DOING BUSINESS IN SHAN

Regulatory

Myanmar Companies Law

The President of the Union of Myanmar signed the Myanmar Companies Law (“the new company law”) on 6 December 2017. This new law will replace the existing Companies Act that has been in use since 1914. The details of the implementation will be further announced via notifications, and expected to be in force in late-2018.
The new law encompasses a wide range of regulations which provides new opportunities for local and foreign companies including shareholding authorities, reduction of share capital, and share transactions.
The law streamlines company management and administration, strengthens governance and enforcement, and makes firms more competitive. It will make it easier for Myanmar public companies to attract new investment technology and expertise by permitting foreign investors to own shares.
The new definition allows foreign investors to take a minority stake in companies incorporated in Myanmar to access business activities that were previously restricted to Myanmar nationals only and thereby indirectly helping to create foreign interest in companies listed on the Yangon Stock Exchange (YSX).

Myanmar Investment Law

By combining the Myanmar Foreign Investment Law 2012 with the Myanmar Citizens Investment Law 2013, the new Myanmar Investment Law 2016 (“MIL”) came into effect in October 2016 to foster a transparent investment environment and fulfil the requirements for local and international investments.
Further to the enactment of MIL, which lays down the legal framework and core principles of the investment regime, the more detailed Myanmar Investment Rules 2017 (“Rules”) was announced on 31 March 2017 followed by the MIC Notification 13/2017 on Classification of Promoted Sector on 1 April 2017.
The Rules and Notifications provide further information about the types of promoted investments, investment assessment criteria and process, tax investment applications and land rights authorization applications.

Tax Regime

On the taxation front, the 2018 Myanmar Union Tax Law (an update of the 2017 Union Tax law) was approved on 20 March 2018 without a tax amnesty clause which is to be drafted separately

Corporate Income Tax

Companies formed and registered under the Myanmar Companies Act 1914 or the Special Company Act 1950, including businesses that have obtained the permit of MIC are subject to an income tax rate of 25%. Tax holidays are available to companies operating with the MIC permits. Companies listed on the YSX are taxed at 20%.

Commercial Tax

Commercial tax, at rates ranging from 0% to 8%, is levied as a turnover tax on goods and services. Generally, commercial tax is imposed at the rate of 5% on a wide range of specified goods and services produced or rendered within the country, and on imported goods. All products and services are subject to 5% commercial tax except for 86 products and 30 services that are specifically exempt from commercial tax. Commercial tax is zero-rated on all exports, except for electricity (8%) and crude oil (5%). Companies registered under the MIC/SEZ may, at the discretion of the MIC/SEZ Committee, be granted exemption from commercial tax during certain stipulated periods.

Specific Goods Tax

With effect from 1 April 2016, the Specific Goods Tax Law was introduced to replace commercial tax on a list of specific goods that are imported into Myanmar, manufactured in Myanmar, or exported to a foreign country. There are 17 specialist goods with tax rates from 5% to 80%. Under the Specific Goods Tax Law, only a manufacturer or exporter of specific goods can claim and offset the specific goods tax incurred on purchase of raw materials/semi-finished goods against the specific goods tax charged on sale of specific goods. On top of specific goods tax, a commercial tax of 5% will also be imposed. Specific goods tax is exempt on all exports.

Personal Income Tax for Foreigners

Resident and non-resident foreigners’ salaries are taxed at the same progressive rate of 0 to 25%, with the only restriction for non-resident foreigners being their ineligibility to claim tax reliefs. A foreigner staying in Myanmar for 183 days or more during an income year is considered a resident.
Tax reliefs applicable to resident foreigners:
• Basic relief (20% of the total salary income), but limited to MMK 10,000,000 • Spouse relief of MMK 1,000,000 (limited to 1 spouse) • Child relief of MMK 500,000 (per child) • Premium paid for life insurance by the employee and his or her spouse • All contributions to social security funds
Special Economic Zones (SEZs) Tax Incentive
Investments in the SEZ shall be applicable under the Myanmar Special Economic Zone Law 2014. Primary attractions of the SEZs include incentives such as a five to seven years corporate tax holiday depending on the zone, 50% relief on income tax for the second five years and investors can lease land up to 75 years, i.e. 50 years plus 25 years extension.
Double Taxation Agreements
The Income Tax Law (ITL) provides that if the government enters into an agreement with any foreign or international organisation relating to income tax, and if the agreement is notified, the terms of the said agreement will be followed notwithstanding anything to the contrary contained in any other provisions of the ITL

Tax treaties have been concluded with India, Indonesia, Malaysia, Singapore, Republic of Korea, Thailand, United Kingdom, Vietnam, Laos and Bangladesh. The tax treaties with Indonesia and Bangladesh have yet to be ratified.