|Daw Khin Cho Kyi|
The new Myanmar Investment Law (MIL) was enacted on October 18 2016, replacing the previous Foreign Investment Law (2012) (FIL 2012) and Citizens Investment Law (2013).
Myanmar Investment Commission application process
There will be a new type of Myanmar Investment Commission (MIC) approval process, referred to as the MIC endorsement. Consequently, it is expected that there will be two types of MIC approval under the new law, depending on the nature of the investment: either (i) approval by way of MIC permit, which will be similar to the approval process under the existing investment regime; or (ii) approval by way of MIC endorsement (which, over time, is expected to become a simpler and more efficient approval process than under the existing investment regime).
Tax holidays and incentives are no longer automatic. Instead, they depend on various factors, including the geographic location of the investment within Myanmar, the business sector, and to some extent, the MIC's discretion.
Investors must now apply to the MIC separately for any tax exemptions. In theory, tax exemptions under the MIL will still be available, but will be granted to investors at the discretion of the MIC.
A new zoning system has been introduced, under which investments in certain regions or zones within Myanmar (the locations and details of which had not been issued at the time of writing) may be granted different corporate income tax exemptions. Under the new zoning system: Zone 1 (representing the least developed areas of Myanmar), will attract the greatest potential income tax holiday of up to seven years; Zone 2 will attract an income tax holiday of up to five years; and, Zone 3 (representing the most developed areas of Myanmar) will attract the shortest potential income tax holiday of up to three years.
Comments from the Directorate of Investment and Company Administration in October 2016 suggest that any tax exemptions granted to investors will also depend on whether the relevant investment project falls within a promoted sector specified by the MIC. However, at the time of writing, further official guidance on this matter had not been issued and it is not certain which sectors will be deemed to be 'promoted'.
Land use rights
Foreign-invested companies are still generally prohibited from leasing premises for more than one year, however (i) a lease of up to 50 years, with the option of two 10-year extensions, may be granted to MIC permit holders and MIC endorsement holders, and; (ii) longer lease terms may also be granted in certain less-developed and remote regions, although the details on this type of arrangement are not yet clear.
Remittance of funds
The MIL clarifies the categories of funds that can be remitted offshore by investors, provided that the entity remitting the funds has complied with all tax obligations in respect of the transfer, among other things.
The MIL contains express guarantees against both expropriation and nationalisation, although it does cite certain exceptions, including for the protection of public interest.
Foreign investors now appear to have more flexibility in their approach to employees, since the required local employee hiring ratios which were contained in the 2012 FIL have been revoked. The MIL retains provisions on recruitment and capacity building of local employees.
Daw Khin Cho Kyi