1. INTRODUCTION

The major taxation laws in Myanmar include the Union Taxation Law of 2022, the Commercial Tax Law of 1990 as amended up to 2015, the Income Tax Law of 1974 as amended up to 2016, the Myanmar Stamp Act 1899 as amended up to 2016, and the Tax Administration Law of 2019. The Union Taxation Law 2022 applies to the 2022/2023 fiscal year. This newsletter will provide an overview of the taxation system of Myanmar.

2. TAXATION OF COMPANIES

3. TAXATION OF INDIVIDUALS

In the case of foreigners, those who reside in Myanmar for at least 183 days during the income year are considered resident foreigners. Residents of Myanmar are liable for personal income tax and profit tax on income derived from Myanmar and a foreign jurisdiction. Non-residents are subject to income tax and profit tax on income derived from within the jurisdiction of Myanmar only under the Income Tax Law 2016.

4. COMMERCIAL TAX

The Commercial Tax is levied as a turnover tax on goods and services. This tax applies to goods that are produced in or imported into Myanmar, as well as services that are rendered in Myanmar. For goods and services supplied in Myanmar, commercial tax is imposed at the time of supply and charged on the sales receipt. For the import of goods, commercial tax is collected by the Myanmar Customs Department at the point of importation and charged on the landed cost under the Commercial Tax Law.

The Commercial Tax is applicable as follows:

* 5% commercial tax is charged on exported crude oil.

* 8% commercial tax is charged on exported electricity,

* 11% commercial tax is charged on jade in uncut forms.

* 9% commercial tax is charged on ruby, sapphire, and other precious gemstones in uncut forms except for diamond and emerald.

* 5% commercial tax is charged on jade, ruby, sapphire, and other precious gemstones finished in cut forms and cut form fitted in jewelry except for diamond and emerald.

* 5% commercial tax is charged on the material made with gemstones.

* 3% commercial tax is charged on the sale proceeds of buildings built and sold in Myanmar.

* 5% commercial tax is charged on the sales price of goods produced and sold in Myanmar, or the landed costs of imported goods, except for goods provided in Sec 14 (a) of the Union Taxation Law of 2022.

* 5% commercial tax is charged on the revenue from domestic services, except for services provided in Sec 14 (d) and Sec (e-1) of the Union Taxation Law 2022.

Under the UTL 2022, goods and services that are exempt from commercial tax are classified into different categories, of which 45 categories are comprised of goods, including mainly agricultural and marine products, and of which 33 categories are comprised of services, including education, life insurance, microfinance, intra-government services, and others.

5. STAMP DUTY

The Stamp Duty applies to several transactions as shown in the examples below:

Transfer of shares: 0.1% of the value

Bonds: 0.5% of the value

Leases of immovable property: 0.5% – 2 % based on the term

Stamp duties must be paid before or at the date of execution of the document if executed locally, or within three months of the time the agreement was brought into Myanmar, if executed outside Myanmar.

6. CUSTOMS DUTY

Most imported goods are subject to customs duties upon importation and must be declared to the Myanmar Customs Department. Export duties are levied on exported goods that are commodities such as gems, electricity, crude oil, and timber, as outlined in the Commercial Tax section.

7. DOUBLE TAXATION AGREEMENTS

Myanmar has entered into Double Taxation Agreements (“DTA”) with the United Kingdom, Singapore, Malaysia, Vietnam, Thailand, India, Bangladesh, Indonesia, South Korea, and Laos. DATs with Indonesia and Bangladesh have also been agreed but have not yet been ratified. Under these DTAs, any tax paid in the country of residence will then not be subject to taxation in the country in which it arises.

1. INTRODUCTION

Insolvency can be a useful tool for businesspersons and legal entities to address unstainable debt. Whilst Cambodia promulgated the Insolvency Law in 2007 as part of its general legal reforms to comply with World Trade Organization (WTO) standards, actual use of the law to date has been limited. However, the Law does provide the rules and framework for insolvency proceedings and governs both foreign and domestic business people and legal entities that own assets in the Kingdom of Cambodia. Certain financial entities are governed under industry specific legislation rather than the 2007 Law: namely the Law on Insurance, the Law on Banking and Financial Institutions and the Law on Issuance and Trading of Non-Government Securities. Due to the economic strain caused by the Covid-19 pandemic, use of the Insolvency Law in Cambodia may increase, and this newsletter will set out the procedure for insolvency proceedings under it.

2. INITIATION OF INSOLVENCY PROCEEDINGS

The term “insolvency” refers to the situation where the debtor has ceased meeting its obligations to pay and is declared “insolvent” by the court. A foreign or Cambodian person or business entity that owns assets in Cambodia could be subject to insolvency proceedings under the law, and failure to pay a debt of KHR 5,000,000 (est. US $1,250) is grounds for initiation.

A petition to the court to open insolvency proceedings may be made by either the debtor themselves, a creditor, the Director of Companies or the public prosecutor, and must contain a description of the circumstances of the petition and evidence of the grounds for its filing.

The debtor themselves are required under the law to petition for insolvency proceedings within thirty (30) days should they fail to meet their required obligations. Failing to discharge this duty through either intention or gross negligence may result in personal liability to the debtor’s creditors for damages, and those damages shall be included in the claim against the debtor.

The petition to open the insolvency proceedings by the debtor shall be heard within fifteen (15) days of filing, and within thirty (30) days should it be petitioned by another party. Should the court be satisfied upon hearing the grounds for the petition, it shall open insolvency proceedings, appoint an administrator, announce a date for the opening creditors’ meeting and set a deadline for the submission of the proof of claims. The court is able to dismiss the petition at this stage, should it believe sufficient grounds do not exist. The petitioner must reimburse the debtor for their reasonable legal costs where the decision is taken for a lack of grounds, and is also liable for damages if the court decides the petition was frivolous or malicious. In the event that the assets of the debtor would be insufficient to cover the court’s fees and costs, and the remuneration, fees, and expenses of the administrator, the petition to open insolvency proceedings will also be dismissed.

3. EFFECT OF INSOLVENCY PROCEEDINGS

Once the proceedings have been initiated by the court ruling, no other action can be brought against the debtor or the estate by any creditor. The opening of the proceedings creates the estate of the debtor, comprising all assets, rights and claims of the debtor. There are certain exemptions from the estate such as salaries up to KHR 200,000 per month and the primary residence of a natural person debtor, provided the market value does not exceed KHR 20 million.

The court-appointed administrator will have full control over the debtor’s assets including, but not limited to, the power to represent the debtor and manage the debtor’s business for the purposes of the insolvency proceedings, to receive all assets of the estate, to sell any unsecured assets, to prepare the list of claims, to organize the creditors’ meetings and to employ agents to assist in the performance of his duties. To enhance and safeguard the estate, the administrator may continue with contracts that have not yet been fully performed by the debtor or the counter party.

In addition, the administrator can petition the court to declare certain transactions to be void, such as those with the intent to defraud by placing assets beyond the reach of creditors. This includes those where no consideration was received, or those where the debtor’s obligation far exceeded the consideration.

4. CLAIMS AGAINST THE ESTATE

All proof of claims shall be submitted to the administrator in writing within fourteen (14) days of the opening of insolvency proceedings with the required information related to the claim including but not limited to the legal nature and cause of the claim, the time when the claim arose, the amount of the claim, and priority of the claimant class. If proofs of claim are not filed within the deadline established for proofs of claims, they will be considered inadmissible. The administrator shall assist the claimant(s) with the required formalities and ultimately produce a claims list detailing all claims in a standardized manner that shall be free for viewing by the public.

The estate shall then be used to satisfy all admissible claims against the debtor as well as administrative claims.

However, the following claims are not considered as admissible:

1) interest accruing on claims from the date of the opening of the insolvency proceedings;

2) costs incurred by creditors by reason of their participation in the insolvency proceedings;

3) fines, administrative penalties and other incidental legal consequences of a criminal or administrative offence which obliges the debtor to pay;

4) claims for which no consideration was owed by the debtor in return;

5) claims for the repayment of a loan made to the debtor by a person holding directly or indirectly not less than ten percent (10%) of the equity capital of the debtor, or recourse claims against the debtor for a loan guaranteed or secured, or caused to be guaranteed or secured, by such a person. If the debtor is a partnership, the claims in this paragraph shall apply only when all general partners of the debtor are companies;

6) claims for recourse which co-debtors or guarantors may have against the debtor if they satisfy a creditor’s claim;

7) claims for which the proofs of claim were filed after the deadline established for the filing of proofs of claims;

8) subordination of claims for which ineffective in insolvency proceedings has been agreed between the creditor and the debtor; and

9) interest on claims of the aforementioned kind.

5. THE CREDITORS’ MEETING

At the opening creditors’ meeting, the administrator shall indicate whether there is the possibility of maintaining the debtor’s business, in whole or in part, shall report on the general situation of the debtor’s business, the causes of the current situation, and the chance of a plan of compromise being implemented, and its effects on the creditors.

The following shall occur at the creditors’ meetings:

• The creditors shall decide, based on the administrator’s report, whether to continue the insolvency proceedings;
• The creditors shall vote on any plan of compromise proposed;
• The claims list shall be verified; and
• The creditors may also decide on other matters related to the insolvency proceedings.

Approval of the claims list shall be made at the creditors’ meeting. The validity, amount, secured status and priority of claims can be challenged, and a judgement on such must come from the court. The administrator will finalize the claims list once the court has passed judgement on the disputed claims.

The opening creditors’ meeting may be adjourned to allow a proposal for a plan of compromise at a subsequent creditors’ meeting, but not by longer than 60 days.

6. PLAN OF COMPROMISE

The court can decide to liquidate the estate of the debtor upon its own motion, however to possibly avoid liquidation, a debtor, or its creditors, may initiate a plan of compromise. A plan of compromise must be submitted to the court at least seven (7) days prior to the relevant creditors’ meeting. The plan of compromise can be any approach to settling the insolvency, including, but not limited to:

Approval of the plan of compromise shall come at the relevant creditors’ meeting. The creditors are grouped into one of three categories: secured claims, state taxes, and those with unsecured claims. To pass, the plan of compromise requires the approval of the following:

7. SATISFACTION OF CLAIMS

Should a plan of compromise not find approval, when it comes to the satisfaction of claims, the liquidated estate shall satisfy creditors in the following manner:

• Employees, administrator’s remuneration and fees, administrative fees & court fees;
• Employees, administrator’s remuneration and fees, administrative fees & court fees;
  Secured Creditors;
• The claims list shall be verified; and
• Secured Creditors;
• State Taxes;
• Unsecured Creditors.

As previously mentioned, there are industry specific rules under the banking, insurance and securities laws, and these contain a different ranking of creditors to that of the Insolvency Law for those entities subject to them.

As expressed in the Civil Code, Cambodian Law allows for the creation of security interests. The Law on Secured Transactions, promulgated on 24 May 2007, has further developed security interests, and parties are able to state under which law the security interest has been created under. Security can be over either the entire estate of the debtor, or over a specific asset. These created security interests allow a creditor to become a secured creditor, and therefore, once insolvency proceedings are established, they are ranked higher and more likely to receive the debt owed.

All assets of the estate shall be converted into cash by the liquidator, and the distribution of the proceeds shall be distributed within six (6) months of the commencement of the liquidation.

The liquidation terminates the insolvency proceedings. A final creditors meeting shall be held to adopt the final account of distributions, and the debtor shall recover the right to dispose freely of any remaining assets in the estate. If the debtor is a company, the company shall be deemed to be dissolved, unless all claims have been satisfied fully.

The debtor can apply to the court to be released from all admissible claims which were not satisfied, unless, amongst other possibilities, the debtor was convicted of a crime involving dishonesty or fraud in connection with the insolvency or the debtor had been released from unsatisfied claims in other insolvency proceedings in the last ten (10) years. Any creditor who was not fully satisfied may make an application to the court to resume insolvency proceedings within one (1) year of the termination of the insolvency proceedings, however the court will only intervene where amounts allocated for contested claims are released or assets have been discovered that were not taken into account in the original insolvency proceedings.

8. CONCLUSION

Cambodia’s Insolvency Law is in line with international standards promoted by the WTO. Insolvency proceedings can help a debtor to clear overwhelming debts and even allow a business to get a new start through restructuring all debts in a single instance via a plan of compromise. The creditor(s) will benefit by such a proceeding by having a pathway to debt recovery, however there may be limited recovery of the full debt obligations. While not a new law, the Insolvency Law has yet to be widely used as a way to clear overwhelming debts, yet there is a sufficient legal framework in place in Cambodia to handle such insolvency cases. Given the extreme economic turmoil brought about by the Covid-19 pandemic, more use of the law could unfortunately be on the horizon.

1. INTRODUCTION

The Law on Competition was promulgated on 05 October 2021 and came into force on 06 October 2021. This law governs any activities that prevent, restrict or distort competition, and establishes and determines the authority of the Cambodia Competition Commission (“CCC”). The commission’s goal is to encourage fair and honest business relations, increase economic efficiency, encourage new businesses, and assist consumer access to high-quality, low-cost, diverse and versatile products and services.

In February 2002, prior to the promulgation of the Law on Competition, the National Assembly adopted the Law on Marks, Trade Names and Acts of Unfair Competition (“Trademark Law”). The Trademark Law protects trademarks but also prohibits acts of unfair competition, however the unfair competition provisions are short, broad and vague. The law states that any act of competition contrary to “honest practices” in business is prohibited. The Law then lists three types of behavior as specifically, but not exclusively, forbidden:

• All acts which create confusion with the establishment, the goods, or services of a competitor;
• False allegations which discredit a competitor or a competitor’s goods or services; and
• Indications or allegations which are liable to mislead the public as to the nature, manufacturing process, characteristics, suitability, or quantity of goods.

As with much of Cambodian law, there appears to have been no official interpretation or precedential cases explaining these provisions.

With the Law on Competition now in place, this law applies to all Persons conducting business activities, or any actions supporting business activities, which significantly prevent, restrict or distort competition in a Market in the Kingdom of Cambodia regardless of whether the activities take place inside or outside the territory of the Kingdom of Cambodia.

1. UNLAWFUL ACTIVITIES WHICH RESTRAIN, RESTRICT OR DISTORT COMPETITION

Should a construction fall under the jurisdiction of the Minister of the MLMUPC, the owner, either an individual or a legal entity, can apply for a construction permit at the one window service of the MLMUPC and may apply for an extension of validity of the construction permit only once. The internal process of the issuance of the construction will take at least 45 days after the one window service has ISSUED the receipt of the application. If necessary, the MLMUPC may assign officer(s) to conduct an on-site investigation of the construction design.

2. COMPLAINT AND INVESTIGATION PROCEDURE

Under the Law on Competition, there are three procedures for an infringement case:

3. PENALTIES

Under the Law on Competition, the available penalties include a warning letter, suspension, revocation or the withdrawal of business registration certificates, business licenses, or business permits, monetary fines, pecuniary penalties and imprisonment. The penalties for a natural person or a legal person who violate the Law on Competition are detailed as follows:

1. INTRODUCTION

In Cambodia, three institutions have the authority to issue construction permits:

• The Minister of the Ministry of Land Management, Urban Planning and Construction;
• The Governor of the Board of Governors of the Capital & Provinces; and
• The Governor of the Board of Governors of the Municipalities, Districts or Khans.

This newsletter covers only the formalities and procedure for the issuance of construction permits at the Ministry of Land Management, Urban Planning and Construction (“MLMUPC”) based on the new Prakas No. 013 DNS/Br.K/Ni.K issued on 20 January 2022 (“PK 013”). PK 013 consists of 7 Chapters and 23 Articles, and its annexes consist of the official application forms. Furthermore, this Prakas aims to regulate the formalities and procedures of the issuance of construction permits for real property development under the jurisdiction of the MLMUPC, specified in Article 4 of Sub-Decree 224 HNK.BK which was promulgated on 30 December 2020.

The Minister of the MLMUPC is authorized to issue construction permits and demolition permits for constructions of the following nature:

• All constructions with a floor size of over 3000 square meters;
• Reconstruction, Additional Construction or Renovation which will be constructed on a total floor size over 3000 square meters;
• All buildings with over 11 floors, including the ground floor;
• All constructions with a basement with a depth of more than 5 meters;
• Ground retaining walls with a height of over 5 meters
• Flammable and hazardous materials such as a station or depot which sells or distributes petroleum, gas or other petroleum products such as fuel storage bags, tanks or flammable gases, and including other workplaces with flammable products;
• Water storage tanks or containers with a height of over 15 meters or with the capacity to store over 50 cubic meters;
• All Constructions for sports, tourism and culture e.g. Stadiums, Golf Courses, Racetracks, Amusement Parks, Swimming Pools, Museums, Theatres, Conference Hall and Cinemas;
• Constructions that are located in an area of environmental protection, cultural protection, that are protected for historical significance, or other protected areas;
• Buildings, Towers or Constructions in Passenger Terminals, Railway Stations, Ports, Airports and Hydropower Stations which do not fall under the part of the road structure or part of the water works;
• Building Constructions, Towers or Gates at the International border;
• Telephone antenna towers and radio or television station antennas;
• Any construction which is not a building but has a height over 30 meters.

2. PROCEDURE

Should a construction fall under the jurisdiction of the Minister of the MLMUPC, the owner, either an individual or a legal entity, can apply for a construction permit at the one window service of the MLMUPC and may apply for an extension of validity of the construction permit only once. The internal process of the issuance of the construction will take at least 45 days after the one window service has ISSUED the receipt of the application. If necessary, the MLMUPC may assign officer(s) to conduct an on-site investigation of the construction design.

3. REQUIRED DOCUMENTS

The construction owner, as an individual, is required to file the application form with the following documents (certified by the competent authority) when requesting the issuance of a construction permit:

Furthermore, should the construction owner be a legal entity, they are required to attach further documents relating to the Construction Owner’s Identification documents, along with the 2 copies of the Memorandum and Articles of Association; other than for Non-Government Organizations or Associations.

Please be aware that after obtaining the construction permit, the construction owner shall apply for an opening construction permit. Once the construction has been completed, they shall apply for a closing construction permit/certificate of occupancy, to be legally entitled to use the construction or have the construction used.

1. INTRODUCTION

Cambodia is located in Southeast Asia and it is bordered by Thailand, Laos, Vietnam, and the Gulf of Thailand, making it an ideal country for import and export operations. Cambodia’s economy is pivoting towards sectors such as import and export, and is attracting increased investment. Real GDP growth is projected to reach 4.5% in 2022. Furthermore, as the government reopens the country, important sectors such as tourism, hospitality, as well as wholesale and retail, are beginning to recover.

Amid the backdrop of the pandemic, numerous investment projects have nevertheless been permitted by the government to operate in Cambodia. According to the latest available data, there were 134 investment project proposals approved in the first nine months of 2021 by the Council for the Development of Cambodia (CDC), of which 33 were established inside special economic zones. The Ministry of Industry, Science, Technology, and Innovation (MISTI) also approved 124 new industrial projects in 2021, from January to September. It brought the total of investment factories operating in Cambodia to 1,843. Furthermore, there was a significant increase in the import of raw materials for the garment sector in the first eight months of 2021. It is clear to see through the establishment of these new projects that there is positive progress regarding investment in Cambodia, despite the challenging global conditions.

The recently promulgated Law on Investment will assist the new economic recovery plan. Cambodia has also ratified Cambodia-China Free Trade Agreement (taking effect on 1st January 2022), and the Regional Comprehensive Economic Partnership (RCEP); the world’s largest free trade agreement, covering nearly a third of the global population and about 30 per cent of the global gross domestic product – taking effect on 1st January 2022. In addition, the Cambodia-Republic of Korea Free Trade Agreement was signed in October 2021. These agreements should also play a role in attracting increased FDI in Cambodia alongside the new Investment Law.

2. WHY INVEST IN CAMBODIA

Cambodia is a member of the Association of Southeast Asian Nations (ASEAN). Whilst it currently has lower traffic on most goods traded within the bloc, and is in the process of integrating its legal system with those of the other members of ASEAN, investment in Cambodia is very favorable for three main reasons:

3.THE ESTABLISHMENT OF THE COMPANY

Currently, the available forms of business entities that can be established and registered legally in Cambodia are governed by the Law on Commercial Rules and Commercial Register, promulgated on 26 June 1995, the Law on the Amendment of the Law on Commercial Rules and Commercial Register, adopted on 18 November 1999 and the Law on Commercial Enterprises, adopted on 26 April 2005. There are no bars to foreign ownership of any form of business entity in Cambodia, other than the bar to owning land. The available forms of business in Cambodia are expanded upon below:

4. THE 2021 LAW ON INVESTMENT

Promulgated on 15 October 2021, the new Law on Investment (New LoI) aims to establish an open, transparent, predictable and favorable legal framework to attract and promote quality, effective and efficient investment by Cambodian nationals or foreigners. This is to enable socio-economic development in the Kingdom of Cambodia, by increasing Cambodia’s competitiveness, increasing the productivity of local industries, establishing an investment incentives regime and providing protection to investors’ rights.

The 2021 LoI replaces the 1994 Law on Investment and the Amendment of the Law on Investment 2003. The LoI includes 12 chapters and 42 articles which apply to all investment projects registered with the CDC or the Municipal Provincial Investment Sub-committees. These registered investment projects comprise the following:

• “Qualified Investment Projects” (QIPs): A QIP is an investment project that has received a registration certificate from the CDC or a Municipal Provincial Investment Sub Committee.
• Expanded Qualified Investment Projects” (EQIPs): An EQIP is an expansion of a QIP in any form, including expansion of existing production, expansion through product line diversification within the same lines, expansion through the use of new technologies that enhance productivity or protect the environment, expansion of infrastructure to serve basic telecommunications services, or expansion in any other forms to be determined by the Sub Decree.
• “Guaranteed Investment Projects”: A GIP is an investment project registered with the CDC or a Municipal Provincial Investment Sub Committee, and is clearly mentioned as an investment project that is not eligible for tax incentives.

5. UPCOMING DEVELOPMENTS

The Law on Concessions had some notable omissions, and was inconsistent with international standards and the actual conditions of the management and implementation of Public and Private Partnership (PPP). It was replaced by the Law on the Public and Private Partnership (PPP), adopted on 18 November 2021, to promote, encourage and attract more local or foreign investors in Cambodia and it will apply alongside with the new Investment Law. Moreover, the law makers will adopt new legal legislation and frameworks to conduct and clarify the new Law on Investment, specially to adopt a new Negative List in order to replace the current Sub-Decree. Regarding dispute settlements, in order to improve the current dispute settlement mechanisms and to attract increased investment, the government is planning to establish the Commercial Court, which will be competent to enforce the new LoI.