Myanmar

Myanmar Investment Law (MIL)

The new MIL 2016 was enacted on 18 October 2016. The new MIL is a consolidation of the Myanmar Citizen Investment Law (2013) and the MFIL (2012). The Myanmar Citizen Investment Law and MFIL have been repealed with effect from 18 October 2016.

The list of tax benefits under the new MIL are as follows:

1. For investments in sectors listed in a notification to be issued by the Commission in order to promote investment, exemption from corporate tax for seven, five, or three years, depending on whether the investment takes place in an underdeveloped, moderately developed, or adequately developed region or state. The designation of these zones are subject to change from time to time, depending on the development in the respective regions.
2. Income tax exemptions shall only be granted to sectors that the Commission has specified as sectors that are promoted for investments.
3. The Commission may allow more favourable exemptions and reliefs for locations where Myanmar citizen-owned businesses are operated. The government may also provide subsidies, funding, capacity building, and training to Myanmar citizen investors and citizen-owned small and medium-sized enterprises.
4. Exemption from customs duties or other internal taxes or both on machinery, equipment, instruments machinery components, spare parts, construction materials not available locally, and materials used in the business that are imported as they are actually required, during the construction period, or during the preparatory period of the investment business.
5. Exemption or relief from customs duties and/or other domestic taxes on raw materials and semi-finished goods that are imported for the production of export goods by wholly export investment businesses.
6. Right to obtain a refund, based on the amount of exported goods, of customs duties and/or other domestic taxes paid at the time of importation of raw materials and semi-finished goods that are used to manufacture the products in the country and re-export them.
7. If the volume of investment is increased and the original investment business is expanded during the period of investment, exemption or relief from customs duties or other internal taxes or both on machineries, equipment, instruments, machinery components, spare parts, materials used in the business, and construction materials not available locally, which are imported as they are actually required for use in the business that is being expanded.
8. Exemption or relief from income tax if the profits obtained from the investment business is reinvested in the same business or in a similar type of investment business within one year.
9. Right to deduct depreciation for the purpose of income tax assessment, after computing such depreciation from the year of commencement of commercial operation based on an accelerated depreciation rate (which is less than the stipulated lifetime of the asset).
10. Right to deduct expenses from assessable income incurred for research and development (R&D) related to the investment activities/business required for the development of the country and carried out in the country.
11. Foreign investors will pay income tax at the rates applicable to citizens residing within the country.

Union of Myanmar Foreign Investment Law (MFIL) incentives

Under the MFIL, companies registered under the MFIL that have obtained permits from the MIC were entitled to the following special benefits and tax incentives, which were granted at the MIC’s discretion:

1. Exemption from income tax for up to five consecutive years for an enterprise. The exemption may be extended for a further reasonable period, depending on the success of the enterprise.
2. Exemption or relief from income tax on profits of a business that are maintained in a reserve fund and subsequently re-invested in Myanmar.
3. The right to deduct depreciation of machinery, equipment, building, or other capital assets used in the business at rates prescribed by the MIC.
4. Relief from income tax for up to 50% of the profits accrued from the export of manufactured goods.
5. The right to pay income tax on the income of foreigners at the rates applicable to citizens residing within the country.
6. The right to deduct from taxable income R&D costs that are necessary for the country.
7. The right to carry forward tax losses for up to three consecutive years, provided the losses are sustained within two years from the end of the tax exemption in (1) above.
8. Exemption or relief from customs duty and/or other internal taxes on imported machinery, equipment, instruments, machinery components, spare parts, and materials used in the business, which are required for use during the period of construction.
9. Exemption or relief from customs duty or other internal taxes on imported raw materials for the first three years of commercial production following the completion of construction.
10. If the investor increases the amount of investment and expands the business within the approved timeframe, it may enjoy exemption and/or relief from customs duty or other internal taxes on machinery, equipment, instruments, machinery components, spare parts, and materials that are imported for the expansion of business.
11. Exemption from commercial tax on goods that are manufactured for export.

Except for item (1) above, the other exemptions and reliefs are subject to discretion of the MIC.

Special economic zones (SEZs)

In addition to foreign investment under the MFIL, foreign investors may invest under the Myanmar Special Economic Zone Law of 2014 (Myanmar SEZ Law).

The Myanmar SEZ Law is a basic law for any SEZ within Myanmar. The main regulatory body handling foreign investment under the Myanmar SEZ Law is the Central Body for the Myanmar SEZ.

The Myanmar SEZ Law contains provisions relating to the exempted zone, business promoted zone, other zone, exempted zone business, other business, developers and investors, exemptions and reliefs, restrictions, duties of developers or investors, land use, banks and finance management and insurance business, management and inspection of commodities by the customs department, quarantine, labour and guarantee of non-nationalisation, dispute resolution, WHT, bank and financial management and insurance business, etc.

Incentives under the Myanmar SEZ Law include:

For investors:

• Income tax holidays for the first seven years starting from the date of commercial operation in respect of those investment businesses operated in an exempted zone or exempted zone businesses.
• Income tax holidays for the first five years starting from the date of commercial operation in respect of those investment businesses operated in a business promoted zone or other business in a promoted zone.
• 50% income tax relief for the investment businesses operated in an exempted zone and a business promoted zone for the second five-year period.
• For the third five-year period, 50% income tax relief on the profits of the business if they are maintained for re-investment in a reserve fund and re-invested therein within one year after the reserve is made.
• Exemption on customs duty and other taxes for raw materials, machinery and equipment, and certain types of goods imported for investors in exempted zones; whereas, for investors in prompted zones, exemption on customs duty and other taxes for the first five years in respect of machinery and equipment imported that are required for construction starting from the date of commercial operation, followed by 50% relief of customs duty and other taxes for a further five years.
• Carry forward of loss for five years from the year the loss is sustained.

For developers:

• Income tax holidays for the first eight years starting from the date of commercial operation.
• 50% income tax relief for the second five-year period.
• For the third five-year period, 50% income tax relief on the profits of the business if they are maintained for re-investment in a reserve fund and re-invested therein within one year after the reserve is made.
• Exemption on customs duty and other taxes for raw materials, machinery and equipment, and certain types of goods imported.
• Carry forward of loss for five years from the year the loss is sustained.

Land use may be granted under an initial lease of up to 50 years and renewable for a period of an additional 25 years. Developers/investors may rent, mortgage, or sell land and buildings to another person for investment purposes within the term granted with the approval of the management committee concerned.

Investors seeking to register an entity under the SEZ need to obtain an investment permit from the relevant SEZ Management Committee.

Foreign tax credit

There is no provision for unilateral relief. Relief may be available pursuant to a tax treaty, but the application of the tax treaties is at the sole discretion of the Ministry of Planning and Finance.