There are several ways to conduct business in Myanmar, as outlined below:
- Partnership/Joint Venture
- 100% Foreign owned companies
- Branch offices owned by a foreign company
- Non-profit associations
The commonly incorporated is the 100% Foreign company as most foreign corporation prefers full control of the company. The second commonly incorporated company is the Partnership/Joint Venture of ration 35% Foreign and 65% Local. With less than 35% shareholding by the foreign investor, the company entity will classified as a local entity and not a foreign entity. A local has privilege
In the case of a private limited liability company, the transfer of shares is restricted and the number of shareholders limited to a minimum of two and a maximum of fifty.
Public limited liability companies require a minimum of seven shareholders. 29 Section 27A of the Myanmar Companies Act stipulates that a foreign company, whether it is 100% foreign owned, a joint-venture or a branch/representative office, is required to obtain a permit and registration certificate. A joint venture with State equity which is formed under the Special Company Act 1950 does not require a registration certificate.
Following registration, a company must apply for a Certificate of Commencement of Business prior to beginning its operations.
The governing law for limited companies is the Myanmar Companies Act of 1914. A company with a share contribution to the State must be registered under the Special Company Act of 1950 and the Myanmar Companies Act of 1914.
There is generally no minimum share capital requirement. However minimum requirements exist for banking and insurance companies, foreign companies and branches of all foreign business. For foreign companies and branches, the minimum capital required in Myanmar is as follows:
- Industrial, hotels and construction: US$150,000
- Services, travels and tours, bank representative offices and insurance representative offices: US$50,000
The Foreign Investment Law sets out three different options for investing in Myanmar.
100% foreign capital provided by foreigner investors.
A joint venture with a set foreign and local capital ratio. The ratio may be sector specific and involves negotiations with the foreign investor, local partner, as well as government departments or bodies to create a Joint Venture Agreement.
Various forms of cooperation between the government and private companies in regards to the BOT and BTO schemes, as well as other schemes under a Joint Venture Agreement
The Government of Myanmar guarantees that any business holding an investment permit from MIC shall not be nationalised within the term of the contract or its extended term. The government also provides a guarantee against the suspension of any business which holds an investment permit before the permitted term has expired without sufficient cause. When the terms of the contract expire, the government guarantees the right of the investor to disburse his holdings of foreign currency under which the investment was made.
Legislative Requirements for Companies
The legal requirements for the companies to comply under the mar Companies Act 1914 are as follows:-
The name of the company shall be painted or affixed on the outside of its registered office and every place of business. It must also be engraved in legible characters on its seal and mentioned in all letterheads, notices, advertisements and other official publications, etc.;
Every company must have a registered office in Myanmar to which all communications and notices may be addressed. A notice of situation of the initial registered office must be filed in the incorporation documents. If the address is subsequently changed, notice must be submitted DICA within 28 days of the change;
Every private company is required to have at least one director. An un-discharged insolvent is not eligible to be a director. A return of particulars of Directors, Managers and Managing Agents and of any changes therein must be submitted to the Company Registry within 14 days of the appointment or changes;
Allotment of Shares:
Every company will have to give notice to the Company Registry of any allotment of shares within one month of the date of allotment
Annual General Meeting:
Every company must hold an annual general meeting once in every calendar year to lay its audited documents before its shareholders. A newly incorporated company is required to hold its first annual general meeting within 18 months of incorporation. Subsequent annual general meetings must be hold once in every calendar year and not more than 15 months after the last general meeting. The interval between the date of the financial year on which the audited accounts are made up and the date of the annual general meeting must be not more than 9 months;
Every company must file an Annual Return within 21 days after its annual general meeting. The annual audited accounts are required to be filed with the Annual Return;
Extraordinary and Special Resolutions:
Every company is required to lodge a copy of every extraordinary and special resolution within 15 days from the date of passing thereof;
Statements, Books and Accounts:
Every company must maintain proper books of accounts which are required to be kept at the registered office of the company;
Consequences of Non-compliance:
There are penalties for the company and its offices for any non-compliance with the law;
Land use rights
Investors are entitled to lease or use land for an initial period of 50 years depending on the type of business or industry and the volume of investment. The Myanmar Investment Commission may extend the period for a further 10 consecutive years on the request of investor.
Right to transfer foreign currency
Subject to the conditions outlined below, investors are permitted to transfer foreign currency overseas via a bank which is legally entitled to provide foreign banking services in Myanmar and in accordance with official exchange rates
MIC evaluates investment proposals using the assessment criteria outlined below:
a) Compatibility with the policies set out in the Foreign Investment Law
b) Financial trustworthiness
c) Economic solidity of the company and conformity with existing laws
Transfer of shares
The transfer of all shares to either a foreigner or Myanmar citizen requires the submission of a Share Transfer Form to the Commission Office. The new shareholder is entitled to the exemptions and reliefs set out by the Foreign Investment Law during the remaining contractual period.
Exemptions and reliefs
The Foreign Investment Law provides foreign investors with a number of financial incentives. Below is a list of the most significant exemptions and reliefs:
- Income tax exemption is granted for a period of 5 consecutive years starting from the year of commencement. It applies to commercial ventures engaged in the production of goods or services
- Income tax exemption or relief on business profits that are re-invested in a reserve fund and then re-invested within a year after the reserve is set up
- The right to deduct depreciation on profits for machinery, equipment, buildings and other capital assets that are subject to income tax assessment
- A relief from income tax of up to 50% on profits accrued from exported goods produced by a manufacturing business
- The right to deduct expenses for research and development activities carried out in Myanmar. The activities must be both relevant and necessary to the business’ objectives.
- The right to carry forward and set-off losses for up to three consecutive years, starting from the period when the loss was incurred
- Exemption or relief from customs duty or other internal taxes (or both) on imported machinery and equipment, machinery parts and other materials used during the period the business was constructed
- Exemption or relief from customs duty or other internal taxes (or both) on raw materials imported for production for the first three years after the construction of the business was completed
- exemption or relief from commercial tax on goods produced for export;
To ensure a smooth transition for local companies adjusting to the opening up of Myanmar’s markets, restrictions on foreign investment have been put in place in selected sectors. The restrictions are publicly issued as rules or notifications.
Generally speaking, there are three types of restricted economic activities:
- The prohibition of economic activities
- Certain investments may only be undertaken as a joint venture with a local partner or local company
- Economic activities which are permitted if in accordance with stipulated conditions
No. PROHIBITED ECONOMIC ACTIVITIES – Notification No. 15/2017
SPECIAL ECONOMIC ZONES (SEZs)
Concept and status The successful completion of Special Economic Zones is a high priority target for the Government of Myanmar, as SEZs will attract foreign investment, promote the export of goods and services and create much needed employment opportunities. Myanmar´s geographically strategic position between India, China and Thailand provides it with the opportunity to become a new manufacturing base and logistic hub in Southeast Asia.
The construction of three major SEZs is already underway in Dawei, Thilawa and Kyaukphyu. Each SEZ is linked to major infrastructure development projects, including the construction of deep sea ports, power grids and pipelines to neighbouring countries, and improved connectivity following the construction of major highways.
Myanmar´s SEZs offer a variety of investment opportunities for foreign investors – both during the development phase as well as post-completion.
Thilawa SEZ covers an area of 2,400 hectares and is located 14 miles (23 km) southeast of Yangon. It is being developed by Myanmar Japan Thilawa Development Limited, which is a joint venture between Myanmar and Japan. Myanmar’s government owns 10% of the project under the Thilawa SEZ Management Committee (TSEZMC). At present, Thilawa is the most advanced SEZ project: construction began in November 2013. A total of 45 companies from 11 different countries have already submitted investment proposals for Thilawa SEZ.
Kyauk Phyu SEZ
Kyauk Phyu SEZ is located in the western region of Rakhine State. The first phase comprises the development of 1,000 hectares of industrial park, a deep-sea port with a container handling capacity of 8,000 20-foot equivalent units (TEU) and 500 hectares of integrated residential area. A Singapore-based consortium has been assigned to develop the master plan, in close cooperation with the Bid Evaluation and Awarding Committee of KP SEZ. The SEZ Committee is currently evaluating Expressions of Interest from local and international developers for the development of a deep-sea port, an industrial park and an integrated residential area.
Dawei is located in Myanmar’s southern Tanintharyi Region. The initial phase of Dawei SEZ includes constructing a two-lane road, a wharf to accommodate 13,000- 20,000 tonnes of vessels, an industrial zone for labour intensive industries, a power plant, residential buildings and a water supply system. Future plans include a motorway linking Dawei SEZ with Thailand’s Kanchaburi province, as well as a railway and links to oil and gas pipelines. The Italian-Thai Development Public Company Limited was initially announced as the successful bidder to develop the 205 sqkm area. However in 2013, the government invited other international investors to submit fresh bids, with a final decision yet to be announced.
The Myanmar Special Economic Zones Law (No. 1/2014) was passed in January 2014 and stipulates the following tax incentives for investors
- Income tax exemption for the first seven years from the date commercial operations commence within an exempted zone or an exempted
- Income tax exemption for the first five years from the date commercial operations commence for businesses located within a promoted zone
or a SEZ
- 50% income tax reduction for the second five year period for businesses within an exempted or promoted zone
- 50% income tax reduction for the third five year period on profits derived from the reinvestment of a business that is within an exempted or
promoted zone (subject to conditions)
- Import duty exemption on the importation of raw materials, machinery, equipment and other specific goods which are used for prescribed
activities in an exempted zone
- Import duty exemption or 50% reduction for up to five years on raw materials, machinery and equipment that is imported by a business
located within a promoted zone
- Losses carried forward for five years from the date the loss was incurred
Commercial tax is payable on goods that are imported or produced in Myanmar, as well as trading sales and services. Rates vary from 3% to 100% and are listed in the table below. Other services and products are subject to 5% tax. A number of domestically produced products, (which are primarily agricultural) are exempt from commercial tax.
Personal income tax for foreigners
A non-resident's salary is taxed at a progressive rate as stated in the table below
0 - 2,000,000 kyats 0%
2,000,001 - 5,000,000 Kyats 5%
5,000,001 - 10,000,000 Kyats 10%
10,000,001 - 20,000,000 kyats 15%
20,000,01 - 30,000,000 Kyats 20%
The following tax reliefs are in place:
Basic relief (20% of the total salary income), but limited to MMK 10,000,000
Spouse relief (MMK 500,000) if a spouse has no assessable income
Child relief (MMK 300,000 per child) if the child is unmarried and enrolled in education
Premium paid for life insurance by the employee and his or her spouse
All contributions to social security funds
A non-resident foreigner is subject to income tax for income that is derived from all sources within Myanmar at a flat rate of 35% or at progressive rates ranging from 5% to 20%; whichever is greater.
Double Taxation Agreement
Myanmar has signed the Double Taxation Agreement with the United Kingdom, Malaysia, Singapore, India, South Korea, Thailand and Vietnam.
Labour regulations for foreign employees
The employment of foreign experts and technicians by enterprises which have been issued with a permit from the Myanmar Investment Commission is legal. Wherever possible however, preference should be given to Myanmar citizens. The requirements for employing foreign experts and technicians are outlined below:
- The investor must disclose the number of foreign experts and technicians he or she seeks to employ in the investment application form and
submitted to MIC
- After obtaining a MIC permit, a company must apply for appointment and stay-permits
- With the endorsement of MIC, a company must submit an application for work permits to the Directorate of Labour, which lies under the
Ministry of Labour, Employment and Social Security. Stay permits and visas are to be obtained from the Immigration and National
Registration Department, which lies under the Ministry of Immigration and Population
Recruitment of local staff
Businesses which are registered under the Foreign Investment Law are required to adhere to the following regulations
- During the first two years of operations, at least 25% of a company’s skilled workforce and technicians must be citizens of Myanmar, while in the second year it is 50% and the third year, 75%
- Provide skills training for local staff
- Unskilled positions must be filled by Myanmar citizens
- No differentiation in salary may be made on the basis of nationality for highly skilled staff
- Employment agreements for the appointment of staff must be in accordance with local laws
- Comply with labour laws regarding minimum wages, leave and holiday entitlements, overtime fees, damages, workers’ compensation, social
welfare packages, insurance and occupational terms and conditions as contained in the employment agreement.
A Minimum Wage Law was passed in March 2013, replacing the Minimum Wage Act of 1949. The current minimum wage has been revised to 4,800 Kyats per day. The new law provides a framework for determining minimum wages according to sector type. A tripartite minimum wage committee is responsible for setting minimum wages across different sectors, while surveys on living costs are conducted every two years. Importantly, the Minimum Wage Law stipulates equal pay for employees irrespective of gender. Further labour regulations are in the process of being developed. In 2014, the average monthly wage for unskilled workers ranges from US$60-70.
Social security contributions
- Social security contributions amount to 5% of the net monthly salary – 3% of which is contributed by the employer while the employee contributes 2%. Contributions are capped at MMK 15,000.
- Employers are required to withhold employees’ contributions from their salaries
- Social security contributions must be made in MMK currency
The Social Security Act of 2012 provides the following benefits to employees:
- General healthcare
- Compensation for work-related injuries and illnesses
- Maternity benefits General healthcare and treatment for work-related injuries are available at specified workers’ hospitals and social security clinics.