Latest version of the draft of a new Myanmar Investment Law

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.

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