Myanmar Investment Opportunities in Infrastructure and Consumer Markets
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Myanmar Investment Opportunities in Infrastructure and Consumer Markets
- 1. www.duanemorris.com MYANMAR Investment Opportunities FOR DISCUSSION PURPOSES ONLY PRIVATE & CONFIDENTIAL
- 3. www.duanemorris.com3 • Official name: Republic of the Union of Myanmar • Strategically located between India, China and ASEAN • Capital: Nay Pyi Taw. Largest city: Yangon • Population of about 63 million (Male 49.7%, Female 50.3%). • Form of Government – Presidential Constitutional Republic (Current President: U Thein Sein) • Total area: 676,578 sq. km. • Total GDP: USD82,679 billion. • GDP per capita: USD1,324 Introduction
- 4. www.duanemorris.com • Large population (60 million / 25% below 30 years old) • Huge potential for growth (only 4% population in consumer class) • Abundant natural resources (petroleum, natural gas, metals, and precious stones) • Massive need for infrastructure development
- 5. www.duanemorris.com Challenges 5 • Poor infrastructure, power shortages. • Legal system in state of flux and uncertainty • Political risks and uncertainty • Primitive banking system • Foreign exchange regulations • Weak educational system • Corruption and cronyism
- 6. www.duanemorris.com • Myanmar Foreign Investment Law 2012 • US bans on most Myanmar imports lifted • US$6 billion (60% of total) worth of debt written off by foreign creditors • 7 new proposed industrial zones • Hotel zones increased from 11 to 25. • SEA Games 2013 to be hosted in Myanmar • General Elections scheduled in 2015
- 8. www.duanemorris.com Investment Framework 8 Foreign Investment Entity Types • Incorporate a company (100% foreign-owned or JV with Myanmar citizen or organisation) • Register a branch office or representative office Key Considerations • Intended business activity • Taxation and applicable incentives • Share capital requirements • Shareholding structure
- 9. www.duanemorris.com Investment Framework 9 MYANMAR COMPANIES ACT 1914 • 100% foreign-owned or JV with Myanmar entity • Minimum of 2 shareholders • Minimum capital requirements US$150,000 for Manufacturing- related business US$50,000 for Service-related business MYANMAR FOREIGN INVESTMENT LAW 2012 • 100% foreign-owned or JV with Myanmar entity • Minimum capital requirements may be determined by Myanmar Investment Commission (“MIC”) • Due diligence conducted by MIC on the Investor – experience, financial standing and on investment project
- 10. www.duanemorris.com Myanmar Foreign Investment Law (“MFIL”) 2012 10 • New MFIL 2012 (Law No. 21/2012) • Replaces previous MFIL 1988 • New improved investment incentives offered to foreign investors • Restrictions on foreign investment on certain business activities • Regulatory authority: Myanmar Investment Commission (“MIC”)
- 11. www.duanemorris.com MFIL 2012 Investment Incentives 11 • Right of Land Use / Lease (50 years +10 +10) • Tax incentives (5 years tax holiday, income tax relief on profits from export etc) • Transferability of ownership • Foreign exchange • Dispute resolution and treaties
- 12. www.duanemorris.com Myanmar Foreign Investment Rules (Jan 2013) 12 • Myanmar Foreign Investment Rules (Notification No. 11 of 2013) released in January 2013 • Foreign ownership in restricted business activities now allowed up to 80% • MIC given more authority as government body • Directorate of Investment and Company Administration (“DICA”) given more power over foreign investments
- 13. www.duanemorris.com MIC Notification No. 1/2013 • Issued by the MIC on 31 January 2013 • Sets out list of prohibited and permitted activities for foreign investors Mining: for large scale mining activities requires a local JV partner Real estate: Development of commercial and residential real estate requires a local JV partner Oil & gas: Drilling for oil and gas from shallow wells of less than 1000 feet is generally not allowed Casino-related: special permission from the Govt and must follow rules and regulations stipulated by Ministry of Hotel & Tourism
- 15. www.duanemorris.com Employment 15 Foreigner • No work permit system implemented yet • Foreigners (MIC companies) may apply for a stay permit (max. 9-month validity + special multiple re-entry visa) • Most foreigners usually enter and stay in the country on the basis of business trips with business visas (max. 6/12 month validity / max. stay period: 70 days) • No foreigners may be employed for jobs requiring no or low skills
- 16. www.duanemorris.com Employment 16 Locals • 25% / 50% / 75% of an MIC company’s skilled employees must be Myanmar citizens in the first and second / third and fourth / fifth and sixth year of operation • Obligation to submit annual training plan • More practical than legal issues • Lack of skilled staff (e.g. marketing staff) • Job-hopping • Wildcat strikes (typically, more common in manufacturing sector).
- 18. www.duanemorris.com INCOME TAX 18 • For income tax purposes, foreign persons and organization are classified into “resident” and “non-resident”. A resident foreigner is: (i) in the case of individual, a foreigner who lives in Myanmar for not less than 183 days during the income years; (ii) In the case of a company, a company formed under the Myanmar Companies Act or nay other existing Myanmar law; (iii) In the case of an association of persons, other than a company, an association where the control, management and decision-making of its affairs are situated and exercised wholly within Myanmar; and (iv) Any enterprise or individual permitted under the Foreign Investment Law. • For resident company, income tax rate is 25%. • For resident individual, progressive rate applicable from 1% to 20% (20% applicable to taxable salary income of more than 20 million kyat – approx. USD 23,000). • For non-resident employee, applicable income tax-rate is 35%
- 19. www.duanemorris.com WITHHOLDING TAX 19 • Dividends – No tax is levied on dividend paid to a resident or nonresident company. • Interest – No tax is withheld on interest paid to a resident company; the rate is 15% on interest paid to a nonresident. • Royalties – Royalties paid to a resident are subject to a 15% withholding tax; the rate is 20% for royalties paid to a nonresident. • Other – Amounts paid to a resident for the procurement of goods within the country and services rendered (including technical services fees) are subject to a 2% withholding tax; the rate is 3.5% if paid to a nonresident company.
- 21. www.duanemorris.com FOREIGN CURRENCY TRANSFER • Right to Transfer Foreign Currency • A person who has brought in foreign capital can transfer the following: - foreign currency entitlement of the person - net profit after deducting all taxes and provisions - foreign currency permitted for withdrawal by the MIC which may include the value of assets on the winding up of business. - A foreign employee can transfer its salary and lawful income after deducting taxes and other living expenses incurred domestically.
- 23. www.duanemorris.com TRADEMARKS 23 • No codified intellectual property law yet, but trademarks can as matter of practice be registered with the Registration of Deeds Office on the basis of the Registration Act of1908. • Remedies against infringements: - Civil (temporary or perpetual injunction; damages); - Criminal (sections 478-489 of Penal Code) • New IP Law to be announced in 2014?