30 August 2012 DOING BUSINESS IN MYANMAR by MYANMAR LEGAL SERVICES LTD A foreign investor looking at a project or transaction in Myanmar

for the first time will find an outdated legal framework and administrative practices governing most business transactions. The role of the law, lawyers and the judiciary in Myanmar was established during the British colonial period, and continued after Myanmar gained independence in 1948 until 1962. In 1962 the government changed the countrys economic policy to socialism. When the State Law and Order Restoration Council took power in September 1988, this marked a shift from a socialist to a more liberal and market oriented economic policy. The first Constitution of Myanmar was enacted in 1947; the second in 1974 and the current one in 2008 effective from 31 January, 2011 (first convening of the Parliament). A general election took place in 2010. By-elections in 44 districts were held on 1 April 2012. During the second session of Parliament in fall 2011, 15 new laws/amendments were enacted and during the third session February March 2012, 11 new laws/amendments were enacted. See listing in Schedule 1. The fourth session of parliament convened on 4 July 2012 and is expected to last until September. Lawmakers are expected to debate bills on a minimum wage, corruption and media censorship as well as further economic reforms including reforms, and ratification of new foreign investment law.1 The laws and practices governing investing in Myanmar are undergoing rapid changes. The Myanmar government is obtaining technical assistance and training in a number of key areas, including foreign exchange controls, finance and investment law reform and trade facilitation.

Foreigners Investing in Myanmar A foreign investor may incorporate in Myanmar a 100% foreign owned company, establish and operate as a registered branch of a company incorporated outside Myanmar; establish and operate as a sole proprietor; and establish and operate as a 100% foreign owned partnership. The incorporation of a foreign Myanmar company and registration of a Myanmar branch of a foreign company in Myanmar is subject to the procedures and requirements set out in the Myanmar Companies Act and by the Directorate of Investment and Company Administration (DICA). The Foreign Investment Law (1988 as amended) defines two types of foreign investment: 1) a sole proprietorship wholly owned by a foreign investor supplying 100% foreign capital, and 2) a joint venture in the form of either a partnership or limited company, in which the foreign capital invested must be a minimum of 35% of the total equity capital. Foreigners who invest in local companies or through nominees have no legal standing to enforce their rights. Foreigners considering investment in Myanmar should only invest through a Myanmar incorporated company in which they are controlling shareholders and directors
1

A new Foreign Investment Law (2012) was expected to be passed by the Parliament in its third session. However, although the Bill was n published in the Myanmar Gazette on 9 March 2012, it has not been enacted. Myanmar Times August 20-26, 2012 reports that 54 amendments to the pending draft FIL were approved by the Peoples Parliament.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

duly registered at the Companies Registration Office in accordance with the Myanmar Companies Act (1914) (or Special Companies Act (1950) if a joint venture with a government enterprise). On 27 February 2012, the Myanmar Investment Commission (MIC) passed an Order relating to nominee investments carried out by Myanmar Citizens. The order requires foreign investors to invest in accordance with the Foreign Investment Law, not through the use of a local nominee; upon failing to do so, the concerned company will be blacklisted. Foreigners may not purchase land or condominiums in Myanmar. International Sanctions Since 1997, investment in Myanmar was restricted by sanctions imposed by the US, EU, UK Australia and Canada. The following is an overview of relaxations of sanctions in 2012; United States: Latest relaxations: o General License No. 14-c issued on 17 April 2012: Authorizes exportation of financial services for not-for-profit activities.2 o On 11 July 2012, the US further relaxed sanctions as follows; OFAC General License No. 16 Authorizes the Exploration of Financial Services to Burma, subject to certain limitations. OFAC General License No. 17 Authorizes New Investment in Burma, subject to certain limitations and reporting requirements. New Executive Order Targeting Persons Threatening the Peace, Security or Stability of Burma.3 European Union: Latest relaxation: Council of the European Union Decision 2012/225/CFSP issued on 26 April 2012All sanctions have been lifted with the exception of the arms embargo and equipment embargo that might be used for internal repression, which continues for 12 months.4 United Kingdom: Latest relaxation: industries.5

Suspend assets freeze on nearly 500 people and restrictions on key

Australia: Latest relaxation: Australia has lifted all travel bans on Myanmar citizens as reported on 7 June 2012. There are no general trade sanctions. However the Australian government retains the capacity to impose sanctions if required by the circumstances, and still has prohibitions on weapons trading.6

3 4 5
6

United States Treasury Department website; http://www.treasury.gov/resourcecenter/sanctions/Programs/pages/burma.aspx; retrieved 15 May 2012 United States Treasury Department, Office of Foreign Asset Controls website; http://burma.usembassy.gov/ retrieved 12 July 2012 Transcript of EU Decision can be viewed at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:115:0025:01:EN:HTML The United Kingdom Treasury Department website; www.hm-treasury.gov.uk/fin_sanctions_burma.htm; Note that the UK shares many policies on sanctions with the EU. see http://www.channelnewsasia.com/stories/afp_asiapacific/view/1206240/1/.html; Retrieved 8 June 2012

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

Canada: Latest relaxation: Prohibitions on import, export, investment, financial transactions, and technical data have been removed. Asset freeze and prohibition on transactions also remain in effect for designated individuals, but the list of individuals is being reduced.7 Myanmar Legislation Myanmar legislation includes 13 volumes of codified laws from the period 18411954 (known as the Burma Code), and numerous special laws, notifications, rules and regulations enacted from time to time. The Government also publishes a weekly Gazette detailing notifications, changes to existing laws and new laws. Myanmar Laws enacted after 1988 are usually published both in Myanmar and English. The Attorney Generals Office published a compilation of Myanmar laws up to 2010. English versions were published up to 2009. The Court System According to the Constitution, Courts of the Union include (i) Supreme Court of the Union, High Courts of the Region, High Courts of the State, Courts of the Self-Administered Division, Courts of the self-Administered Zone, District Courts, Township courts and the other Courts constituted by law, (ii) Courts-Martial, and (iii) Constitutional Tribunal of the Union. The Supreme Court is the highest Court in the country without jurisdiction over the powers of the Constitutional Tribunal and the Courts-Martial. There is no jury system in Myanmar. Cases are normally tried by a single judge; however, in special cases the Chief Justice of the Supreme Court can instruct to form a panel of judges. The language of the Court is Myanmar, and procedures of all courts are governed by the Civil Procedure Code, Criminal Procedure Code and the Courts manual, all of which are available in Myanmar and English language versions. Sources of Local Advice 8 Myanmar Investment Commission: The MIC is the agency responsible for reviewing most types of foreign investment, and for coordination with other government agencies. MIC is a good source of information for foreign investors. Before September 2011, in practice, in some commercial matters, the MIC submitted to the Trade Council (TC and afterwards named TISC) for final approval. Commencing from 1st September 2011, the Government issued Notification No 82/2011 and formed a new MIC with the Minister of No (2) Ministry of Industry as Chairman, four members, one Secretary, and one Joint Secretary. MICs objectives include to develop the States economy by promoting investment projects; to promote more opportunities for investment, technical knowhow and job prospects; to prepare in advance to incorporate and cope up with ASEAN countries, and to be more efficient on investment under the market oriented system. Notification relating to the formation of TISC replacing TC, was repealed by this Notification No 82/2011. Currently, there is no TISC or TC above MIC. Legal Advice: Legal advice on business law in Myanmar can be obtained from local Myanmar lawyers. There are several local law firms that are affiliated with international law firms.

7
8

http://www.gazette.gc.ca/rp-pr/p2/2012/2012-05-09/html/sor-dors85-eng.html See website of DICA (Directorate of Investment and Company Administration, Ministry of National Planning and Economic Development) www.dica.gov.mm, This website includes a Myanmar Investment Guide.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

International Accounting Firms: Myanmar.

Currently, there are no international accounting firms in

Currencies and Exchange Rates There are three main currencies in use in Myanmar. 1. 2. Kyat: is the national currency for daily transactions among citizens and visitors in Myanmar. Foreign Exchange Certificates (FEC): are purchased (as required) with foreign currency by foreigners visiting Myanmar. One FEC technically is equal to one US dollar. FECs are accepted by government agencies and certain vendors established to use by the Central Bank of Myanmar since 4 February, 1993. 9 US Dollars: which is the preferred foreign exchange currency, but cash dollars can be used legally by locals only at establishments licensed to accept US dollars. While banks will also buy Euros and Singapore dollars, for every day transactions US dollars may be used in transactions, if they accept foreign currency at all.

3.

Before 1st April 2012, the official exchange rate was approximately 6.00 kyat per one US dollar; this official exchange rate regime was abandoned on 1st April 2012 in favor of a managed market exchange rate. The free market rate as of 27 July 2012 was approximately 860 kyat per one US dollar as monitored by the Central Bank of Myanmar. Foreign investors doing business in Myanmar should know that some types of investment will require part of the capital to be imported in amounts determined by this free market rate. The government sometimes issues an internal notification of the market exchange rate for tax purpose only to calculate the exchange rate loss and profit for tax payers. In October 2011, the government licensed exchange rate centers where legal foreign exchange currency earners can change US$, Euros, Singapore Dollars and FECs with kyat. Currently, the government is taking steps in consultation with IMF on reforming the countrys exchange rate system. When the Foreign Investment Law was enacted, only two banks, the MFTB and MICB were permitted to operate foreign bank and foreign exchange transactions. Recently, the authorities have granted permission to Co operative Bank, Kanbawza Bank, Asia Green Development Bank and Ayeyarwaddy Bank to operate as foreign banks in ASEAN countries, notably Thailand, Singapore and Malaysia. These banks require official authorization from the Central Bank of Myanmar to actually carry out transactions. GENERAL LAWS GOVERNING DOING BUSINESS Foreign investors, like domestic investors, must comply with the general business laws of Myanmar. The principal laws include: Myanmar Companies Act (1914) 10 A Myanmar investor wishing to carry on business in Myanmar through a limited company may register a company under the Myanmar Companies Act. However, a local Myanmar company may have no foreign shareholder and no foreign director.

Information Minister Kyaw Hsan announced in August 2011 that the Myanmar Government would begin phasing out FEC. [http://www.dvb.no/news/govt-to-phase-out-fecs-cut-export-taxes/17047] This will likely come as part of the overhaul the government is planning, in consultation with the IMF, expected to be tabled some time during 2012. 10 As amended by the Law Amending the Myanmar Companies Act (1989); and, the Law Amending the Myanmar Companies Act (1991). Myanmar investors may register limited companies under the Myanmar Companies Act. Under s. (2A) of the Myanmar Companies Act, a local Myanmar company may have no foreign shareholder and no foreign director.
9

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

A foreign investor wishing to carry on business in Myanmar through a locally incorporated limited company may register the company under the Myanmar Companies Act, unless the company is a State-owned enterprise or involves the Government, in which case it must be incorporated under the Special Companies Act (1950) and be approved in accordance with the Foreign Investment Law. Under the Myanmar Companies Act, a foreign company, whether a 100% owned, joint-venture or a branch/representative office, is required (with certain exceptions) to obtain a Permit to Trade Certificate before registration. Permits to Trade are currently renewable every three years (formerly, every two years). The Permit to Trade is applied for at Companies Registration Office and requires approval by MIC. A joint venture company with a State entity, formed under the Special Company Act 1950, is also required to obtain a Permit to Trade. In the past, MIC promoted companies did not require a Permit to Trade Certificate. Currently, Permit to Trade Certificates are also issued to MIC promoted companies, which have to be renewed every three years together with the Company Registration Certificate. MIC Permits are approved for a long term and do not have to be periodically renewed. There are three categories of companies for Permits to Trade purposes: Services Company, Trading Company and Manufacturing Company. At present, no Permits to Trade for trading companies are issued or renewed. The government did not announce any notification of such prohibition. A limited company has memorandum and articles of association. The articles of association may include special voting rights and other minority shareholder protections. Care must be taken by foreign investors in prescribing the powers of the managing director, etc. There are no nationality or residence qualifications applicable to directors unless otherwise prescribed in the articles of association. Imported Capital There are two classes of imported capital which concern foreign investors. First is the minimum capital required to register for a Permit to Trade. Since all foreign companies (excluding joint ventures with a State entity) require a Permit to Trade to operate, this first class represents the minimum imported capital required to operate in Myanmar. Second is the foreign capital required to qualify for an MIC permit. Companies qualifying for an MIC permit are entitled to the incentives outlined in the FIL. Unlike the Permit to Trade, the MIC permit is not required to operate in Myanmar, so this second class represents the minimum imported capital to qualify for incentives. A more detailed description of the Permit to Trade and the MIC permit can be found below: Permit to Trade A foreign Myanmar company, after obtaining a Permit to Trade from the Company Registration Office, must import capital into Myanmar in foreign currency in an amount determined at the official exchange rate, with minimum capital for each category as follows: Ks 133,333,333 (approx. US$166,607) for an industrial company; Ks 66,666,666 (approx. US$ 83,333) for a trading company; and Ks 40,000,000 (approx. US$ 50,000) for a service company. 50% of capital must be deposited into the Myanmar Foreign Trade Bank or the Myanmar Investment and Commercial Bank in Yangon when the company submits its registration application. The remaining 50% must be imported within one year. The capital may be held in US$ accounts, and exchanged at market rates.
Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

MIC Permit The minimum amount of foreign capital required to be eligible under the Foreign Investment Law is: For an industry US$ 500,000. For a service organization US$ 300,000. Foreign capital may be imported in the following forms: Any foreign currency acceptable to the MFTB or MICB Machinery, equipment, machinery components, spare parts instruments, etc., that is necessary for the enterprise ; License, trademarks, patent rights and other rights which can be evaluated; Technical know-how; and Re-investment out of profits accrued to the enterprise from the above or from share of profit. Special Company Act (1950)

This Act governs all companies in which the State has equity share capital. When its memorandum and articles of association has been approved by the government, a notification will be issued by the Ministry of Commerce, classifying such a company as a Special Company. The provisions of Myanmar Companies Act apply in so far as they are not excluded. Labor Laws Existing labor laws in Myanmar include: Employment and Training Act (1950), Employment Restriction Act (1959), Employment Statistics Act, (1948), Factories Act (1951), Labour Organization Law (2011), Leave and Holidays Act (1951), Minimum Wages Act, (1949), Oilfields Labour and Welfare Act (1951), Payment of Wages Act (1936), Social Security Act, (1954), Shops and Establishments Act (1951), Workmens Compensation Act (1923) and Labour Dispute Settlement Law (2012). These laws governs labor relations problems and deal with such subjects as work hours, holidays, leaves of absence, woman and child labor, wages and overtime, severance pay, workmens compensation, social welfare, work rules and other matters. There is a minimum wage only in certain fields (i.e. agricultural workers). A social security act established a fund with contributions by employers, employees and the government. These Labour laws were formerly announced as rules under the 1964 Law Defining the Fundamental Rights and Responsibilities of the Peoples Workers (1964 Law). On 21st December 2011, a Law revoking the 1964 Law was passed. On 11th October 2011 the Trade Unions Act 1926 was repealed by the Labour Organization Law. The Labour Organization Law took effect on 9 March 2012. The Ministry of Labour and the Attorney Generals Office have drafted a new Labour Law which is expected to be submitted and passed by the Parliament in the near future. The Myanmar Special Economic Zone Law (2011), Dawei Special Economic Zone Law (2011) and the Bill of the New Foreign Investment Law prescribe special rules applicable to foreign employees, work permits, and minimum percentages of employees which must be citizens.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

Myanmar has been a member of the ILO since 1948. A Myanmar tripartite delegation comprising with the representatives of Government, Employers and workers attend the ILO conference held in Geneva annually. Immigration Law Foreigners cannot enter Myanmar without a visa. A normal tourist visa is valid for 28 days. Foreigners doing business in Myanmar can apply for a stay permit for 3 months, 6 months or 9 months. A foreigner wishing to remain in Myanmar more than 90 continuous days must apply to the Immigration Department for a Foreigners Registration Certificate, which can be extended for a stay of one year with a recommendation letter from the employing company, subject to obtaining a recommendation from the relevant Ministry. Land Laws Restrictions on land ownership Before 30 September 2011, foreigners and foreign companies were not allowed to own land in Myanmar or lease land for a term exceeding one year unless specifically permitted by the Government according to the Transfer of Immovable Property Restriction Law of 1987. However, a company approved under the Foreign Investment Law could request a long-term right of lease from the government. On 30 September 2011, the Government issued Notification No. 39/2011 (Notification on Right to Use of Land relating to the Republic of the Union of Myanmar Foreign Investment Law). This Law allows a foreign company investing under a MIC Permit to lease land up to initial 30 years based upon the permitted investment term, which is extendible for another 15 years twice with the permission of MIC. Land for property development Generally, land in Myanmar is owned by the State. Land administration is assigned to various government departments. While a foreign investor may not own land, land use rights can be obtained in either one of the following two ways: obtaining land use rights under a lease, from either the government or private citizens, approved by the government; or land use rights are contributed to a joint venture by a government agency

Foreign investors may, however, invest in property development on a build, operate and transfer (BOT) basis. The project can be a 100% wholly foreign owned project or a joint venture with a government partner. Many of the projects approved by the MIC are BOT projects. Mining Laws Prior to 1990, the mining sector was open only for State investment. With the introduction of the FIL, foreign investment was introduced into the mining sector. As the old mining laws were out of date, the Government promulgated the Myanmar Mines Law 1994, Myanmar Gemstone Law 1995, and the Myanmar Mines Rules 1996.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

Since the nature of the mineral industry is capital intensive and also requires technical know-how, foreign participation is needed and expected by the Ministry of Mines. 11 A foreign investor can apply to the Ministry of Mines in order to obtain a permit under the following categories: prospecting, exploration, large scale production or small scale production of metallic minerals; large-scale production of industrial minerals; or large-scale production of stone (decorative stones). Oil and Gas Laws Current legislation governing oil and gas includes: The Oilfields Act (1918), The Oilfields Rules (1936), The Petroleum Act 1934, The Petroleum Rules, 1937, The Essential Supplies and Services Act 1947, The Water Power Act 1927, The Petroleum Resources (Development Regulation) Act 1957, Law Amending the Petroleum Resources (Development Regulation) Act 1969, Oilfield (Workers and Welfare) Act 1951 and the Myanmar Petroleum Concession Rules, mostly based upon British Law Codes of the pre-independence and Indian statutes. Notifications are also issued from time to time as a guideline from the Ministry of Energy. The State-owned Economic Enterprises Law (SEE Law) states that the Government has the sole right to carry out the exploration, extraction and sale of petroleum and natural gas and production of products of the same. However, the Government may, in the interest of the State, permit such activities to be carried out jointly between the government and any other organizations. Although the abovementioned laws relating to petroleum are still applicable, in practice, investors generally enter into production sharing contracts with MOGE, the terms and conditions of which govern the process so long as they are not contrary to the laws in force. The last round of bidding for blocks was opened on 9 July 2011, resulting in the award of 10 blocks to 8 companies in January 2012. Tax Laws Myanmar tax structure comprises fifteen different taxes and duties under the four major heads, namely: 1. Taxes levied on domestic production and public consumption - excise duty; licence fees on imported goods; state lottery; taxes on transport, commercial tax and sale proceeds of stamps; Taxes levied on income and ownership-income tax; Customs duties; and Taxes levied on utility of State-owned properties-taxes on land; water tax, embankment tax; taxes on extraction of forest products, minerals, rubber and fisheries.

2. 3. 4.

11

See website of Ministry of Mines <www.mining.com.mm>

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

Income Tax Law (1974) 12 In the past, a flat rate of 30% of net profits was applicable to enterprises operating under the Foreign Investment Law and those formed under the Myanmar Companies Act. On 15 March 2012, notification 111/2012 was issued, prescribing an income tax rate of 25%. Resident and non-resident foreigners For income tax purpose, foreigners and foreign organizations are classified into "resident" and "non-resident" foreigners. A resident foreigner is: (i) (ii) (iii) in the case of an individual, a foreigner who lives in Myanmar for not less than 183 days during the income year; in the case of a company, a company formed under the Myanmar Companies Act or any other existing Myanmar law; in the case of an association of persons, other than a company, an association where the control, management and decision-making of its affairs are situated and exercised wholly within Myanmar; and any enterprise or individual permitted under the Foreign Investment Law.

(iv)

A foreigner or a foreign organization which does not satisfy the relevant criteria listed above is classified as a "non-resident". A branch of a foreign incorporated company registered in Myanmar under the Companies Act is considered a "non-resident" for the purposes of taxation. Withholding Tax The Ministry of Finance and Revenue issued Notification No 41/2010 on 10 March, 2010 prescribed a withholding tax regime. Effective 1 April 2010, persons responsible for disbursement of the following types of payments, other than under the head salaries must at the time of payment deduct and remit tax in the currency the disbursement is made, at the rates below: 1. 2. 3. Interest paid to non-resident foreigners: 15% Royalties: 15% on payments to residents, 20% to non-resident foreigners. Payments for purchase of goods and services: 2% on payments to residents, 3.5% on payments to non-resident foreigners.

Commercial Tax (1990) 13 All enterprises with sales of taxable goods and services exceeding or expected to exceed the applicable threshold in a year are required to pay commercial tax be registered with the Township Revenue Officer. The application for registration must be in the prescribed form and filed one month before the commencement of business. Irrespective of the level of its sales at any time, a registered enterprise is required to comply with all the provisions of the law including submitting returns, paying tax monthly and keeping records, until its name is removed from the register. Only registered enterprises are allowed to deduct input taxes incurred on their purchases.
12

As amended by the Law Amending the Income Tax Law (1989); the Law Amending the Income Tax Law (1991); and, the Law amending the Income Tax Law (2006). 13 As amended by the Law Amending the Commercial Tax Law (1991). Rates range from zero (for exempt items), 5 to 25% for specified goods, and 30 to 200% for luxury goods.
Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

Double Taxation Agreements (DTA) Myanmar currently has double taxation treaties with the United Kingdom, Singapore, Malaysia, Vietnam, South Korea, India and Thailand. The DTA with Thailand came into force for fiscal years beginning on 1 January 2012. INVESTMENT PROMOTION LAWS Foreign Investment Law (1988) 14 The Foreign Investment Law (FIL) was promulgated in November of 1988, to encourage foreign investment in Myanmar. A draft new FIL is expected to be passed in the current Parliament Session. The bill was announced in the Myanmar Gazette, but according to Myanmar Times 2026 August 2012, 54 amendments have been approved by the Peoples Parliament. The MIC was formed in order to oversee and administer the FIL. In order to provide more specific guidance to foreign investors, the MIC issued a notification listing the types of economic activities open to foreign investment. It covers many activities with the exception of those reserved for the State under the State-owned Economic Enterprises Law (SEE Law). However, if a foreign investor is interested in an activity not specified in a notification or defined in the SEE Law, the investor can apply to MIC stating its interest and demonstrating that such an enterprise would be beneficial to the State. Upon satisfaction, MIC may approve the application. The FIL offers a large range of incentives and guarantees to foreign investors. An enterprise permitted by the FIL enjoys a tax holiday period of three years; inclusive of the year the enterprise commences commercial operation.15 In addition, MIC may grant one or all of the following exemptions and reliefs: 1. exemption or relief from income tax on the profits of the business kept in a reserve fund and reinvested in the business within one (1) year after the reserve is made; accelerated depreciation in respect to machinery, equipment, building or other capital assets used in the business, at a MIC approved rate; relief from tax on up to 50% of the profits accrued from the export of goods produced in Myanmar; right to pay foreign employees income tax and deduct such payments from assessable income; right to pay income tax on the income of the above mentioned foreigners at the rates applicable to the citizens residing within the country; right to deduct from assessable income, expenses incurred in respect to necessary research and development carried out within Myanmar; carry forward and set off losses up to three (3) consecutive years after the year in which the loss was sustained;

2.

3.

4.

5.

6.

7.

14

15

As amended by the Notification No. 39/11 (the Notification of the Right to Use Land relating to the Republic of the Union of Myanmar Foreign Investment Law (2011)) and Notification No. 40/11 (the Notification Concerning the Foreign Currency relating to the Republic of the Union of Myanmar Foreign Investment Law (2011)). This tax holiday may be extended on application, provided that the MIC considers it appropriate.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

10

8.

exemption or relief from customs duty licensing requirements and internal taxes on the import of approved machinery and materials during the initial period/period of construction; and exemption or relief from customs duty, licensing requirements and internal taxes on the import of raw materials imported within the first three years of commercial production following start up/completion of construction.

9.

Right to Transfer Foreign Currency A person who has brought in foreign capital can transfer the following: foreign currency entitlement of the person net profit after deducting all taxes and provisions foreign currency permitted for withdrawal by the MIC which may include the value of assets on the winding up of business. a foreign employee can transfer its salary and lawful income after deducting taxes and other living expenses incurred domestically

Guarantee Enterprises operating under the FIL have the State guarantee against nationalization and expropriation. In the Bill of the new FIL, the guarantee is subject to an exception if the nationalization or expropriation is in the natural interest, in which case the investor is to be compensated for the market value of the investment. Application Procedures for Foreign Investment A promoter for foreign investment must submit a proposal in prescribed form to the MIC. With the proposal the following must be attached. Documents supporting financial credibility (audited final accounts of most recent year of the person or the firm that intends to make investment). Bank recommendation regarding the business standing. Detailed calculation relating to the economic justification of the proposed project indicating inter alia: o o o o o o estimated annual net profit estimated annual foreign exchange earnings or savings and foreign exchange requirement for the operation. recoupment period prospects of creating employment prospects of increase in national income. Local and foreign market conditions and the requirement, if any, for local consumption.

If it is a hundred percent foreign investment, a draft contract to be executed with an organization determined by the Ministry concerned. If it is a joint venture, a draft contract to be entered into between the foreign investor and local counterpart. If it is a joint venture in the form of a limited company, draft Memorandum and Articles of Association and also a draft contract between the foreign and local investors. The promoter may apply for the exemptions and reliefs from taxes stated in chapter 10 Article 21 of the FIL.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

11

Special Economic Zone laws On 27 January 2011 the Government promulgated the Myanmar Special Economic Zone Law, Law No. 8/2011 (the MSEZL). This law also provides the land use for a foreign investors, with objectives to base on the framework of maintenance, protection and safeguarding the sovereignty of the State in allowing to operate foreign investment businesses; to develop the momentum of the economy of the State by establishing and operating the Special Economic Zones; to develop the industry and high technologies in the State; to improve the goods processing, trading and service business; to enable the citizens to train, learn and transfer the high technologies; to create more employment opportunities for the citizens; and to develop the infrastructure of the State. To date, a special SEZ law has been enacted for only one zone in Myanmar, namely Dawei Economic Zone in Southern Myanmar under the Dawei Special Economic Zone Law (DSEZL). According to news reports, addition SEZ zones will be announced: Pathienn, Myawaddy and Thilawa. State-Owned Economics Enterprises Law (1989) SEE Law provides that the following 12 activities may only be undertaken by a State-owned economic enterprise, namely: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) extraction and sale of teak in Myanmar and abroad; cultivation and conservation of forest plantation with some exceptions; exploration, extraction and sale of petroleum and natural gas and production of products of the same; exploration, extraction or export of gems; breeding and production of fish and prawns in fisheries which have been reserved for research by the government; post and telecommunications services; air transport and railway transport services; banking and insurance services; broadcasting and television services; exploration, extraction or export of metals; electricity generating services other than those permitted by law and cooperative electricity generating services; and manufacturing of products relating to security and defense.

While the SEE Law restricts the aforementioned activities, it also gives the government the right to grant the activities reserved to State-owned economic enterprises to joint ventures between the government and any other person or economic organization. Regulation of Manufacturing A manufacturing business in Myanmar is regulated by the Ministry of Industry No. 1, which is responsible for directing and promoting industrial investment and production of consumer goods and other light industrial products. A variety of consumer goods such as textiles and garments, foodstuffs and beverages, pharmaceuticals, soap and toiletries, enamel wares, aluminum wares, steel products, cement, marble and porcelain wares, rubber goods, leather, packing materials, pulp, paper and paints, jute carpet, etc. are being produced by State-owned factories.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

12

Foreign investors may submit proposals to engage in these manufacturing activities under the FIL, either as joint ventures or wholly owned foreign enterprises. They can also enter manufacturing contracts with existing factories to provide raw materials and spare parts in exchange for the finished products after payment of processing charges in foreign currency. Foreign investors can also participate in a buy-back system, under which they will supply machinery and equipment on a deferred payment basis. The cost of the machinery and equipment is then paid back in agreed quantities of finished goods annually at mutually agreed upon prices. The Private Industrial Enterprise Law (1990) The Private Industrial Enterprise Law and Procedures of 1990 enables the establishment of small, medium and large scale enterprises and promotes private industrial enterprises excluding those industrial enterprises conducted as a joint venture with the State. The Private Industrial Enterprise Law provides: 1. joint ventures with the Government/State-owned economic enterprises are specifically exempted from the Private Industrial Enterprise Law; all private individuals and entities (whether 100 percent foreign-owned, locally owned or a joint venture) operating an enterprise which produces finished goods from raw materials using any form of power in any building must apply for registration with the Ministry of Industry No. 1 in the manner prescribed by the Private Industrial Enterprise Law; the Ministry may impose conditions on the registration (particularly with regard to technology transfer and pollution controls) and the registered private industrial enterprise is required, among other things, to comply with the orders and directives issued by the Ministry from time to time; and the Minister of the Ministry of Industry No. 1 has wide discretion to suspend or cancel the registration if it is necessary in the interests of the State. Also, the registration will become invalid upon the enterprise being terminated under any other law. Arbitration Myanmar is a party to the Geneva Protocol on Arbitration Clauses of 1923, but is not a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, the ICSID Convention or other international conventions relating to arbitration. There is no public record of any international commercial arbitration cases having been conducted under the English based, Myanmar Arbitration Act 1944. There have been very few international commercial arbitration cases conducted in Myanmar. This probably reflects the economic policy of Myanmar prior to 1988 of minimizing economic relations with foreign countries. Since 1988, there have been a number of contracts between public and private sector Myanmar parties and foreign companies, in which a foreign governing law and foreign arbitration rules are prescribed. Myanmar is a party to the ASEAN Investment Protection Agreement, 1987. Myanmar became a member of ASEAN in 1997, and is obliged to ratify 14 key agreements prescribed by ASEAN. The Protocol on Enhanced Dispute Settlement Mechanism (2004) is one of these agreements.

2.

3.

4.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

13

The arbitration provision in the Myanmar Companies Act states: (1) A company may by written agreement refer to arbitration, in accordance with the Arbitration Act on existing or future differences between itself and any other company or person. Companies, parties to the arbitration, may delegate to the arbitrator power to settle any terms or to determine any matter capable of being lawfully settled or determined by the companies themselves, or by their directors or other managing body. The provisions of the Arbitration Act shall apply to all arbitrations between companies and persons in pursuance of this Act.

(2)

(3)

The arbitration procedure must always be in accordance with the Arbitration Act, 1944. As a matter of government policy, most contracts between State-owned enterprises and foreign companies specify Myanmar law as the governing law, and prescribe that disputes be settled by arbitration under the Arbitration Act. In general, the Attorney Generals Office (AGO) and MIC do not allow foreign arbitration provisions. In practice at present time, disputes between the contracting parties in Myanmar are settled by the Union of Myanmar Federation of Chamber and Commerce Industry in Yangon. On 8th March 2012 at the third Parliament session, it was proposed to amend the Arbitration (Protocol and Convention) Act and the 1944 Myanmar Arbitration Act. It is concluded that the 1944 Act will be kept for the purposes of domestic arbitration, to adopt the UNCITRAL Arbitration Rules, and to officially join the New York Convention.

Investment Promotion Treaties Myanmar has investment promotion treaties with China, India, Laos, the Philippines, Thailand and Vietnam. The treaties with China, India, the Philippines and Thailand have come into force. The treaty with Thailand came into force on 8 June 2012.

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

14

ADDRESS OF MAIN OFFICES FOR INVESTMENT IN MYANMAR MYANMAR INVESTMENT COMMISSION OFFICE DIRECTORATE OF INVESTMENT AND COMPANY ADMINISTRATION MINISTRY OF NATIONAL PLANNING AND ECONOMIC DEVELOPMENT www.dica.gov.mm/index.htm FOR COMPANY REGISTRATION COMPANY REGISTRATION OFFICE DIRECTORATE OF INVESTMENT AND COMPANY ADMINISTRATION MINISTRY OF NATIONAL PLANNING AND ECONOMIC DEVELOPMENT Building No. 32, Nay Pyi Taw Myanmar Tel: 95-67-406342; 406124; 406124 Fax: 95-67-406074 Website: www.mnped.gov.mm/index.php

FOR EXPORT & IMPORT EXPORT IMPORT REGISTRATION OFFICE DIRECTORATE OF TRADE MINISTRY OF COMMERCE Building No. 3, Nay Pyi Taw Myanmar Tel: 95-67-408009; 406124; 408003 Fax: 95-67-408234 Website: www.commerce.gov.mm DIRECTORATE OF TRADE YANGON BRANCH No. 226/240, Strand Road Pabedan Township, Yangon MYANMAR Tel: 951-251197 Fax: 951-253028

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

15

Schedule 1 New Myanmar Laws (last updated 28 July 2012) Subject: Laws approved and enacted by the Union Parliament (Pyidaungsu Hluttaw) in its second and third session, August to November 2011 and February to April 2012. Name of the Law Law Revoking the Revenue Law Law Amending Myanmar Stamp Act Law Amending the Commercial Tax Law Law Amending the Income Tax Law Law Amending the Court Fees Act Law Amending the Union Election Commission Law Labour Union Law Law Amending the Peoples Parliament Election Law National Parliament Election Law Law Amending the Division Regional or State Parliament Election law Law Amending the Registration of Political Parties Law The Law Revoking the 1964 Law Defining the Fundamental Rights and Responsibilities of the Peoples Workers Microfinance Law Private Schools Registration Law Peaceful Demonstration and Peaceful Grouping Law Remarks Union Parliament Law No. 1/2011 Union Parliament Law No. 2/2011 Union Parliament Law No. 3/2011 Union Parliament Law No. 4/2011 Union Parliament Law No. 5/2011 Union Parliament Law No. 6/2011 Union Parliament Law No. 7/2011 Union Parliament Law No. 8/2011 Union Parliament Law No. 9/2011 Union Parliament Law No. 10/2011 Union Parliament Law No. 11/2011 Union Parliament Law No. 12/2011 Union Parliament Law No. 13/2011 Union Parliament Law No. 14/2011 Union Parliament Law No. 15/2011

No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Date of Approval 29-9-2011 29-9-2011 29-9-2011 29-9-2011 29-9-2011 5-1-2011 11-10-2011 18-10-2011 18-10-2011 18-10-2011 4-11-2011 21-11-2011

13. 14. 15.

30-11-2011 2-12-2011 2-12-2011

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

16

No. 16.

Date of Approval 25-2-2012

Name of the Law Ward and Village Administration Act

Remarks Union Parliament Law No. 1/2012 Union Parliament Law No. 2/2012 Union Parliament Law No. 3/2012 Union Parliament Law No. 4/2012 Union Parliament Law No. 5/2012 Union Parliament Law No. 6/2012 Union Parliament Law No. 7/2012 Union Parliament Law No. 8/2012 Union Parliament Law No. 9/2012 Union Parliament Law No. 10/2012 Union Parliament Law No. 11/2012

17. 18. 19. 20. 21. 22. 23. 24. 25. 26.

25-2-2012 20-3-2012 20-3-2012 29-3-2012 30-3-2012 30-3-2012 31-3-2012 1-4-2012 2-4-2012 3-4-2012

Union Supplementary Budget Allocation Law (2012) Union Election Commission Law National Planning Law Labour Disputes Settlement Act Union Budget Law 2012 Ward and Village Administration Amending Act Families of Disabled or Deceased Soldiers Supporting Act Environmental Law Vacant, Fallow and Virgin Land Management Act Farmland Act

Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Business

in Myanmar (ATC 310812)_(693980_7).DOC

17