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Your Guide to Investment in

MYANMAR

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The Basics for Doing Business in Myanmar

Duane Morris & Selvam (Myanmar) Limited The information contained herein is up to date as of June 2017.

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Legal System in Myanmar

Myanmar’s legal system is originally based on English common law. Myanmar legislation includes thirteen volumes of codified laws enacted between 1841 to 1954, known as the Burma Code, in

addition to numerous special laws, notifications, rules and regulations enacted from time to time.

What distinguishes the Myanmar legal system is that it is a combination of colonial era English common law, traditional Myanmar customary law and modern Myanmar legislation. The result is a

collection of rules and regulations that often overlap and, at times, offer contradictory or inadequate

guidance. Which can be a sense of frustration for investors and lawyers on the ground.

In respect of Court hierarchy, under the Myanmar Judiciary Law 2010, Myanmar courts are divided

into four separate layers being the Supreme Court (at the top); the High Court, District Courts and

Township Courts. There are also separate administrative tribunals and special courts for juvenile

offences, municipal offences and traffic offences.

The legal and judicial infrastructure in Myanmar is at a stage where it can cater for a heavier intake of

foreign investment. The Myanmar Government is in the process of passing additional investor friendly laws and regulations to promote foreign investment. These include the Myanmar Companies Law and implementing Rules, the Condominium Law (Rules), and the Mining Law Amendment Act (Rules).

Overview Of Foreign Investment Activity In Myanmar According to the International Monetary Fund’s recent World Economic Outlook, the Republic of the Union of Myanmar (“Myanmar”) is currently ranked as the world’s fast-growing economy, with expected

projected growth of 8.6 percent.1 Statistics recently released by the Directorate of Investment and

Company Administration (“DICA”) (Myanmar’s company regulator) shows that, during the period between 1 April 2016 and 31 March 2017 (“2016 Financial Year”), foreign direct investment (“FDI”) in

Myanmar reached US$6.649 billion. In the 2016 Financial Year, transportation and telecommunications

were the highest yielding FDI sectors, followed closely by the manufacturing industry, which reached a high of US$3.081 billion. Generally, Myanmar’s other high performing FDI sectors include: oil and gas,

power, manufacturing, real estate, mining, hotel and tourism, livestock and fisheries, agriculture,

industrial estates, and construction. The top investor countries in Myanmar include: China; Singapore; Thailand; Hong Kong; United Kingdom; Republic of Korea; Vietnam; Malaysia; The Netherlands; India; Japan and France.

Myanmar remains very attractive to foreign investors; it is one of the most natural resource-rich

countries in Asia with plentiful supplies of oil and gas reserves (both on and offshore), various minerals,

jade, precious stones and gems, forest products, and solar and hydro power project potential. While there has been very little exploration of Myanmar’s natural resources due to a lack of developed

exploration techniques and availability of equipment, the geographical location of Myanmar is central to

1 World Economic Forum, Which are the World’s Fastest Growing Economies? (2016, April 18). Retrieved 17 June 2016, from

www.imf.org/external/pubs/ft/weo/2016/01/index.htm

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key markets; in addition, the cost of local labour remains low, with the minimum wage set at approximately US$56 per month for a standard five-day working week.2

With recent economic, political and legal reforms, the winds of positive change have swept across Myanmar for foreign investors. The National League for Democracy (“NLD”) won nearly 80 percent of

contested seats in the Myanmar parliament during the general elections on 8 November 2015, and

successfully transitioned into civilian-led power with Daw Aung San Suu Kyi as State Counsellor and U Htin Kyaw being sworn in as President in March 2016. This ended over 25 years of control by the

military under the Union Solidarity and Development Party (“USDP”), recently led by President U Thein

Sein. Due to restrictions under the Myanmar Constitution 2008, the presidency is held by U Htin Kyaw, a close confident of Daw Aung San Suu Kyi, and she herself is holding the newly created position of state counsellor.

Reforms undertaken in Myanmar’s financial sector further support the country’s growth, as evident from

the kyat-managed floated exchange rate system established in 2012, the creation of a Central Bank

licensing mechanism for new foreign banks and the expansion of foreign branch networks. Development of special economic zones3 (“SEZs”), such as the opening of Thilawa SEZ Zone A and approval of developments in Kyaukphyu and Dawei SEZs, similarly point to a promising financial sector.

Substantial progress has been made in recent years with the passing of relevant laws on investment,

being the Foreign Investment Law (2012); Myanmar Citizens Investment Law (2013) [both repealed

and replaced by the Myanmar Investment Law (2016) and Myanmar Investment Rules (2017)]; and Financial Institutions Law (2016) (“FIL”).

The FIL permits mergers between banks and allows foreign banks to acquire all or part of another bank established in Myanmar. However, this is subject to Central Bank of Myanmar (“CBM”) approval.

Another recently enacted Arbitration Law 2016 (“AL”) gives effect to the New York Convention on the

Recognition and Enforcement of Foreign Arbitral Awards and provides a reliable option for dispute resolution concerning FDI investment and M&A deals. The Yangon Stock Exchange (“YSX”), which

launched on 9 December 2015, made notable progress in Myanmar’s capital markets sector, which

began trading in March 2016. First Myanmar Investment Co,4 was the first company listed on the YSX on 25 March 2016, followed by Myanmar Thilawa SEZ Holdings Public Ltd on 20 May 2016.

FDI and M&A activity into the country will continue to be delayed until the government allows foreign investors to buy shares in local companies, which includes local companies trading on the YSX. This

will require the government to remove its existing policy of prohibiting foreigners from purchasing shares

in local companies. This position changed as of 1 June 2017 with the promulgation of the Myanmar Companies Law 2017 (“MCL”).

The MCL will also allow for foreign to buy and sell shares in Myanmar companies listed on the Yangon Stock Exchange. The MCL will also create additional duties for company directors. Such duties will be

akin to statutory duties existing under the Australian Corporations Act 2001 (Cth). The Draft Myanmar

2 A minimum wage was set in August 2015, nearly two-plus years after the enactment of the Minimum Wage Labour Law

(March 2013). The minimum wage has been set at 3,600 kyats per day calculated at a rate of 450 kyats per hour. 3 Special Economic Zones Law (2013). 4 Which was advised by Duane Morris & Selvam LLP.

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Companies Law 2017 (“MCL”) was expected to be passed into law on 1 April 2017. Given, the passage of the MCL will be delayed until at least 1 June 2017, the promulgation of the implementing rules will be deferred until at least September 2017.

Legal Framework for FDI in Myanmar

A. Myanmar Investment Law (2016), Myanmar Investment Rules (2017), Notification No. 10/2017, Notification No. 11/2017, Notification No. 13/2017 and Notification No. 15/2017

Under the Myanmar Investment Law (2016) (“MIL”) the Myanmar Investment Commission (“MIC”) is

the regulator for foreign investment.

A foreign investor may want to consider obtaining an MIC Permit (Investment Permit), which would

allow a foreign investor to benefit from certain investment incentives available under the MIL. An MIC Permit is not mandatory for operating a business in Myanmar, but companies with MIC permits are subject to the MIL entitled to incentives. Key incentives include:

Investment Protection. The MIL guarantees that a company operating with an MIC Permit under the MIL will not be

nationalized during the permitted period. There is also a further guarantee that investments with an MIC Permit will not be terminated before the expiration of the term of the MIC permit without

sufficient cause.

Tax Incentives. Income tax holidays is available for a period of three, five or seven years depending MIC discretion

and the zone location of the project. Zone 1 (less developed areas, excludes Yangon and Nay Pyi

Taw), Zone 2 (moderately developed zone, excludes Yangon but includes Nay Pyi Taw) or Zone 3 (developed zone, includes Yangon and Mandalay). The income tax holiday is inclusive of the year

the enterprise begins operations. Both 100-percent foreign-owned companies and joint venture

companies are governed by the Myanmar Companies Act (MCA) and/or the Special Companies

Act, depending on whether or not the state of Myanmar is involved.

The MIC may also grant one or more of the following exemptions and reliefs: Exemption from internal taxes on imported raw materials within the first three to seven years of

commercial production.

Exemption or relief from income tax on profits of the business kept in a reserve fund and

reinvested in the business within one year after the reserve is made.

Right to deduct accelerated depreciation from the profit after calculation of accelerated

depreciation with regards to machinery, equipment, building or other capital assets used in the

business at rates set by Myanmar.

Relief from tax on up to 50 percent of the profits accrued from the export of goods produced in

Myanmar.

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Right to pay foreign employees’ income tax at the rates applicable to citizens residing within

the country.

Right to deduct from assessable income the expenses incurred with respect to necessary

research and development carried out within Myanmar.

Exemption or relief from customs duty and/or other domestic taxes on imported machines and

other equipment used during the period of construction of the business.

Exemption or relief from commercial tax on the goods produced for export.

Right to Transfer Foreign Currencies A foreign investor has the right to transfer abroad these types of foreign currencies:

Foreign currency entitlement of the person who brought in the foreign capital.

Net profit after deducting all taxes and reserve funds from the person who brought in the foreign

capital.

Foreign currency permitted for withdrawal by MIC, which may include the value of assets on the winding-up of business. Furthermore, a foreign employee can transfer his salary and lawful

income after deducting taxes and other living expenses incurred domestically.

Right to Enter into a Long-Term Lease A foreign-owned company without an MIC Permit or Endorsement is only allowed to enter into a

lease agreement that does not exceed one year. With an MIC Permit, subject to MIC approval, a

foreign investor may be permitted to lease or use land for an initial period of up to 50 years, which

may be extended for two further periods of 10 years each.

Regime for share transfer. The FIL and its implementing regulations set out provisions on transfer of shares, and with the approval of MIC, a foreign investor is allowed to transfer shares to another foreign investor as well

as to a Myanmar citizen.

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Endorsement A foreign investor intending to do small-scale investment (having investment capital less than US$5

million) who desires a long-term lease right for a period exceeding one year, may apply for an

Endorsement from the MIC. If the investors investment capital exceeds US million he must instead

apply for an MIC Permit as he will unlikely be eligible for an Endorsement.

B. FDI Restrictions

FDI by non-Myanmar residents is restricted under the MIL and Notification No. 15/2017.

Activities Reserved for the Union Government of Myanmar: Security and defence

Arms and ammunition National postage stamps

Air traffic services

Pilotage services Natural forest and forest area

Radioactive metals

Control of electric power system Inspection of electrical business

Prohibited FDI by Foreign Investors FDI into companies carrying out the following business is prohibited: Publishing and distribution of periodicals in ethnic languages

Fresh water fisheries

Establishment of quarantine station for export and import of animals Pet care services

Forest products

Prospecting, exploration, feasibility study and production of mineral for small and medium scale tour-guide service

Mini-market

Convenience store Limited FDI by Foreign Investors

FDI in the following sectors can only be done by joint venture with a Myanmar partner (individual,

entity or state-owned entity): Research activities related with fisheries

Manufacturing and domestic distribution of all kind of confectionary, including sweets, cocoa

and chocolate Development, sale and lease of residential apartments and condominiums

Local tour services

Governmental Approval by Relevant Ministry Required FDI in the following sectors can only be done with the grant of approval from the relevant Ministry:

Publishing of periodical newspaper in foreign languages

Cable TV Laboratory services for animal diseases diagnosis

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Aircraft repair and maintenance Wood-based industries

Private hospital services

Urban development projects of more than 100 acres

C. Merger Control

Myanmar’s Competition Law (“CL”), which was enacted on 24 February 2015, came into force on 24

February 2017 under Notification 69/2015 issued by the President’s Office on 12 December 2015. The CL is far-reaching and provides for the creation of a Competition Commission with investigative and

adjudicative powers. It classifies violations into four categories to regulate competition, market

monopolies, anticompetitive acts and merger control. Civil and criminal penalties can be imposed and include the conviction of senior managers. The CL will likely have significant impact once enforced, and businesses would be well advised to seek necessary assistance.

D. Company Law

Under Myanmar Companies Act 1914 (MCA) a foreign investor has a number of options for structuring a business entity in Myanmar based on the kind of business activity to be carried out.

The most common business structure used in Myanmar is a private company limited by shares (they

include both 100-percent foreign-owned companies and joint venture companies) although other legal forms are permitted

Companies limited by shares include: (a). Companies incorporated in Myanmar but with 100-percent foreign ownership (shareholders can be both companies and individuals).

(b). Joint venture companies incorporated in Myanmar between foreign-owned companies or individuals and Myanmar companies or individuals (including state-owned entities).

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Both 100-percent foreign-owned companies and joint venture companies are governed by the MCA and/or the Special Companies Act, depending on whether or not the state of Myanmar is involved.

Foreign companies can establish their presence in Myanmar as a branch office (typically with Oil & Gas Companies, Airlines, and Foreign Banks).

A representative office is also permitted (typically with Foreign Banks not operating in Myanmar, Insurance Companies).

Other less common options include establishing a not-for-profit organization, business associations (such as a Chamber of Commerce) company limited by guarantee (with or without share capital) and unlimited company without share capital.

The above legal structures will require registration under the MCA through the DICA and in some cases with the MIC under the MIL.

Entity differences For a private company:

The number of shareholders is capped at 50. Transfer of shares and public subscriptions of shares and debentures are restricted.

There must be a minimum of two shareholders and two directors at the time of incorporation.

For a public company: There is no cap on the number of shareholders.

There must be a minimum of seven subscribers at the time of incorporation.

A list of directors and consent forms must be registered with DICA, in addition to the other documents required at the time of company registration.

Establishing a Private Limited Company There are two main government administrative vehicles involved, either alone or together, in the foreign

investor’s establishment and registration of its limited company. One entity is the DICA, which is the

government agency in charge of registering juristic entities. If the applicant does not wish to seek any preferential tax or customs duty treatment, then application is made directly with DICA, and except for

specific licensing requirements, no other government agency’s involvement is required. Conversely, if

the applicant wishes to obtain preferential tax and customs duty-free treatment, then they would also submit a proposal to apply for an investment permit (referred to as an ‘MIC Permit’, which offers one‐

stop processing where specific, separate Ministry approvals and licenses are also needed. A third way is to establish a company in a special Economic Zone.

Shareholders’ Liabilities A private limited company in Myanmar is required to have at least two directors and two shareholders (the shareholders may be related, and the second shareholder only need to hold one share).

Shareholders and the directors may be the same persons and appointment of local shareholders or directors is not necessary at this time, but the concept is being considered.

Minimum Capital Requirements The capital structure requirements are:

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Shares to be issued with par value in local currency (Kyat) or United States Dollar. The issued and paid-up share capital is the local currency equivalent Kyat of US$50,000 or

US$50,000 for a services company and local currency equivalent Kyat of US$150,000 or

US$150,000 for a manufacturing company. The issued capital brought in is the same as paid-up capital, 50 percent of which is to be brought

into Myanmar before the commencement of business operation and the rest into the country

within five years.

E. Foreign Exchange Controls

Offshore remittances are permitted under MIL and the Foreign Exchange Management Law 2012.

However, the Central Bank of Myanmar (“CBM”) curbs the use of United States Dollars in Myanmar by limiting withdrawals to a maximum one-time withdrawal of US$5,000, and a weekly withdrawal

maximum of US$10,000. When an individual or an entity remits foreign currency out of Myanmar, the

remitting bank will provide the necessary documents and forms. The remitting bank will typically request the document or contract underpinning the transaction (e.g. if the remittance is to pay for goods, the

remitting bank will request the sale and purchase contract and/or the invoice). Thereafter, the remitting

bank will forward these documents to the CBM for approval. The CBM will scrutinize these documents, but will also not necessarily scrutinize the actual transaction in great detail.

Foreign investors are permitted to transfer certain categories of foreign currencies out of Myanmar to other countries. These categories are: (1) the foreign currency entitlement of the person or entity that

brought in the foreign capital; (2) net profits after all taxes and reserve funds have been deducted; (3)

foreign currency that may otherwise be permitted to be withdrawn, including the value of a business’s assets after it has been wound up; and (4) a foreign employee’s salary and other forms of lawful income, after taxes and domestic living expenses have been deducted.

The domestic banking system in Myanmar is in its infancy and local banks lack modern day banking

expertise. It is not uncommon to find that some local banks still maintain their accounts in paper ledgers

rather than in electronic form. For individuals and businesses that maintain accounts at local banks, it can often take up to three to four hours to wait to make deposits or withdrawals. Internet banking is still

non-existent for the local banks, and privacy and data protection in Myanmar banks is virtually non-

existent. Bank statements are often delivered without envelopes or any other means of concealing their contents.

The CBM acutely understands the need to reform Myanmar’s banking sector and transfer international knowledge and skills to local Myanmar banks. In an attempt to address these issues and modernize its

banking sector, the Myanmar Government has issued preliminary banking licenses to 13 foreign banks

to engage in wholesale banking and lending. Foreign licensed banks are only allowed to offer their services to foreign corporate entities registered in Myanmar, but not to Myanmar companies. Foreign

banks are restricted from providing retail banking and lending activities directly to Myanmar citizens,

businesses and foreign nationals. These 13 licensed foreign banks include: ANZ Bank; Industrial and Commercial Bank of China; Bank of Tokyo-Mitsubishi UFJ; Sumitomo Mitsui Banking Corp; Mizuho

Bank; Maybank; Bangkok Bank; Overseas-Chinese Banking Corporation; United Overseas Bank; Bank

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for Investment and Development of Vietnam, State Bank of India, Sun Commercial Bank and Shinhan Bank.

F. Infrastructure Laws

Myanmar has no developed infrastructure or private public partnerships (“PPP”) laws. Directive no. 1/2013 titled: “Regulations to be abided by when issuing tenders for investment and economic activitie”

("Tender Regulations") are to be followed when procuring PPPs. Note the Tender Regulations are

only a presidential directive and not law. The MIL and implementing rules provide a basic framework for private foreign investors to obtain an MIC permit and project approval. However, other than the

granting of MIC Permits and associated endorsements, the MIL does not deal with infrastrcuture or tendering in any detail.

There are no specific PPP laws or policies that capture PPP approval requirements before launching

the procurement process. The Tendering Regulations do not touch on this matter save for mention that “all Tender activities should be carried out in accordance with the basic political, economic and social

principles, in a manner acceptable by the Government.” Myanmar law is silent on this matter. There is a strong need for a new piece of legislation in Myanmar dealing with PPP procurement and tendering.

G. Key Property Laws

Restriction on Foreign Ownership Under §§3-5 of the Transfer of Immovable Property Restriction Law 1987 (“TIPRL”), foreign ownership of immovable property is restricted: “transferring immovable property to or by a foreigner or a company

owned by a foreigner by way of sale, purchase gift, acceptance of a gift, mortgage, acceptance of a

mortgage, exchange or transfer, and acceptance of transfer by any other means.” Limited exemptions to the provision above apply for foreign embassies. 5

Right to Secure a Long-term Lease Under the MIL, which replaced FIL, the MIC may grant an MIC Permit or Endorsement on a case-by-

case basis to foreign investors to enter into a long-term lease. In the absence of an MIC Permit,

foreigners may only lease land for a period of up to one year. A foreign investor who obtained an MIC Permit is permitted to lease land for an initial period of up to 50 years with two consecutive extensions

of 10 years each (70 years). In 2016, the MIL introduced a new process, for investors not eligible for an

MIC Permit but desire to enter into a long-term lease (referred to as MIC Endorsement). The MIC Endorsement application process and clarity surrounding its associated rights remain unclear as the

implementing regulations have not been tested. Foreigners are not prohibited from purchasing property

in Myanmar.

5 §14 of the TIPRL provides that “the relevant Ministry may allow exemptions from the provisions of this Act to a foreign

government for the use of its diplomatic mission accredited to the Union of Myanmar or to United Nations’ organizations or to any other organizations of individuals.”

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With the exception of freehold land, all land in Myanmar is ultimately owned by the state. The main types of land classification relevant to foreign investors for the lease of immovable property in Myanmar are summarized in the table below:6

Category of Land Restriction to Lease to Foreign Investors

Freehold Land The only form of privately owned land in Myanmar is mostly found in urban

centres, and is not a widespread form of land title. Landowner(s) may freely lease land to a foreign investor, with approval from the MIC.

There is very little freehold land (fee simple)7 in Myanmar and freehold land can be potentially compulsorily acquired by the government (expropriated/

confiscated) for public interest purposes (i.e. development) under the Land

Acquisition Act 1894. In such a case, compensation may be paid to the landowner at government discretion.

Grant Land Grant lease of 30, 60 or 90 years from a Union Government entity that is akin

to freehold ownership in that the grant is easily renewable ad infinitum, transferable, leasable, heritable and mortgageable. The landholder may lease

all or part of the land to a foreign investor, with permission from the Union Government owner entity and the MIC.

Farm/Agricultural Land

The land use purpose must be changed and approved by the Union Government to allow for a landholder to lease to a foreign investor.

Culturable, Fallow and Waste Land

Can be leased, sub-leased to a foreign investor only with approval of the Union Government.

May require change of purpose of the land depending on the desired use of the land by the foreign investor.

Town Land Similar to Farm/Agriculture Land and could be converted to “Grant Land” upon approval of Union Government and subsequently leased.

Village Land In general, “Village Land” is considered as land outside of towns (i.e., village tracts), and is transferable via lease.

Best Practice Foreign investors are advised to undertake an extensive Land Due Diligence (“LDD”) before contemplating entering into a long-term lease. Please see reasons below.

6 Under §2.6 of the Registration Act 1909, immovable property includes: lands, buildings, hereditary allowances, right to ways,

lights, ferries, fisheries or any other benefits to arising from land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing corps nor grass.

7 A fee simple means the owners have complete ownership of the land, and therefore the owner may do whatever he or she chooses with the land. If an owner of a fee simple dies, the land will descend to the heirs.

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The land registration system is still in its infancy in Myanmar and is a paper-based system. Therefore, the registration records may not be accurate and updated. Despite requirements of

registration with the Office of Registration of Deeds (“ORD”), it is common for landowners to

not register land transaction documents to avoid paying stamp duty. Under the Registration Act

1909 (“MRA”), the land transaction documents cannot be registered until stamp duty has been

paid. This means the land title documents (Forms 105 and 106, [see Annex attached hereto])

are not updated if stamp duty has not been paid. Therefore, we recommend these issues be resolved before lease execution or incorporation as a condition precedent to the lease.

As a part of the LDD, we recommend that Forms 105 and 106 be inspected to check any issues

regarding current and multiple landowners. It is not uncommon for land to be held by a different or multiple parties.

We do not recommend investing in conflict areas.

Registration Under §17(d) of the MRA, any lease for a term exceeding one year shall be registered with the ORD in the township where property is located. In order to register a lease, the following steps must be satisfied:

Step 1: Stamp duty shall be duly paid. Any lease agreement is not capable of registration until

stamp duty has been paid.

Step 2: Documents for registration (may vary depending on the regions where the lease is registered) shall be lodged with the ORD within four months from the execution date of the

lease agreement. Parties to a lease must register the lease together with two witnesses to the

lease at the ORD. Usually finger prints will be taken.

Stamp Duty Any agreement that has not been properly affixed with stamp duty cannot be admissible as evidence in

any Myanmar Court. In the context of foreign arbitration clauses in lease agreements, where the governing law is Myanmar law, there may be issues with admissibility of evidence, and enforcing an arbitral award where stamp duty has not been affixed.

Effective on 1 October 2016, stamp duty is levied on a lease agreement at the rate of 0.5% of annual rent for a term less than three years, and 2% of annual rent for a term exceeding three years.

H. Employment Laws

Labour laws in Myanmar, like most other Myanmar laws, are outdated. There is no single uniform piece

of employment legislation, instead a plethora of different laws exist regulating the employment sector.

An employment contract must be established in writing in the prescribed employment contract issued by the Ministry of Labour. All employees in Myanmar, including expatriate staff and local workers, have

the same rights under Myanmar employment laws. Accordingly, both foreign and local employers must comply with the following Myanmar employment laws:

1. Social Security Law 2012;

2. Minimum Wage Law Labour (March 2013);

3. Immigration Act 1947;

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4. Employment and Skill Development Law 2013;

5. Employment and Training Act (1950);

6. Factories Act 1951;

7. Foreign Investment Law 2012;

8. Payment of Wages Act 1936;

9. Leave and Holidays Act 1951; and

10. Workman’s Compensation Act 1923.

Amendments have been made to several of the above laws; however, there is still not one unified labour

code in place. Labour laws are still in a state of flux. Other relevant legislation, policies and customary practices exist:

1. The Myanmar Contract Act 1872- provides for freedom for parties to contract;

2. Oilfield (Labour and Welfare) Act 1951- provides for different work hour arrangements for “petroleum labours”;

3. It is common (not statutory) in Myanmar to provide all employees with yearly bonuses of one month’s salary during the Thingyan Water Festival (Myanmar New Year) in April;

4. It is becoming a practice for employers to provide meal and ferrying (transport) benefits to Myanmar employees.

Navigating the Myanmar employment law framework is highly complicated for employers in Myanmar (as well as for professional advisers).

Minimum Wage Law A minimum wage was set in August 2015, nearly two plus years after the enactment of the

Minimum Wage Law Labour (March 2013) (“Minimum Wage Law”).

The minimum wage has been set at Kyats 3,600 (US$2.80) per day calculated at a rate of Kyats

450 (US$0.35) per hour. Approximately US$56 per month on a standard five-day work week. The Minimum Wage Law prescribes that a committee will set minimum wage levels based on

the business sector and the skill demanded of the employee, which only applies to the private

sector. The Law distinguishes between “laborers” and “employees”.

Generally, wages in Myanmar vary greatly depending on the nature of the work and the

employer, for example skilled vs unskilled workers – “unskilled” work is generally understood to mean work that requires no education or special training.

Failure to abide by the Minimum Wage Law can result in a fine of about US$330 and

imprisonment of between one and six months for the employer. The rules allocate the establishment of committees to different categories of work to devise

minimum wages.

Work specifically relating to offshore activities is not mentioned in the rules.

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I. Tax Laws

Income Tax Law Under the Income Tax Law (“ITL”), the taxable period of a company (income year) in Myanmar coincides

with its financial year, from 1 April to 31 March. Income tax returns must be filed within three months of the end of the income year. Capital gains tax returns must be filed and the corresponding payment

made within one month of the date of disposal of the capital assets, defined as the date of the execution of the deed of disposal or the date of delivery of the capital assets, whichever is earlier.

Corporate Income Tax Corporate income tax is levied at a rate of 25 percent on total income, not including capital gains (except the transfer of shares in an oil and gas company, where rates ranging from 40 to 50 percent will apply

on gains). It is applicable to both resident and non-resident companies in Myanmar. A resident company

is defined as one formed under the MCA or any other existing law of Myanmar, including companies under the MFIL.

Resident companies are taxed on a worldwide basis; hence, income deriving from sources outside of Myanmar is also taxable. Non-resident companies are those that are not formed under the MCA or any

other existing Myanmar law. Taxable income includes trade or business income and rental income from moveable or immoveable property.

Capital Gains Tax Capital gains tax of 10 percent, applicable to both resident and non-resident companies, is payable on any gains realised from the sale, exchange or transfer of one or more capital assets, including shares

in a company. Higher rates of between 40 and 50 percent apply on gains from the transfer of shares in an oil and gas companies.

Withholding Tax Myanmar has a one-tier corporate tax system where dividends, branch profits and shares of profits of an association of persons (i.e., partnerships, joint ventures, companies) that have been taxed are

exempt; therefore, no withholding tax is deductible. Withholding tax on interest payments only applies

to payments made by non-residents or foreigners at a rate of 15 percent. The payment of royalties for the use of licenses, trademarks or patents is subject to a withholding tax rate of 15 percent for residents and 10 percent for non-residents.8

Commercial Tax Commercial tax is generally a five percent turnover tax on goods and services produced or rendered

within Myanmar based on sales proceeds, and is dependent on the nature of goods and services. All services are subject to five percent commercial tax, except 26 types of services that are specifically

exempted from commercial tax (e.g., home rental, life insurance, banking services). It is only applicable to specific commercial transactions listed in the Commercial Tax Law, including imp

Special Goods Tax

8 For residents, deductions as above shall be set off against tax due on final assessment. For non-residents, the above

withholding tax from payments to non-resident companies is a final tax (Ministry of Finance and Revenue Notification No. 41/2010 of 10 March 2010).

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The Union Tax Law 2016 took effect on 1 April 2016, with key developments including the reintroduction of the Special Goods Tax Law. This imposes tax rates ranging from five to 120 percent on listed special

goods including cigarettes, tobacco leaves, cheroots, cigars, pipe tobacco, alcoholic beverages, gemstones, teak, petroleum, jet fuel and natural gas.

Offshore Share Transfers The offshore transfer of shares in an offshore holding company that holds shares in a Myanmar company is not at the moment taxable in Myanmar.

Dividends No withholding tax is levied on dividends paid to a resident or non-resident company.

Stamp Duty and Transfer Pricing Stamp duty is levied on various types of instruments such as the sale or transfer of immovable property,

shares and bonds. Stamp duty rates vary depending on the relevant type of instrument being stamped. As an example, stamp duty on the transfer of shares is 0.3% of the value of shares being transferred. There are currently no transfer pricing laws in Myanmar.

Permanent Establishment Risk The current practice is that only income earned within Myanmar is subject to tax, either at the resident

tax rate or non-resident tax rate. From a corporate entity perspective, we are not aware of any case where the tax authorities have assessed additional income taxable as a result of a permanent establishment within Myanmar.

Double Tax Agreements Under the ITL, double tax agreements (“DTAs”) entered into by the government with any foreign state

on income tax will be followed notwithstanding any terms contrary in the ITL. However, this first requires approval of the director general of the Internal Revenue Department in Nay Pyi Taw.

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Myanmar DTAs have been concluded with India, Indonesia, Malaysia, Singapore, the Republic of Korea, Thailand, the United Kingdom, Vietnam, Laos and Bangladesh.

IV. OUTLOOK

As Myanmar gains momentum in its reform process, after a year of transition to a civilian-led government and the removal of U.S. sanctions, many changes are taking place in Myanmar. In 2016,

Daw Aung San Suu Kyi announced a crackdown on unpaid taxes and revisited Myanmar’s Anti-

Corruption law with a set of guidelines lowering limits on gifts by civil servants. The Anti-Corruption Law (“ACL”), passed by parliament in August 2013, sought to ‘eradicate bribery as a national cause’. The

ACL sets out a framework for a presidential commission to investigate cases of bribery, and look into

the assets of public officials on its own initiative. While primarily targeted at bribe-taking by those in the public sector, the net can be cast to catch those in the private sector. There is a ban on the receipt of

gifts from organizations or individuals seeking gains from civil servants, whether of a business or other

nature. Gifts subject to the new limit include “money, gold, silver, air tickets, hotel stays, free meals, golf club membership fees”. The new guidelines state that they aim to distinguish “gifts offered as a means

of social courtesy […] from ones given with the intention of bribery”. The new guidelines offer specificity

to many aspects outlined in the 2013 law, and will be a development welcomed by those seeking to invest in and do business in Myanmar.

Lawyers and investors alike are still eagerly awaiting the passing of the key new laws, including the Myanmar Companies Law and implementing Rules, the Condominium Law (Rules), and the Mining Law

Amendment Act (Rules). Myanmar is still in desperate need of a Secured Transactions Law and an

improved Intellectual Property Law to help stimulate foreign investment. Myanmar is moving towards a more open economy and democratic society, although these transitions will neither be seamless nor

occur overnight. As the country readies itself for increased foreign investment, it will remain a

challenging frontier market for investors. Nevertheless, from multinational corporations to private equity firms, companies still seem to be drawn to one of the world’s last economic frontiers. If prospective

investors are able to identify and mitigate risks through focused risk assessments, comprehensive due diligence and appropriate compliance measures, there are vast opportunities in Myanmar.

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For More Information To learn more, please contact:

Krishna Ramachandra, Managing Director T: +95 1.233.9522 | M: +65 9822.5011 | kramachandra@duanemorrisselvam.com

Krishna Ramachandra is Managing Director of Selvam & Partners in Yangon and of Duane

Morris & Selvam LLP in Singapore. As head of its corporate finance, investment and

private client practice groups, his experience includes M&A and capital markets, investments funds or private equity and technology, media and telecommunications law.

He has almost two decades of experience in advising issuers, funds, investment banks, listed and private companies and high net worth individuals in Asia, Europe and the US on equity and debt

securities issuances, compliance and regulatory matters. He also possesses extensive experience

providing counsel to local Myanmar business leaders on issues involving a cross-border element in Myanmar’s key industry sectors. His valued legal advice has earned him numerous accolades by

respected industry authorities including Asialaw Leading Lawyers, Chambers and Partners, Asia Pacific

Legal 500 and IFLR1000. Legal 500 noted that Krishna’s ‘intellectual stamina and acute appreciation of commercial realities make him a formidable adviser – his ability to come up with creative, workable solutions is second-to-none.’

Krishna graduated from Christ’s College, Cambridge University, with an LLM in corporate finance on a

Freshfields Bruckhaus Deringer scholarship in 1996. He articled and qualified with Freshfields in

London prior to relocating to Singapore with Clifford Chance in 2003 and subsequently joined Selvam LLC in 2006. In 2011, Duane Morris and Selvam LLC entered into the first US–Singapore joint law venture to form Duane Morris & Selvam LLP.

Krishna is an advocate and solicitor of the Supreme Court of Singapore and a solicitor of England and

Wales. He previously sat on the Singapore Law Society’s Corporate Practice Committee for Mergers &

Acquisitions and Insolvency, Corporate Commercial Matters and Listing Matters. He is invited to speak regularly on M&A, corporate governance, listings, and fundraising matters at conferences globally.

Rory J. Lang, Senior Associate T: +95 1.233.9522 | rjlang@selvamandpartners.com

Rory J. Lang is an international corporate lawyer and Senior Associate at Duane Morris &

Selvam LLP’s Myanmar office in Yangon. He practices in the areas of banking and finance,

corporate, cross border transactions, commercial, mergers and acquisitions, real estate, employment and energy and resources law. He has experience in all forms of foreign direct

investments and cross border transactions. Rory provides on-going legal assistance in relation to

corporate structuring for investment; commercial contracts with local and international corporations and individuals; labour law; local regional compliance requirements; and real estate guidance for developers and hospitality providers.

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Rory has more than eight years of experience in Australia and South East Asia, including nearly three years on-the-ground experience in Myanmar, Laos, Singapore and Sri Lanka. He speaks regularly on

market entry, M&A, employment law, energy, resources and property matters at conferences throughout the ASEAN region.

Rory holds a BA, LLB from the University of Notre Dame Australia, a Graduate Diploma in Legal Practice

from the Australian National University, a Graduate Diploma in Commercial and Resources Law and an LL.M in Mining and Energy Law from the University of Western Australia.

Rory is admitted to practice as a lawyer of the Supreme Court of Western Australia and as a solicitor of the Federal and High Courts of Australia. He is also a registered foreign lawyer in Singapore.

Duane Morris & Selvam (Myanmar) Limited

No. 14, Kaymarthi Street (1) Mi Kyaung Kan, Thingangyun Township Yangon, Myanmar

www.duanemorrissselvam.com

© Duane Morris & Selvam LLP, February 2018.

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This publication is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The invitation to contact the attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP is a law firm based in the United States founded in 1904. We use “Duane Morris” to refer to Duane Morris LLP, a Delaware limited liability partnership, and affiliated entities that practice under the name Duane Morris or a similar name. In Singapore, Duane Morris Singapore LLP and Selvam LLC operate a Joint Law Venture serving clients throughout Asia, Duane Morris & Selvam LLP, pursuant to Licence 2/2010 granted by the Attorney General of Singapore. Selvam LLC lawyers may provide services to clients of Duane Morris & Selvam under secondment from Selvam LLC pursuant to Licence 2/2010.