INTRODUCTION
Because of growing international interest in the Myanmar economy, which is currently undergoing restructuring, and due to continuing reforms of its antiquated regulatory framework, demand for information and advice regarding the country’s legal system and regulatory environment is increasing.
Myanmar offers attractive business opportunities through its strategic geographic location between China and India, sizeable low-cost workforce, rich supply of natural resources, including fertile agricultural land, and natural and cultural sites that have the potential to become international tourism destinations.
While Myanmar offers great opportunities, investors must be aware of the ever-evolving regulatory framework in which they are operating and should tailor their plans to the realities of the local market. As in other Southeast Asia frontier markets, BNG Legal can help you to effectively do business in this promising, yet challenging market.
TAXATION
Overview of Legal Entities for Foreign Investment
Foreign investors wishing to conduct business activities in Myanmar can establish a foreign-owned company, an overseas corporation, sole proprietorship, partnership, or joint venture.
Foreign Company
Foreign investors wishing to conduct business activities in Myanmar can establish a foreign-owned limited liability company, branch office of an overseas corporation, representative office of an overseas corporation, sole proprietorship, partnership, or joint venture.
Depending upon the business scope of the entity, foreign investors can own up to 100% of Companies. Company can be registered under the Myanmar Companies Law 2017 (“MCL 2017”). Myanmar law provides for two types of companies: private and public companies. There are three categories of companies whether public or private: a company limited by shares; a company limited by guarantee; and an unlimited company. A private company must have one shareholder and a maximum of fifty shareholders. In a public company, it must have minimum of three directors and there is no limit on the number of shareholders, at least one of which must be a Myanmar citizen, an ordinarily resident in Myanmar. A person is deemed an ordinarily resident if he or she holds permanent residence of Myanmar or be resident in the Myanmar for at least 183 days during every calendar year.
Foreign Company means a company incorporated in the Union in which a foreign individual or entity owns or controls an ownership interest of more than thirty-five percent. It means that if more than 35% of a company’s shares are directly or indirectly owned by foreign shareholder, the company will be classified as a foreign company. No minimum capital requirement exists for the incorporation of a company under Myanmar Company Law 2017. However, minimum capital requirements may be set by relevant government authorities depending upon the entity’s business operations.
Every Company will have a constitution to bind a company and its members including their heirs and legal representatives to observe all the provision of the constitution. The Directorate of Investment and Company Administration (DICA) published a model constitution, which is not mandatory to follow and can be modified. Any person may apply to Companies Registry Office (CRO) via online platform to incorporate and register under the Myanmar Companies Law. Every Company must open a registered office in Myanmar within 28 days at the date of registration. All Companies must file the annual return with the registrar within 2 months of its corporation and once at least every year.
Overseas Corporation
An overseas corporation operating in Myanmar may register the entity to carry on business in the Union. An overseas corporation may not be registered if it has a name identical or closely resembles to that of a body corporate in existence that is already registered in Myanmar. The overseas company shall appoint an ordinarily resident authorised officer who is authorised to accept the service of documents in Myanmar on behalf of the overseas corporation. The overseas corporation notify to DICA of any changes relating to the corporation. Every overseas corporation shall file a balance sheet made up to the end of its last financial year; a copy of its cash flow statement for its last financial year; and a copy of its profit and loss statement for its last financial year annually. Also, the annual return must be filed with the registrar within 28 days of the end of its financial year.
Investment Entities
A foreign company may establish its business in the form of a 100% foreign-owned company, register as an overseas corporation, or enter into a joint venture arrangement with a local entity, citizen, state owned entity. The aforementioned types of entitles are permissible under the Myanmar Investment Law and Myanmar Company Law.
There are two categories of investment approval procedure, one is a Myanmar Investment Commission (MIC) permit and the other one is an investment endorsement. The investor can invest after receiving the permit from the commission for the investment activities stipulated in the Myanmar Investment Rules. If the investors are not in the category of investment activities acquire a MIC permit, he may apply an investment endorsement in order to enjoy the rights to use long-term lease land and other incentives. A Joint Venture is permissible for any project in Myanmar, but there are certain business sectors specified in the MIC notification 15/2017 which require a citizen or local company.
Restriction and Prohibition on Investment Businesses
Myanmar currently offers a wide range of opportunities for foreign investment. Nevertheless, depending on the entity’s business scope, several restrictions may apply. The MIC issued Notification 15/2017 on April 10, 2017, which sets out the following restrictions:
| Types of Restrictions |
Business Categories |
| Prohibited investment activities |
Arms and weapons manufacturing, forest management, electric grid system administration, air traffic services, pilotage services, and others |
| Investment areas reserved for Myanmar citizens |
Manufacturing of forest products, establishment of animal quarantine stations, exploration and production of gemstones (including jade), pet care services, tourism services, fresh water fisheries services, and others |
| Business lines to be carried out by joint venture |
Manufacturing/distribution of plastic products, flammable solids and liquids, oxidants, corrosive chemicals, confectionery, spirits, food products, drinking water, soap, and cosmetic products; real estate development projects; tourism services; and others |
| Business lines that require approval from a particular ministry or other governmental body |
Media and broadcasting services, investment relating to fisheries, import and export services, telecommunication services; production/distribution of mineral water, beer, and cosmetics; and among others. |
In addition, certain large-scale or environmentally-sensitive investment projects require an environmental impact assessment report. Foreigners are prohibited from investing in projects that adversely affect public health, produce hazardous or poisonous wastes, or that cause significant harm to the environment.
Investment Incentives and Guarantees
A foreign investor under MIL has the right to a wide range of benefits and incentives at the discretion of the MIC. These incentives include:
Income tax exemption for 3 years for adequately-developed regions, 5 years for moderately-developed regions, and 7 years for less-developed regions, each exemption starting from the year beginning from the commencement of commercial operations;
If the investor reinvests profits from its business within one year, the tax exemption/relief may be extended to income from such reinvested profit;
A right to accelerate the depreciation rate for the machinery, equipment, buildings, or other working capital and to claim the same as a deductible expense;
The income tax exemption will be allowed for up to 50% of the profits on the exported product;
Exemption or relief of commercial tax on the products manufactured for export.
Also, the Government guarantees the foreign investors under the Myanmar Investment Law as follows:
The entity will not be nationalized during the term of the project;
The investor will not be nationalized and revoked without sufficient cause during the terms of the project; and
The investor shall have the right on payment of fair compensation in the same currency in which the investment was made if it is necessary for public-interest.
Special Economic Zones
In order to attract foreign investment, the Myanmar government has established three Special Economic Zones:
Income tax exemption for 3 years for adequately-developed regions, 5 years for moderately-developed regions, and 7 years for less-developed regions, each exemption starting from the year beginning from the commencement of commercial operations;
The Thilawa Port SEZ near Yangon;
The Kyauk Phyu SEZ in the Western Rakhine State; and
The Dawei SEZ in the Southern Thaninthayi Region.
The investment approval for investors (locators) in Special Economic Zone is granted by the SEZ Management Committee under the Special Economic Zone Law 2014. The SEZ Committee is responsible for processing applications from foreign investors for projects under the SEZ Laws and for granting related long-term land use rights, as well as tax exemption and relief.
Exemption and Relief under SEZ Law, the investor is entitled:
Income tax exemption for the first seven years from the commencement of the commercial operation for the investment business in a free zone;
Income tax exemption for the first five years from the commencement of the commercial operation for the investment business in a promotion zone;
50% relief on the income tax for the second five-years period for the investment business in a free zone and promotion zone; and exemptions from customs duties and other tax for five years from the commencement of importing equipment and instruments required for the business, 50% relief of custom duty and other taxes for five consecutive years.
TAXATION
The major tax laws in Myanmar include the Union Taxation Law of 2020, Commercial Tax Law of 1990, Income Tax Law of 1974, which was amended in 2011, the Myanmar Stamp Act, and the Tax Administration Law of 2019. The Union Taxation Law 2020 applies to the 2020/2021 fiscal year ending September 30, 2021.
Taxation of Companies
Scope
Corporate income tax is charged on the gross income or net profit obtained within the tax year.
Tax Rates
Corporate tax rates vary depending on the type of taxpayer and the nature of the income. The current rates in Myanmar are as follows:
| Category of Taxpayers |
Tax Rates |
| Companies incorporated under MCL 2017 or the Special Company Act of 1950 |
25% |
| Companies incorporated under MIL 2016 |
25% |
| State-owned enterprises |
25% |
| Non-resident foreigners, excluding salary income |
25% |
| Capital Gains Taxes |
Tax Rates |
| Individual or association taxpayer |
25% |
| Oil and gas sector companies |
40% – 50% |
Capital Gains Tax
Capital Gains Tax is calculated based on the difference between the sale proceeds and the cost of the asset, less the accumulated tax depreciation allowed under Myanmar tax laws.
Capital gains are taxable at 10% for an individual person or an association of persons. The tax must be paid in the type of currency earned if the individual is a non-resident foreigner. Capital gain for shares in oil and gas companies is subject to 40% and 50% tax rates.
Dividends
Dividends are not subject to tax under Myanmar’s laws.
Withholding Tax
Any person making any of the following payments is required to withhold income tax at the time of payment at the rate listed below.
| Types of Payment |
Rate Applicable to Resident |
Rate Applicable to Non-Resident |
| Interest |
None |
15% |
| Royalties paid for the use of licenses, trademarks, patents, etc. |
10% |
15% |
| Payments by Union (Country) level organizations, Department of Union Ministers, Nay Pyi Taw Council, regional or state governments, state-owned enterprises, municipal organizations for the purchase of goods, work performed, or the supply of services within the country under a tender, bid, quotation, contract, agreement, or other forms |
2% |
2.5% |
| Payments by enterprises carried out jointly with the State on a mutual-benefit basis; joint ventures, partnerships, companies, associations of individuals, organizations, or associations registered and organized under the existing law; cooperatives, foreign enterprises for the purchase of goods, work performed, or supply of services within the country under contract, agreement, or other forms |
None |
2.5% |
Tax Losses
Taxpayers are entitled to carry losses forward for up to 3 years, except in the case of capital losses and shares of losses from associations of persons. Losses, however, cannot be carried back.
Double Tax Agreements
Tax law provides that if Myanmar and a foreign state sign and ratify an agreement relating to income tax, the agreement will be followed, notwithstanding anything to the contrary contained in any other provisions of International Trade Law.
Myanmar has entered into Double Tax Agreements (“DTA”) with the United Kingdom, Singapore, Malaysia, Vietnam, Thailand, India, Bangladesh, Indonesia, South Korea, and Laos.
Taxation of Individuals
Scope
A person domiciled in Myanmar is deemed a resident. In the case of foreigners, those who reside in Myanmar for at least 183 days during the fiscal 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.
Tax Rates
Income tax is levied at the following progressive rates on the salary received by residents and non-resident foreign nationals in Myanmar Kyats (“MMK”) and foreign currency, after tax deductions, exemptions and allowance.
| Taxable Income (MMK) |
Rate Applicable to Non-Resident |
| From |
To |
|
| 1 |
2,000,000 |
0% |
| 2,000,000 |
5,000,000 |
5% |
| 5,000,000 |
10,000,000 |
10% |
| 10,000,001 |
20,000,000 |
15% |
| 20,000,001 |
30,000,000 |
20% |
| Over 30,000,000 |
|
25% |
Relief and Allowances
The following relief permitted shall be deducted from the total income of the individual:
Parent: 1,000,000 MMK per parent;
Spouse: 1,000,000 MMK; and
Children: 500,000 MMK per child.
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.
The commercial tax is applicable as follows:
5% commercial tax is charged on exports of crude oil.
8% commercial tax is charged on exports of electricity.
1% commercial tax is charged on the sale proceeds of gold jewelry and landed costs of imported jewelry.
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 the Union Taxation Law of 2020 (“UTL 2020”).
5% commercial tax is charged on the revenue from domestic services, except for services provided in UTL.
Under UTL 2020, goods and services that are exempt from commercial tax are classified into different categories, of which 43 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.
Stamp Duty
The Stamp Duty is applicable 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 immoveable property: 0.5% – 2 % based on the term
Conveyances: 2% on the value
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.
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.
INTERNATIONAL AGREEMENTS
World Trade Organization
On February 21, 2013 a new World Trade Organization (“WTO”) reference center opened in Myanmar. Myanmar is a long-standing member of the WTO. Nevertheless, because it is considered a “least-developed country,” Myanmar has not been required to make substantial concessions in offering market access, in maintaining most-favoured nation status, or in guaranteeing non-discriminatory treatment of foreign investors.
Other International Treaties
Myanmar is a party to certain multilateral investment treaties, including the ASEAN-Australia-New Zealand Free Trade Area and the Bay of Bengal Initiative for Multi-Sector Technical and Economic Cooperation, a broad-reaching treaty that aims to establish a free trade area among Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand.
Myanmar has also entered into several bilateral investment agreements with China, India, Laos, the Philippines, Thailand, Japan, Korea, and Israel. These agreements permit favorable treatment for investors from member countries in numerous service sectors.
LAND OWNERSHIP
In Myanmar, foreign investors and enterprises aren’t allowed to purchase immovable property and/or to lease for a term exceeding one year. However, the foreigner may obtain a long-term lease up to 50 years on the date of receipt of a Permit or an Endorsement of the Commission under MIL 2016. This initial term may be extended for two additional periods of 10 years, subject to approval of the MIC. The investor must register the land lease contract at the Office of Registry of Deeds in accordance with the Registration Law.
EMPLOYMENT
MIL 2016 permits foreign-invested companies to employ a citizen of any nationality who is a qualified as a senior manager, technical and operational expert, or advisor. For work that does not require a particular skill, the investor may only employ Myanmar citizens. The employment contract must be signed between the employer and employee in accordance with labor laws. As per Sec 5(a) of the Employment and Skills Development Law 2013, the employer must enter the employment contract with their employees within 30 days of employment. But there is no requirement for a written employment contract during the pre-training period or probation period before the appointment. Then, the employment contract shall be approved and registered to the relevant Township labor office. The registration requirement is enforced in practice for entities with five or more employees.
INTELLECTUAL PROPERTY
In 2019, the Myanmar Government enacted a group of intellectual property legislation, comprised of the Trademark Law, Industrial Design Law, Patent Law, and Copyright Law, in order to provide businesses and individuals with protections for their intellectual property rights that are in line with international standards.
The Trademark Law and the Industrial Design Law were enacted by the Pyi Htaung Su Hluttaw on January 30, 2019. The Patent Law was signed by the President on March 11, 2019. The Copyright Law was enacted on May 24, 2019.
These new laws will protect intellectual property rights by stipulating damages, fines, and customs actions in infringement cases. Moreover, Intellectual Property Courts will be established to handle all intellectual property issues and disputes, such as adjudications of applications, oppositions, invalidations, and cancellation actions.
