On 12
July 2016, DICA published the latest
version of the draft of the new Myanmar Investment Law. The new law will,
if enacted, merge the present Foreign
Investment Law and the Citizens Investment Law. Foreign investors in non-MIC businesses may, according to
the draft, be eligible to lease land
long-term and obtain tax exemptions. Furthermore, they benefit from other
advantages under the draft law (e.g. guarantee against confiscation, explicit
right to repatriate profits) that are presently only available to MIC
companies.
Please find an analysis of the draft below. We have prepared an English translation of the draft which is available on our homepage.
1. Domestic
investor and foreign investor
A
domestic investor is defined as a citizen investing in the country. The term
“citizen” includes business entities established only by citizens. This is at
odds with the draft of the new Companies Law (the latest version can be found
here:
http://tinyurl.com/jm4vu9x) according
to which companies with a foreign shareholding not exceeding a “prescribed
ownership amount”are treated as a local company.
A
foreign investor is a person who is not a citizen.
2. Two routes
to invest
As
is also the case now, the draft law provides for two routes to invest in the
country: (i) with permission from the Myanmar Investment Commission (“MIC permission”) and (ii) without it.
MIC
permission is required for businesses that (i)are important for the State’s
strategy, (ii) require a high amount of capital, (iii) have a high impact on
the natural environment and residents, or (iv) are classified by the Government
as requiring MIC permission. Further details will be provided in implementing
rules. It should be noted that the requirement to obtain MIC permission applies
to both foreign and domestic investors.
Other
businesses do not require MIC permission. Differently from now, however, the
draft provides that foreign investors in non-MIC businesses may be eligible to
lease land long-term and obtain tax exemptions. Furthermore, they benefit from
other advantages under the draft law (e.g. guarantee against confiscation,
explicit right to repatriate profits) that are presently only available to MIC
companies.
3. Approval
application
Foreigners
wishing to invest in businesses for which no MIC is required may file an
application to obtain MIC approval for the long-term lease of land (50+10+10
years) and/or obtaining tax exemptions.
4. Market
access restrictions
The
draft provides for the following market access restrictions:
(a) Certain businesses which are deemed to be
harmful are prohibited to domestic and foreign investors alike.
(b) Concerning state monopolies, the draft only
states that access is “restricted” without differentiating between domestic and
foreign investors. One would expect, however, that - as is the case already now
- access may be possible on a case-by-case basis.
(c) Businesses which a foreign investor is not
allowed to engage in, or only allowed to engage in if he forms a joint venture
with a citizen.
(d) Businesses which require approval of the
relevant ministries. The draft does not distinguish between local and foreign
investors in this regard.
The MIC shall, with the approval of the Cabinet, issue a
notification which shows the restricted businesses (b)-(d).
5. Tax
incentives
The
draft provides for the following tax incentives:
(a) For investments in sectors listed in a
notification issued by the MIC in order to promote investment: Exemption from
corporate income tax for seven, five or three years depending on whether the
investment takes place in an underdeveloped, reasonably developed or
well-developed region or state.
(b) Exemption from customs duties and other domestic
taxes on the import of machines, equipment and other specified items required
during the construction period of a new business, or during the expansion
period of an existing business that obtained permission from the MIC to
increase the investment amount.
(c) Exemption from customs duties and other domestic
taxes on the import of raw materials and partially manufactured goods by an
export-oriented business if these items are used in the production of goods for
export.
(d) Exemption from corporate income tax on profits
reinvested within one year.
(e) Accelerated depreciation (although this would
often not work as an incentive).
(f) Right to deduct R&D expenses from the
corporate income tax base if R&D is done in the interest of the State
(although these expenses would be deductible under the ordinary tax laws
anyway).
(g) Better incentives may be granted to
citizen-owned businesses.
6. Labour
matters
Unlike
the present Foreign Investment Law, the draft contains no requirement as to the
hiring of a specified percentage of skilled employees. However, investors (both
domestic and foreign) are obliged to implement skill development programmes.
7. Dispute
resolution
The
draft obliges the MIC to implement a mechanism by which disputes can be
resolved before reaching the official dispute resolution stage.
Investors
are free to agree on a dispute resolution method of their choice.