic Tourism
While international tourism remains a key focus, domestic tourism has also seen strong growth. The government has actively promoted domestic travel through infrastructure improvements, marketing campaigns, and incentives for local businesses.
Sihanoukville
Sihanoukville, a coastal city known for its white-sand beaches and vibrant nightlife, has become a popular destination for both domestic and international tourists. The city has seen significant infrastructure upgrades, including improved road connections and the expansion of Sihanoukville International Airport. Direct flights from Phnom Penh and Siem Reap to Sihanoukville have made it more accessible for travelers. The city’s growing casino and resort industry have also contributed to increased tourist activity.
Koh Rong and Koh Rong Samloem
Koh Rong and Koh Rong Samloem islands, located off the coast of Sihanoukville, have gained recognition as top eco-tourism destinations. The islands offer pristine beaches, clear waters, and rich marine biodiversity. Ferry services from Sihanoukville have been upgraded, reducing travel time and improving the overall visitor experience. The government has implemented sustainable tourism initiatives to preserve the islands’ natural beauty while supporting local communities.
Kep
Kep, known for its fresh seafood and colonial-era architecture, remains a popular weekend destination for local travelers. The government has improved road infrastructure and promoted eco-tourism initiatives, including mangrove conservation projects and community-based tourism. The reopening of historic resorts and the expansion of boutique hotels have further enhanced Kep’s appeal.
Call for International Airlines to Operate Domestic Routes
As Cambodia’s domestic aviation sector expands, there is growing potential for international airlines to enter the domestic market. Currently, domestic flights are primarily operated by Cambodian carriers, but the newly introduced tax incentives and improved airport infrastructure create an attractive opportunity for international airlines to establish domestic operations within Cambodia.
International airlines are well-positioned to offer domestic services, which would enhance the overall travel experience for passengers and strengthen Cambodia’s tourism ecosystem. By launching domestic routes, international airlines can:
- Improve connectivity between major cities such as Phnom Penh, Siem Reap, and Sihanoukville.
- Support tourism growth by providing convenient connections for international travelers seeking to visit multiple Cambodian destinations.
- Enhance customer experience by offering seamless travel between international and domestic flights.
- Increase competition in the domestic market, which can lead to better service quality and competitive pricing.
- Boost passenger traffic and help airports reach their full potential.
For example, direct flights from Siem Reap to Sihanoukville or Phnom Penh to Koh Kong could create more travel options and reduce travel time for both domestic and international tourists. The tax reduction to 2% makes Cambodia an attractive market for international airlines to explore domestic routes.
Introducing domestic services would not only benefit airlines through increased passenger volume but also create new business opportunities and stimulate the tourism sector. Cambodia’s growing tourism and business activities present a strong foundation for international airlines to expand their market presence.
Future Outlook
The Cambodian government’s strategic focus on improving aviation infrastructure, reducing tax burdens, and promoting domestic tourism is expected to drive long-term growth in the tourism and business sectors. The reduction in withholding tax for airlines is likely to increase competition, reduce airfares, and encourage more direct flights to and from Cambodia.
The development of Techo International Airport and Siem Reap–Angkor International Airport will position Cambodia as a key transit hub in Southeast Asia, supporting increased passenger traffic and facilitating cargo transport.
Introducing domestic services by international airlines would further enhance connectivity and tourism growth. Increased competition and improved access to key destinations would strengthen Cambodia’s reputation as a top travel destination.
By balancing international growth with domestic resilience, Cambodia is positioning itself for a strong and sustainable expansion in the coming years.
