MYANMAR What You Need to Know Before Investing

Transcription

1 MYANMAR What You Need to Know Before Investing By: Kelvin Chia Yangon Ltd Copyright: Kelvin Chia Yangon Ltd This document is intended only for IE Singapore and should not be distributed to any other person or entity.

2 Introduction: Kelvin Chia Yangon Ltd Part of the network of law firms of Kelvin Chia Partnership ( KCP ), a regional law firm headquartered in Singapore with offices and transactional experience throughout Southeast Asia Established in 1995: the oldest foreign legal consultancy firm based in Yangon Full range of corporate and commercial services Substantive experience in transactional work, particularly in crossborder issues and in Myanmar s key industry sectors Assists and advises clients on investment structures and the setting up of investment vehicles, including provision of corporate secretarial services Seamless combination of international and local legal expertise with local Myanmar team working in conjunction with foreign/international lawyers from the KCP network

3 Today s Agenda 1. Current Myanmar Investment Framework 2. Key Steps in Investing in Myanmar 3. Significant Issues/Aspects 4. Q & A Session

4 Has the new Foreign Investment Law been enacted? Should I wait for it to be passed before investing? Is there an existing legal framework for investing now?

5 General Legal Framework for Investing in Myanmar Key mainframe laws to consider: State-Owned Economic Enterprises Law ( SOEEL ) Foreign Investment Law (note: MIC permit) Companies Act (note: permit to trade and registration) Note: Relevant rules, regulations, notifications and internal directions/policies, as well as industry/sector-specific laws, should also be considered.

6 General Legal Framework for Investing in Myanmar IS THE INDUSTRY/SECTOR CONCERNED RESERVED TO STATE-OWNED ENTERPRISES? Reserved industries/sectors are listed in the SOEEL. 12 industries/sectors are listed in the SOEEL. If a reserved industry/sector, then foreign investment may still be possible with the approval of the Myanmar Government. Joint venture between state organization/enterprise; citizen and/or foreigner Any person or economic organization subject to prescribed conditions Other forms of collaboration, e.g., production sharing

7 Reserved industries/sectors under the SOEEL Extraction and sale of teak Forest plantations Exploration, extraction and sale of petroleum and natural gas, and production of the products of the same Exploration, extraction and export of pearls, jade and precious stones Certain kinds of breeding and production of fish and prawn Postal and telecommunications services Air and railway transport services Banking and insurance services Broadcasting and television services Exploration, extraction or export of metals Electricity generation services Manufacture of products relating to security and defense Note: There may be additional reserved sectors which are not otherwise on the list (e.g., education, trading).

8 General Legal Framework for Investing in Myanmar SOME KEY POINTS TO CONSIDER UNDER CERTAIN CURRENT INTERNAL POLICIES/DIRECTIONS General classification of business activities into the following: Industrial (manufacturing) Services/Construction Trading Currently, trading activities are reserved to Myanmar nationals and companies wholly owned by Myanmar nationals.

9 Investing under the Foreign Investment Law (FIL) main criteria for investment: Support the national economic development plan Opening up of more employment opportunities Increase exports Production for import substitution Production of products which require heavy investment To develop high-skill technology and develop advance technology for production Development of the manufacturing and services sector requiring heavy capital Businesses which would save energy consumption Exploration/Production of new energy and renewable energy Development of modern industries Conservation of the environment General Legal Framework for Investing in Myanmar The Myanmar Investment Commission Formed under the Foreign Investment Law Reviews investment proposals Issues MIC Permit and Decision

10 Incentives under the Foreign Investment Law (1988) Tax Holiday 3 years from commencement of commercial production* Exemption of Tax on Profits which are Reinvested If they are maintained in a reserve fund and re-invested therein within 1 year after the reserve is made Reduction of Tax on Profits from Export up to 50 percent on the profits accrued from exported goods

11 Incentives under the Foreign Investment Law (1988) Accelerate Depreciation at the rate fixed by the MIC* Payment of taxes for Expat Employees At rates applicable to citizens Deductible from assessable income R&D expenses Deductible from assessable income

12 Incentives under the Foreign Investment Law (1988) Carry forward losses Carry forward losses for 3 consecutive years If losses are sustained within two years after the initial tax holiday Tax exemption on Imports Imported Equipment and Materials used in business for the period of construction and for the first 3 years of commercial production*

13 Given the existing investment framework, what are the key steps/procedures for investing? Do I have to go to the MIC or not?

14 Key Steps in Investing in Myanmar 1. Define your intended business activity in Myanmar 2. Identify the relevant ministries/authorities in charge of the business sector/activity 3. Establish contact with the relevant ministries/authorities (need for endorsement/no objection for the investment applications) 4. Determine the appropriate entity to be established in Myanmar Note: Sourcing for local partners and land ahead, where applicable, is also critical.

15 Key Steps in Investing in Myanmar DEPENDING ON THE NATURE AND REQUIREMENTS OF THE PROPOSED BUSINESS ACTIVITY/INVESTMENT, AN INVESTOR MAY TAKE EITHER OF TWO ROUTES IN GENERAL: MIC route (with MIC Permit) Industrial (manufacturing) Reserved sectors Services Companies Registration Office ( CRO ) route (without MIC Permit) Only for services company and branch/representatives offices Note on branch/representative offices in Myanmar

16 Key Steps in Investing in Myanmar Under the Foreign Investment Law Reserved sectors/industrial Long-term lease Import licence Tax incentives/ guarantees Minimum capital requirement Under the Companies Act Service companies/branches One-year lease No import licence No tax incentives/guarantee s Minimum capital requirement

17 MIC and Incorporation Myanmar Investment Commission Approval Regulated by the Foreign Investment Law which is administered by the MIC Establishing a Company Establishing a Branch Office Cabinet Committee Executive Committee Applying for a Permit to Trade With the CRO (Business License) Registering Company or Branch Office with the CRO Regulated by the Myanmar Companies Act and Administered by the Directorate of Investment and Company Administration under the Ministry of National Planning and Economic Development

18 Is the MIC a one-stop shop? Ministerial support/ministerial submission How long is the MIC application process? What are the documents to be submitted to the MIC? Economic Justification/Draft Contracts Is there any situation where I do not have to go to the MIC?

19 Corporate Vehicles Type of vehicles Activities Is an MIC Permit required What is the minimum capitalization Are tax Incentives available Tax Status Private Company Industry Yes US$500,000 Yes Resident foreigner Private Company Services Depending on the needs of the business land lease and import of goods US$300,000 with an MIC Permit US$50,000 without an MIC Permit Yes No Resident foreigner Resident foreigner Branch office Representative office/ Services No US$50,000 No Non-resident foreigner

20 Is a wholly foreign owned entity allowed for investments? Can I enter into joint ventures? Minimum 35% foreign shareholding requirement Joint ventures may be preferred/encouraged in certain sectors

21 Key Challenges for Joint Ventures Sourcing for appropriate local partners Conducting due diligence Structuring the joint venture - Current restriction on direct acquisition of shares in wholly Myanmar-owned local companies) - Onshore versus offshore Dispute resolution

22 Significant Issues/Aspects Land Employment Foreign Exchange Dispute resolution

23 Dealings in Land Foreigners may not purchase/own land Foreign-owned companies with an MIC permit may obtain long-term leases (up to 60 years in total; longer period is possible in SEZ) Under Notification 39/2011, foreigners may lease land from private entities (with government approval) Foreigners and foreign-owned companies without an MIC permit may lease residential and commercial units for not more than a year at a time.

24 Employment (under the new draft FIL) Local hiring requirements Unskilled labour: 100% Skilled labour: 25% during the first 5 years, 50% during the next 5 years, 75% in the third 5 year period Training Provide training for citizens for skilled positions Applicable regulations Overtime wages, leaves and holidays, workmen compensation, social security, etc. Note on proposed minimum wage law

25 Termination and Retrenchment Length of Employment Notice Pay Less than 3 months - Severance payment 3 months to 1 year One month s salary One month s salary 1 to 3 years Two months salary More than 3 years Four months salary Notice: No legal requirement Customary to give one month s notice

26 Foreign Exchange Restrictions Taking currency out of Myanmar Receiving payments outside of Myanmar and then using them outside of Myanmar Transacting in foreign exchange in Myanmar Remitting money out of Myanmar

27 Repatriation with MIC Approval What may be remitted Conditions for remittance Net profits after taxes Remaining funds after taxes Capital where the company is liquidated Damages By permission from the MIC Annual Audit /Report submitted to MIC Application to remit must be based on the audit report MIC will specify approved amount

28 Dispute Resolution New Developments Myanmar Arbitration Act New York Convention Myanmar Arbitration Act Myanmar not a party to the New York Convention implications Note on developments re: potential entry of Myanmar into the New York Convention

29 For more information on investing in Myanmar, please contact: Marlon Wui, Partner, Kelvin Chia Partnership U Than Maung, Senior Associate/Advocate, Kelvin Chia Yangon Ltd. utm@kcyangon.com We also invite you to learn more about Kelvin Chia Partnership and its regional capabilities by visiting our website at: Singapore Tokyo Shanghai Bangkok Hanoi Ho Chi Minh City Yangon Phnom Penh Pyongyang

30 Thank you for listening! We look forward to assisting you in Myanmar soon.