Doing business in myanmar By KMPG

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Doing business in myanmar By KMPG

  1. 1. Doing Businessin Myanmar5 February 2013Myo Aung Lwin
  2. 2. Disclaimer This brief presentation is intended to provide an introduction to some key issues and considerations that is relevant to potential investors. The information is intended for general information purposes only and should not be used for decision making purposes Applicability of the information to specific purposes. situations should be determined through consultation with professional advisors.© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  3. 3. Agenda - Doing Business in Myanmar • Is there any restrictions or privileges for your business?  A quick look at New Foreign Investment Law • In what form you should invest? y  A brief Introduction to Myanmar Tax  Structuring your Investment • What operational issues to consider?  Starting up the operation  Money matters© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  4. 4. A Quick Look atNew FN Foreign iInvestment Law
  5. 5. Restriction on Businesses• 3 forms of investment  100% foreign owned  Joint Venture  BOT system with private or state• 21 Restricted Businesses activities• 42 Business activities which are allowed only in y the form of Joint Venture with nationals• Allowed business activities with certain conditions/restrictions  With regulations from relevant Ministries  With other requirements/regulations• Business activities which require Environmental impact assessment© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  6. 6. Tax Incentives Companies registered under the Myanmar Foreign Investment Law can be granted a number of g incentives, including: • 5 year tax holiday • CIT exemption on profits that are reinvested within one year, • Accelerate depreciation, • Reduced CIT for export activities, activities • 3 years carry forward losses, • Exemption on import duties for machinery, and • Exemption on import duties on raw materials. The benefits are approved by the Myanmar Investment Commission upon application.© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  7. 7. A briefintroduction toMyanmar Tax
  8. 8. Corporate Income Tax• Tax residency based on registration. • Resident companies subject to tax on world wide income – except companies registered under the MFIL that are only subject to tax on Myanmar source income• Corporate Income Tax rates: • Resident companies – 25% • Branch with incentives under the MFIL – 25% • Branches without MFIL incentives – 35%• Capital Gains Tax rates: • Resident tax payers – 10% • Non-resident tax payers – 40% • Oil and gas industry – 40 to 50% g y• Withholding Tax for transactions to non-residents: • Dividends – 0% • Interest – 15% • Royalties – 20%© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  9. 9. Double Tax Agreements Myanmar has entered DTA’s with • United Kingdom, • Singapore, • Malaysia, • Vi t Vietnam, • Thailand, • India, • Bangladesh, g , • Indonesia, • South Korea • Laos Most DTA’s – except UK – has not been “Notified” in accordance with requirements under the Income Tax Law. Thus, from a legal , g perspective there is some uncertainty to the application of the DTA’s. Recommendable to verify application before arranging structures.© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  10. 10. Withholding Tax under DTA’s Withholding Taxes Transaction type- Rates Rates Thai Residents Singapore payment to Foreigners applicable to applicable to – DTA Rate Resident – resident non-resident DTA Rate citizens and foreigners resident foreigners Interest 0% 15% 10% 8/10% Dividends 0% 0% 0% 0% Royalties 15% 20% 10% 10/15% Share Sale Gains 10% 40% Exempt1 Exempt2 Goods 2% 3.5% 0% 0% Services 2% 3.5% 3 5% 0% 0% Note 1: If gain relates to sale of shares of company which is not principally owner of immovable property and the shares sold constitute less than 35% of the capital of the company Note 2: Broadly, the same as note 1, but with additional restriction that seller must sell less than 20% of his position of shares.© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  11. 11. Structuring yourInvestment
  12. 12. Structuring considerations: • Equity • Potential restrictions on level of ownership? • Restrictions on transfer of shares to foreigner? • Loans • Need approval by Central Bank? • Interest cap? • Financial instruments • Complex financial instruments not well known • Legal? • Management fee structures • Indirect allocations not approved?© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Investment in Myanmar February 2013
  13. 13. Offshore holding structures • Popular holding regimes for investments to Myanmar are : • Singapore • Malaysia • Thailand • Easy to structure tax efficient repatriation of dividends • No WHT on distributed dividends from Myanmar • Utilize exemption in holding regime • Difficult to structure efficient exit structures • Limitation of 35% position to benefit from capital gains exemption under DTA.© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  14. 14. A few comments on acquisitions.... • Experience from due diligences in Myanmar • Quality of accounts variable • Uncertainty to formal ownership to assets • Can foreigners buy shares in the target? • Can foreigners buy the assets? • Frequently observed structure • Form a new “joint venture” company •L Local partner contribute assets l t t ib t t • Foreign investor contribute capital. • Nominee structures not recommendable!© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  15. 15. Operational issues
  16. 16. Starting up the Operation.... • Finding the Location • Getting the people • Expatriates • Recruiting the local • Staff benefits • Labour Law • Setting up the facilities • U d t di the people and market Understanding th l d k t • Unique culture/market • Connecting with the community • Where to meet?© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  17. 17. Money matters to consider..... • Opening Bank Account • Cash Management • Bookkeeping and payroll • Accountant • Outsourced Services© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  18. 18. Thank youMyo Aung LwinAssociate DirectorKPMG Advisory (Myanmar) Limited.Tel: +95 1 527103Tel: 66T l +66 87 0579998Email: mlwin@kpmg.co.th

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