The Myanmar FDI nvestment Law 2016 And Rules 2017.

The Myanmar Investment Law 2016 And Rules 2017.

10 July, 2017

New investment laws, rules and procedures in Myanmar have sparked widespread interest as they introduce reforms to boost investor confidence, increase efficiency, ease the doing of business and attract more foreign investments into the country.

The Myanmar Investment Law 2016 (“MIL”) came into effect on 18 October 2016 and consolidates and replaces the previous Foreign Investment Law 2012 and the Citizens Investment Law 2013. The MIL, which provides the overall legal framework, was followed by the more detailed Myanmar Investment Rules 2017 (“Rules”) which came into effect on 30 March 2017 as well as two notifications: Notification 13/2017 dated 1 April 2017 (Classification of Promoted Sector) (“Notification 13”) and Notification 15/2017 dated 10 April 2017 (List of Restricted Investment Activities) (“Notification 15”).  Together, these represent the body of the current Myanmar foreign investment laws.

Here are some of the key highlights introduced under the MIL, Rules and notifications:

1. Scope of law and treatment of investors

The MIL, from its start date, applies to existing or new investments in Myanmar except for matters coming under the old Foreign Investment Law 2012 such as investment disputes or prior permit investments previously suspended from business operations before the start date or investment projects suspended by governmental measures under general and national security exemptions.

With the merging and consolidation of the Foreign Investment Law 2012 and the Citizens Investment Law 2013 into the new MIL, the Government will now treat foreign and local investment projects equally in terms of expansion, management, operation and sale of direct investments.

2. New or streamlined procedures for investment approval 

There are now two types of processes to obtain approval from the Myanmar Investment Commission (“MIC”), that is, the permit application process and the endorsement application process.

Proposal submission for permits 

A proposed investor must submit a proposal to MIC for a permit which relates to the following types of businesses:

Endorsement applications

The endorsement process speeds up the approval process for investments in non-restricted business activities (that is, activities that do not require a permit).  Endorsements entitle investors to enjoy land use rights and other exemptions and reliefs such as customs free duty and income tax exemptions.

According to Notification 13, if the business is in one of the “Promoted Sectors”, it may be possible to be a 100% foreign-owned business qualifying for endorsement by MIC or the relevant state or regional committee.  Investors can better understand what activities qualify for 100% foreign-owned treatment by reading Notification 13 together with Notification 15 (discussed below). Endorsement applications can be submitted to either the MIC or the relevant state or regional committee.

3. Prohibited investment activities

Prohibited investment activities include those which may (a) bring or cause hazardous or poisonous wastes into Myanmar, (b) bring technologies, medicines, flora and fauna and instruments which are still being tested abroad, except for investments made for research and development, (c) affect Myanmar’s ethnic groups’ traditional culture and customs, (d) adversely affect the public, (e) cause an enormous impact on the natural environment and ecosystem, and (f) manufacture goods or provide services that are prohibited by law.

4. Restricted investment activities

According to the MIL, Rules and Notification 15, the list of restricted investment activities are divided into the following categories:

• investment businesses allowed to be carried out only by the Republic of the Union of Myanmar
• investment businesses not allowed to be carried out by foreign investors
• investment businesses only allowed in the form of a joint venture with a Myanmar citizen or citizen owned entity (a Myanmar local minimum direct shareholding interest of at least 20% however is required with approval from the relevant Ministries).
• investment businesses requiring approval of the relevant ministries.

5. Investment screening application and guidance from MIC

For investors who are uncertain as to what type of investment they can engage in, MIC can pre-screen their investment applications for a nominal fee.  The project’s nature and all material information will need to be fully disclosed to allow MIC to assess what type of application needs to be made.  MIC can offer non-binding guidance within 10 working days from the date of application.

6. Tax incentives 

Tax exemptions or incentives may apply depending on a number of factors, including the following:

The zone in which the investment takes place: MIC may with the approval of the Government grant income tax exemptions in Zone (1) (less developed regions) for 7 years; in Zone (2) (moderate developed regions) for 5 years; in Zone (3) (adequate developed regions) for 3 years.

Whether the business is in a promoted sector: Notification 13 sets out a list of promoted sectors

Other factors such as the value of investment (must exceed USD300,000); whether the investment creates new employment opportunities in Myanmar and develops a skilled labour force, brings new or enhanced technology or business skills, leads to market competition, greater efficiency or productivity, or provision of enhanced infrastructure or services in Myanmar.

Applications for tax incentives may be submitted together with or subsequent to a proposal for a permit or application for endorsement, and must specify the precise tax incentives applied for.

7. Land use rights 

Investors who obtain permits or endorsements are entitled to obtain long-term lease rights (on land or building) for up to an initial 50 year period and two consecutive 10-year extensions. Such investors may apply to the MIC for a land rights authorization, which will be assessed by the MIC or relevant state or regional committee.

8. Transfers of funds

Foreign investors may transfer abroad funds relating to investments made under the MIL. Any transfers of funds shall be allowed only after paying all tax obligations imposed on such amount in accordance with the relevant tax laws. Foreign experts with legal work permits may make remittances abroad without any further deduction from the amount paid under income tax law.

Transfers of loan proceeds or taking a loan is subject to the approval of the Central Bank of Myanmar.

The approval of MIC  is also required in relation to the transfer of proceeds from a total or partial sale or liquidation, payments resulting from any settlement of investment disputes, compensation under investment or expropriation, or where the investor has any outstanding tax obligations, or any contingent or disputed obligations within Myanmar.

9. Insurance

Investors holding a permit or endorsement are required to take out relevant insurance based on the following types of insurance:  property and business interruption insurance; engineering insurance; professional liability insurance; professional accident insurance; marine insurance; and workmen compensation insurance.

10. Transitional and miscellaneous provisions

Under the Rules, any permit issued to an investor under the previous investment law shall remain effective until the permit expires.  If the investor wishes to take advantage of any additional or discretionary incentives available under the new law, the investor may apply to enjoy the new benefits. An investor who has commenced operation prior to the Rules coming into effect and who intends to change its original investment activities will have to apply for a permit if such change requires a proposal to be submitted.  However, for ownership structural changes (Myanmar local investment to foreign investment or vice versa) a proposal or endorsement application is not required to be submitted to MIC.

 Ref:http://www.conventuslaw.com/report/the-myanmar-investment-law-2016-and-rules-2017/

Myanmar Investment Law Official Translation 3-1-2017 by Than Han on Scribd

 

Foreign Investment Law in Myanmar~ 2012

An Introduction to the 2012 Myanmar Foreign Investment Law

In 2012 the Government of Myanmar introduced a new Foreign Investment Law (FIL). The FIL replaced the 1988 Foreign Investment Law (1988 FIL). The FIL provides a framework for investing in Myanmar. The Government separately introduced implementing rules (Investment Rules) on 31 January 2013. The Investment Rules provided significant additional detail in relation to the operation of the FIL and the business activities in which foreigners are permitted to engage, the restrictions that apply, application procedures, the use of land, the transfer of shares, foreign currency remittance, and the taking of security on land and buildings and labour relations. The FIL and the Investment Rules are key pieces of legislation underpinning the Government’s efforts to attract foreign investment and kick-start Myanmar’s economy.

Pursuant to the FIL, when doing business in Myanmar,  foreign investors can benefit from significant tax exemptions and other benefits. To be eligible, the foreign company will need to apply for a permit from the Myanmar Investment Commission  (MIC Permit). Foreign investors operating in certain sectors are obliged to incorporate a business under the FIL.

Foreign Investment Law – Forms of Investment

Pursuant to Article 9 of the FIL, investments may be made in the form of:-

• a 100% foreign-owned enterprise (other than for restricted activities),
• a joint venture with Myanmar citizens or enterprises; or
• a permitted form of business contract.

Foreign investors must form a Myanmar company in order to be entitled to the benefits of the new FIL. If a joint-venture is formed, the ratio of foreign to local capital can be mutually agreed by both parties.

Tax Exemptions and Reliefs

Pursuant to Article 27 of the FIL, foreign investors are granted a number of tax emptions and relief. These include:-

• a 5-year tax holiday that may be extended
• tax exemption for re-invested profits
• accelerated depreciation on capital assets
• tax relief on income tax up to 50% on profits from exports
• tax deductions for research and development
• exemptions from customs duties on capital assets to be used in the business imported during construction period
• exemption from customs duties on raw materials imported during first 3 years of production
• a deduction for expat salaries at normal rates
• relief on customs duties on imports for expansion of the business
• exemption from commercial tax for exports

Foreign companies wishing to benefit from incentives under the FIL must apply for an MIC permit.

Duties and Rights of Investors

Article 17 of the FIL sets out the duties owed by investors investing in Myanmar. Investors must, among other things, operate within and generally respect the laws of Myanmar, utilise land only as permitted by the MIC, obtain MIC approval before transferring land or buildings, avoid polluting or degrading the environment, register share transfers and comply with rules regarding knowledge transfer.

Article 18 set out investors’ rights. In addition to tax exemptions and reliefs investors have the right to sell and exchange or transfer assets in accordance with the laws of Myanmar, the right to transfer and sell all shares in the investment company, the right to promote the proposed investment, the right to additional benefits for developing new technologies promoting the quality of goods, improving production capacity and reducing pollution or for investing in underdeveloped regions of the country.

Foreign Ownership Restrictions

Certain restrictions apply when investing in Myanmar. Restricted activities are set out in Article 4 of the FIL. Restricted activities are broadly identified as being those contrary to the interests of Myanmar and its people or activities reserved exclusively for Myanmar citizens. Investment in restricted activities can only be undertaken if approved by the Government, and must be undertaken via joint ventures with local citizens or enterprises.

Land usage and Ownership

Pursuant to the FIL, foreign investors are permitted to lease land for an initial term of up to 50 years. Depending on the nature of the investment, two 10-year extensions can be applied for.

The MIC can grant longer leases to investors investing in Myanmar in less developed or more inaccessible parts of the country.

The MIC shall set the leasing price of Government owned properties after consultations with the Government.

Leases are not granted for:-

• religious land;
• land restricted for state security;
• land under litigation; and
• land restricted by the state.

Guarantee Against Nationalisation

The FIL provides an explicit guarantee that an economic enterprise granted an MIC permit cannot be nationalised during the term of the contract or during any extended term. Article 28 states that businesses approved by the MIC shall not be nationalised during the term of the contract or during an extended term whereas Article 29 states that businesses approved by the MIC shall not be forced to cease operations. Investors are also provided with a guarantee that they will be able to repatriate capital at the expiry of the term of contract (Article 30).

Transfer of Shares

The FIL provides that the foreign investors investing in Myanmar has the right to sell all or some of its shares to any foreigners/citizen/foreign company/citizen company. Transfers of shares must be registered in accordance with the laws of Myanmar and with the prior permission of the MIC.

Foreign Currency Issues

The FIL provides guarantees for the remittance in foreign currency of imported foreign capital and profits. Such remittance may be made through any bank authorised to perform international banking, at the prescribed exchange rate.

Dispute Resolution

The FIL contains provisions allowing for the incorporation of dispute-resolution mechanisms into investment contracts. Disputes that cannot be settled amicably are to be resolved in accordance with the contracts’ dispute resolution provisions. If there no such provisions are provided then Myanmar laws regarding dispute resolution shall apply.

Insurance

Pursuant to Article 23 of the FIL  foreign investors are required to obtain insurance from state approved insurance companies.

Appointment of Employees

The FIL contains provisions intended to increase the use and skills of local Myanmar employees. All unskilled positions should be filed by Myanmar citizens.

In relation to skilled positions, Myanmar nationals must account for the following percentages of an FIL incorporated company’s workforce:-

• At least 25% during the first two years
• At least 50% during the second two years
• At least 75% during the third two years

Ref:https://www.charltonsmyanmar.com/investing-in-myanmar/foreign-investment-law/