25 Jan 2018
Establishing a Presence in Myanmar
The Directorate of Investment and Company Administration (DICA) of the Ministry of Planning and Finance is in charge of handling company registrations for local and foreign businesses. DICA also serves as a secretary to the Myanmar Investment Commission (MIC), a government-appointed body responsible for verifying and approving investment proposals.
The regulations governing the registration of companies and foreign investment in Myanmar are the Companies Act 1914 (CA 1914) (before it is superseded by the new law in August 2018) and Myanmar Investment Law 2016 (MIL).
Following the enactment of Myanmar Investment Law in October 2016, the Myanmar government proceeded to update the investment rules and negative list of business activities and promoted sectors for investor in 2017. In Myanmar, foreign companies are only permitted to invest in certain sectors, with some sectors either closed to FDI or subject to certain restrictions. The FDI restricted list is updated regularly, with the last update in 2017 putting in the following restrictions:
- Investment activities not allowed to be carried out by foreign investors, including manufacturing of products for the security of the Myanmar government.
- Investment activities allowed only in the form of a joint venture with any Myanmar business or citizen. These include transportation activities, oil, gas and mining and the manufacturing of food and drink related products.
- Investment activities to be carried out only with approval of the relevant ministries.
Full detail on the activities within each area is documented in the List of Restricted Investment Activities, Notification No. 15 /2017.
Establishing a Presence in Myanmar
The table below provides the options available to Hong Kong companies wishing to establish a presence in Myanmar.
Limited Liability Company
– Wholly foreign-owned companies are allowed except that the investment sectors are on the restricted activities list. Hong Kong companies can either establish a private or public limited liability company.
– A private limited liability company is required to have at least two but no more than 50 shareholders, whereas a public limited liability company is required to have seven or more shareholders.
– DICA levies a foreign company registration fee of MMK1 million (about US$730). Additionally, stamp duties are payable.
– The minimum share capital for a foreign-owned company is US$50,000 for a service company and US$150,000 for a manufacturing company.
– A joint venture can be set up either as a partnership or limited company with any Myanmar partner that can be an individual, a private company, a co-operative society or a state-owned enterprise.
– There is an extensive list on the type of foreign investment allowed in forming joint ventures with Myanmar partners that should own a minimum shareholding of 20%.
– A branch can be formed as a manufacturing or a services company.
– Foreign-owned branches are subject to the same registration fees and minimum investments for foreign-owned companies.
Representative Office (RO)
– Foreign companies with business relations or investment projects in Myanmar may apply to open an RO.
– Unlike branches, ROs incorporated outside Myanmar are not allowed to perform direct commercial or revenue generating activities in Myanmar. Instead, they are permitted to liaise with and collect data useful for the head offices.
Setting up a Foreign-owned Company, Branch or Representative Office
The World Bank’s Doing Business 2018 ranks Myanmar 155th out of 190 economies for starting a business, below the East Asia and Pacific regional average. Two steps must be completed before operating in Myanmar:
1. Register the company with DICA.
2. Obtain an MIC permit, which is mandatory for all foreign investors who wish to carry out direct investment in Myanmar. Foreign companies providing only services within Myanmar do not require an MIC permit and can start operating their business after incorporation (e.g. an RO). When an investor is granted an MIC permit, it may begin operations after completing all necessary contracts with government entities, organisations or individuals.
Registering a Company, Joint Venture or a Branch with DICA
Full details on the specifics for registering with DICA are available on its website under “How to register your company?”. The flowchart below provides an overview of the steps.
Obtaining a Permit from MIC
To obtain an MIC permit, Hong Kong companies should follow the steps in the flow chart below. Investment proposals submitted to MIC are approved on a case-by-case basis, with proposals evaluated against their compatibility with the prevailing investment policies, the company’s financial trustworthiness and economic solidity.
The Myanmar Accountancy Council (MAC) is responsible for prescribing accounting and auditing standards. The Myanmar Accounting Standards (MAS) and Myanmar Financial Reporting Standards (MFRS) have been effective since January 2011, and are consistent with the International Financial Reporting Standards (IFRS) that existed on that date. Hong Kong companies should be advised that there are differences between MFRS and IFRS when accounting for their investments in Myanmar. With the Myanmar government in the process of updating outdated laws, the MAC are expected to update MFRS and MAS in due course, which will be a challenge for finance professionals in Myanmar to adapt to the new regulations.
There are a number of incentives available to foreign companies in Myanmar and these include:
- Tax incentives – which include income tax holidays of up to five years, relief from income tax for up to five years, exemption from customs duties, exemption on commercial tax on goods available for export
- Non-tax incentives – which allow foreign investors to lease land on a long term basis and gain access to stay permits and employ foreign workers
- Guarantees against nationalism
The easiest way to be eligible for these investment incentives is to locate the company or branch in one of the three Special Economic Zones in Myanmar (that is, Thilawa, Dawei and Kyaukphyu), which were established in 2014. Generally, investment incentives are granted at discretion by MIC and Hong Kong companies are advised to discuss the availability of incentives with MIC upon obtaining an Investment Permit.
- Regulatory Environment
- Establishing a Presence
- Intellectual Property Protection
- Staff Recruitment
- Tax Considerations
- Import/Export Procedures
- Further Information