dfdl myanmar tax pocket guide 2015

Page A

Page i

Contents

1. Myanmar Regulatory Overview.................................................1

2. SettingupBusinessinMyanmar ...............................................3a) Commonly Used Business Forms ........................................3b) MainLegalFormalitiesforFormationofaCompanyor

RegistrationofaBranch ......................................................5c) RequirementsforForeignInvestors ....................................7d) Currency/MonetaryRestrictions .........................................8

3. Accounting/FinancialReportingforCompaniesandBranchesofForeignCompaniesinMyanmar ................................................9a) FinancialStatements ...........................................................9b) AuditRequirements ............................................................9c) FinancialYear-end ...............................................................9d) ReportingCurrency .............................................................9

4. TheForeignInvestmentLaw ...................................................10

5. SpecialEconomicZone ...........................................................12

6. OtherComplianceRequirements ............................................16a) SocialSecurity ............................................................................ 16b) WorkPermits/Visa ..................................................................... 16

7. Taxation ..................................................................................17a) Overview .................................................................................... 17b) TaxationofCompanies ............................................................... 17c) TaxationofIndividuals ............................................................... 18d) IndirectandOtherTaxes ............................................................ 20e) TaxAdministration ..................................................................... 24f) TaxIncentives ............................................................................. 25g) Tax Losses ................................................................................... 25h) GroupRelief ............................................................................... 26i) Tax Audits ................................................................................... 26j) ThinCapitalization ..................................................................... 26k) TransferPricingRules ................................................................. 26l) LimitationsofDeductibleExpenses ........................................... 26m) StatutoryLimitations.................................................................. 27

THEDFDLTAXPOCKETGUIDETOINVESTINGINMYANMAR

Page ii

n) InternationalTax ........................................................................ 27o) Anti-avoidanceRules ................................................................. 27p) ForeignExchangeControls ......................................................... 28q) SpecialExemptions .................................................................... 29

8. DFDLTaxServices....................................................................30a) OurServices ............................................................................... 30b) OurPeople ................................................................................. 32

Page iii

The information provided in this guide is based on our understandingofpubliclyknownMyanmar laws,regulationsandofficialpracticesasofJanuary2015andmaybeaffectedbylawsthataresubsequentlyadoptedby Parliament or notifications that are adopted by various ministries.There may also be instances where the unofficial practices applied bythe Government authorities (including the tax authorities) are not inaccordancewithorevencontradictorytoMyanmarlaw.Moreimportantly,as thedecisionsof thecourtsandtaxauthoritiesarenotmadepubliclyavailable, it is possible that the tax authorities or the courtswill adoptan interpretationofMyanmar lawswhich isnot inaccordancewithourinterpretation.Furthermore,notalllawsandregulationsarepublished.

DFDL,2015

Allrightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmitted,inanyformorbyanymeanselectronic,

mechanical,photocopying,recordingorotherwisewithoutthepriorpermissioninwritingfromthepublisherorcopyrightholder.Thispublication,andanyformofcopyofthispublication,maynotbesold,re-sold,hiredout

orotherwisedisposedofbywayoftrade,byanypersonorentity,withoutthepriorwrittenpermissionofthepublisherorcopyrightholder.

Theinformationcontainedinthisbookisprovidedforinformationpurposesonly,andisnotintendedtoconstitutelegalandtaxadvice.Legalandtaxadvice

shouldbeobtainedfromqualifiedcounselforallspecificsituations.

Formoreinformation,[email protected]

1. MYANMARREGULATORYOVERVIEW

AsMyanmaropensuptoforeigninvestment,itstaxandlegalsystemsareundergoingchangesatarapidpace.TheGovernmentismakingreformsinanumberofkeyareasincludingtaxation,foreigninvestmentlaw,foreignexchangecontrols,laborlaw,tradedisputeresolutionandinareassuchastelecommunications,agricultureandmicrofinance.

Myanmarslegalsystemiscomplexandreliantonsomeveryoldstatutes.Itisbasedonacombinationof:

a) Colonialperiodlaws(pre1948);b) Parliamentarylaws(19481962);c) RevolutionaryCouncillaws(19621974);

d) PeoplesAssemblylaws(19741988);ande) State Law and Order Restoration Council / State Peace and

DevelopmentCouncillaws(19882011).

In addition to statute law, the courts of Myanmar continue to applycommonlawprinciplesdatingfromtheBritishcolonialperiod.

In 1988, the Myanmar government implemented a market economypolicyinordertoattractforeigninvestmentandrevitalizethedomesticprivatesector.ItwasinthiscontextthattheUnionofMyanmarForeignInvestmentLawof1988(theMFIL)wasenacted,andtheProceduresrelatingtotheUnionofMyanmarForeignInvestmentLawof1988wereintroduced to ameliorate foreign investment conditions. Until recently,foreigninvestmentopportunitieswerelimited.Sincetheregimechangein March 2011, however, the new government has been pro-activelypromulgatinganopen-doorpolicytoforeigninvestment.

On2November2012,MyanmarsPresidentTheinSeinsigned into lawthehighly anticipatednew framework for investments in theUnionofMyanmar.ReferredtosimplyastheForeignInvestmentLaw(theFIL),thenewlegislationsupersedestheMFIL.

The FIL is a law allowing foreign investors special benefits. In general,registrationundertheFILisoptional,exceptinthefollowingcases:

InvestmentsthatfallundertheState-OwnedEnterpriselawof1989

Infrastructureprojects Manufacturing

InvestmentsapprovedundertheMFILwillalsobedeemedasapprovedundertheFIL.

Laws intended to promote foreign investment in special economiczoneshavebeenenacted.TheSpecialEconomicZoneLawof2011(theSEZL)andtheDaweiSpecialEconomicZoneLawof2011enableforeigninvestorstoundertakearangeofbusinessactivitiesindesignatedSpecialEconomic Zones and also offer various tax reliefs and exemptions toeligibleinvestors.

TheMyanmarInvestmentCommission(theMIC) isthegovernmentalagency,whichadministerstheFILandcoordinateswithvariousministriesandorganizationstofacilitateforeigninvestmentinMyanmar.Itisalsoresponsibleforreviewingforeigninvestmentproposals.

2. SETTINGUPBUSINESSINMYANMAR

a) CommonlyUsedBusinessForms

Thefollowingcommonentitiesarerecognizedandavailableforforeigninvestment/tradeinMyanmar:

i) AnEntitywith100%ForeignEquity:Aforeigninvestormay:

IncorporateinMyanmara100%foreign-ownedcompany Establish and operate as a registered branch of a company

incorporatedoutsideofMyanmar

Ifanindividual,establishandoperateasasoleproprietor

TheFILgenerallyallows100%foreignownershipofinvestmentsinsucheconomicactivitiesasmaybeprescribedbythegovernment.

As with the MFIL, the list of economic activities will be guided bythe principles of job creation, export promotion, local development,applicationofhightechnologyandlargeinvestments,amongothers.TheFIL includesanumberofnewkeyactivities, including those relating toimportsubstitutionandthedevelopmentofamodernindustry.

TheFILprovidesthatthefollowingsectorsmaybesubjecttolimitationsonforeignownership:

a) Mattersthatcanaffectpublichealth,naturalresourcesandtheenvironment;

b) Activities related to manufacturing and services reservedfor Myanmar citizens which will be specified in the ForeignInvestment Rules to be issued by the Ministry of NationalPlanningandEconomicDevelopment(theRules);and

c) Mattersthatinvolveagriculture,livestockfarmingorfisheriesaswillalsobespecifiedinRules.

The rules promulgated under FIL provide details on what businessactivitieswill be disallowed for foreigners. The activities are classifiedintofoursections:

1. Activities that are to be restricted for foreigners includingsmall and medium size mining projects; restrictions forforeigners to engage in printing and broadcasting activities;production of arms and ammunitions, regarding defense andtherebrandservicesthereof;hill-sidecultivationwithcropsandfarmlands,businessescausingtodamagethewaterresources;agriculturebusiness,productionfactoriesworkshopwhicharenotinconformitywiththeFertilizersLaw,SeedsLawandotheragriculturallawsissuedfromtimetotime;importingofwastematerialsfromoutsidethecountryandestablishingfacticesandproductionincountry,etc.

2. Activitiesthatareonlyallowedfor foreigners in JointVenturewith Myanmar nationals (foreigners may own up to 80%equity) includingmanufacturing rawmaterials ofmedicine,pharmaceuticalsanddrugs;testing,explorationandexploitationraw materials of industrial natural resources and mineralsector; construction of buildings, establishing of factories,workshops,manufacturinginadvanceofironframestobeusedin construction of bridges, concrete products; constructionof huge bridges, highways, underground railway lines etc.developingbusinessesregardingtransportation;establishment,selling and hiring of residential buildings, community ownedbuildings(condominiums);establishmentandsellingofofficesand business centers; establishment, selling and hiring ofresidential buildings in dwelling areas related with industrialzones;constructionofbuildingswhichthecitizenscanaffordtobuy; aviation transportation service; special privatehospitals/specialprivatenativehospitals,tourism,amongothers.

3. Activities that are to be allowed under certain conditions(requiring approval from relevant governmental bodies orsubjecttoothercondition)

4. Activities that are only to be allowed after an EnvironmentalImpactAssessment.

ii) JointVenture:Aforeigninvestormay:

IncorporateinMyanmarajointventurecompany Establishandoperateunderacontractual/unincorporatedjoint

venture(i.e.apartnership)

ProposedjointventureswillneedtobeapprovedbytheMICundertheFIL.TheoldprovisionundertheMFILrequiringaforeignpartytoajointventuretocontributeatleast35%ofthejointventuresequityhasbeenabrogated.Instead,theFILprovidesthatforeignersmayownupto80%ofJVswherefullforeignownershipisrestricted.

iii) AgencyorDistributionArrangements

Aforeignentitymay:

Appoint a business representative/enter into an agencyarrangementwithaMyanmarcitizenor100%Myanmarownedcompany

SelltoorbuyfromaMyanmarcitizen/company

b) MainLegalFormalitiesforFormationofaCompanyorRegistrationofaBranch

i) TheMICPermit

A Foreign Company wishing to register under the FIL must submit aproposalintheprescribedformtotheMIC.TheMICevaluatestheforeigninvestment proposal and issues aMIC permit which stipulates certaintermsandconditions.

Forlargescaleprojects,seriousthoughtshouldbegiventoinvestingunderthe FIL which provides significant tax and other incentives. However,suchinvestmentsmustcomplywitharigoroussetofcriteriaandmaybesubjecttosignificantconditions.For smaller investments, or the foreign investorwhodoesnotwish togo through the FIL procedures, a companymay be formed under theMyanmarCompaniesActandRegulations(theCompaniesAct)without

securingapermitundertheFILandtheinvestormayproceeddirectlytoitsapplicationforaPermittoTrade.

ii) ThePermittoTrade

UndertheCompaniesAct,allforeigncompaniesseekingtodobusinessinMyanmar(eveniftheprojectitwillbeconductingisalreadyapprovedundertheFILandhasbeen issuedapermitbytheMIC)mustobtainaPermittoTrade(aTradePermit)fromtheMinistryofNationalPlanningandEconomicDevelopmentpriortocommencingbusinessinMyanmar.AForeignCompanyincludescompaniesincorporatedinMyanmarwhichhaveatleastoneshareholderwhoisnotaMyanmarcitizen,butdoesnotincludeacompanyinwhichtheGovernmentoraState-ownedeconomicenterpriseisashareholder.

Currently,theapplicationforaPermittoTradeissubmitted,alongwiththeapplicationforincorporationoftheForeignCompany,totheRegistraroftheCompaniesRegistrationOffice.WhereanFILPermitisbeingappliedfor,thePermittoTradeapplicationandcompanyincorporationstepsaretobefollowedonlyafterissuanceoftheFILPermit.

APermit toTrade isvalid for threeyears fromthedateof issueand isrenewable.

Therearenoexpressprohibitionsagainstthesettingupofforeign-ownedtradingcompaniesinMyanmar.However,atpresent,noPermitstoTradefor tradingcompaniesarebeing issued.This situationhasevolvedasamatterofpractice,notoflaw.

iii) CapitalRequirements

EveryForeignCompanygrantedapermitisrequiredtobringintoMyanmarinforeigncurrencyIssuedandPaidUpCapital(Capital)intheamountprescribedbytheCapitalStructureCommitteeoftheMinistryofNationalPlanningandEconomicDevelopment.

TheFILandtheimplementingrulesdonotprovideforaminimumcapitalrequirement,butthisistobedeterminedonacasetocasebasis.

TheminimumCapital for investments outside the scope of the FIL forcompaniesundertheCompaniesActis:

USD150,000foranindustrialcompany USD50,000foraservicescompany

Forcompanyformation,atleast50%oftheCapitalmustbedepositedinabankinMyanmarafterthepreconditionstoissuancehavebeennotifiedandpriortotheissuanceofthePermittoTrade.ThebalanceoftheCapitalmustbebroughtintoMyanmarwithinthespecifiedperiod;generallyonetothreeyears.

c) RequirementsforForeignInvestors

AForeignCompanyincorporatedinMyanmarmust:

1. Appointanexternalauditorsoonafterincorporation;

2. Hold its first annual general meeting within 18 months ofincorporation;

3. File an annual return with the Office of the Registrar ofCompaniesRegistrationwithin21daysofthecompanysannualgeneralmeeting,whichistoinclude:

i) alistofmembersanddirectors;ii) detailsofthecapitalstructureofthecompany;iii) details of any mortgages over the companys property;

andiv) acertificatetotheeffectthatthecompanyhasnotissued

anyinvitationtothepublictosubscribeforshares;

4. Keepproperbooksofaccountandstatutoryrecords(suchasaregisterofmembers, shareholders, share transfers,directors,mortgages,charges,etc.);and

5. Present the companys audited financial statements (in theprescribedform)foreachaccountingperiodtothemembersatthecompanysannualgeneralmeeting.

d) Currency/MonetaryRestrictions

TheMyanmar currency is known as Kyats and is denominated as KorMMK. The Central Bank ofMyanmar (the CBM) has floated theKyatsfrom1April2012andtheaverageexchangerateisapproximatelyMMK850totheUnitedStatesDollar. Priorto1April2012,Myanmarhadatwo-tieredexchangerateregimeinvolvinganofficialrateandamarketrate.

Please see Section 7.p for a discussion on the restrictions on foreigncurrencies.

3. ACCOUNTING/FINANCIALREPORTINGFORCOMPANIESANDBRANCHESOFFOREIGNCOMPANIESINMYANMAR

a) FinancialStatements

Financial statements must be prepared in accordance with MyanmarAccountingStandards(MAS).TheMASarebasedontheInternationalFinancial Reporting Standards and International Accounting StandardsissuedbytheInternationalAccountingStandardsBoard.

b) AuditRequirements

Acorporatetaxpayerisrequiredtosubmititsauditedfinancialstatementstogetherwith itsannualtaxreturn.Forthepurposeoftaxreturns,thefinancialstatementsofcompaniesmustbeauditedbyaCertifiedPublicAccountantlicensedbytheMyanmarAccountancyCouncil.

c) FinancialYear-end

Thetaxassessmentyearisfrom1Aprilto31Marchandcannotbevaried.Thisismandatoryevenforbranchesofforeigncompaniesthatmayhaveadifferentfinancialyear-end.

d) ReportingCurrency

ThestatutoryreportingcurrencyisinMMK.

4. THEFOREIGNINVESTMENTLAW

UndertheFIL,theMICmayprovidetaxexemptionsorreliefsfromamongthefollowing:

a) From the year of starting production or service activitiesincluding thestartingyearsup tocontinuousfiveyearsof taxexemption, and if beneficial for the state depending on theprogress of investment activities, additional tax exemption/reliefforasuitableperiod;

b) IftheFILentityreinvestsprofitfromitsbusinessorpartofitsreserve funds within one year, the tax exemption/relief maybeextendedtoincomefromsuchreinvestedprofitorreservefunds;

c) A right toaccelerate thedepreciation rate for themachinery,equipment,buildingorotherworkingcapitalandtoclaimthesameasadeductibleexpense;

d) Iftheproductsofanyproductionworkareexported,thenthetaxexemptionshallbeallowedonupto50%oftheprofitofthesaidexports;

e) Foreignemployeeshave the right todeclarepersonal incometaxatthesamerateasMyanmarcitizens;

f) Expensesforresearchanddevelopmentmaybedeductedfromincome;

g) Arighttocarryforwardandset-offalossuptothreeconsecutiveyearsfromtheyearthelossissustainedifthelossissustainedwithin two years of exemption or relief from income taxbecomingapplicable;

h) A right toexemption/reliefofduty,other internal taxorbothonimportedrawmaterialsforthreeyearsafterestablishment;

i) Aright toexemptionor relief fromduty,other internal taxorbothontheimportedmachinery,equipment,toolsmachinerypartsandaccessoriesnecessaryfortheexpandedworkwiththeapprovalofcommission;and

j) Exemption and relief of commercial tax on the productsmanufacturedforexport.

ObligationsandRightsofInvestors

The FIL provides for various obligations and rights of investors. Rightsinclude the ability to transfer or sell shares, to apply for expansion oftheprimaryinvestmentactivitiesortherevisionoftherelevantproject.Investors are also entitled to lawful settlement of grievances, possibleadditional benefits for the use of advanced technology, enhancedproduction,environmentalprotectionand/orinvestmentindifficultareasofthecountry.

Labor

For skilledpositionsand technicians, theFILprovidesanobligation fortheenterprisetoincreasetheuseoflocalMyanmarstaffovertime.Theinvestorisrequiredtoachievethefollowingtargets:

Atleast25%of itsworkforcetobeMyanmarnationalsduringthefirsttwoyears,

Atleast50%duringthesecondtwoyears;and Atleast75%duringthethirdtwoyears.

Forunskilledpositions,theinvestorisrequiredtoemployonlyMyanmarcitizensfromthetimetheenterprisecommencesoperations.

LandUseRights

LanduserightsofinvestorshavebeenenhancedundertheFIL.Foreigninvestorswillhavetheabilitytoleaselandfor50yearsinitially,increasedfrom30yearsundertheMFIL.Theleasecanthereafterbeextendedfortwoadditionalten-yeartermsasopposedtothetwo15-yearextensionsthatwereavailableundertheMFIL.

5. SPECIALECONOMICZONE

The SEZ includes high-tech industrial zones, information andtelecommunications technology zones, export processing zones, portareazones,logisticsandtransportationzones,scientificandtechnologicalresearch and development zones, service business zones, sub-tradingzonesandzonesprescribedbytheGovernmentfromtimetotime.

ActivitiesintheSEZmayincludeinvestmentsin:

1. Production based businesses such as goods processingbusinesses, hi-tech production businesses, industries,agriculture, livestockbreedingandfisheries,mineralproducebusinessesandforestryproducebusinesses;

2. Servicebusinessessuchastrading,logisticsandtransportation,storage, hotel and tourism, educationandhealth, residentialquarters, infrastructure supply and support centers, greenareas which conserve and protect the natural environment,recreationandresortcenters;

3. Infrastructureconstructionbusinessessuchasroads,bridges,airports, ports, electricity, communication and water supply,environmentconservationandprotectionandwastecontrol;and

4. OtherbusinessesdeterminedbytheCentralBodyoftheSEZLwiththeapprovaloftheGovernment.

TheSEZLisaimedtoencourageinvestorstooperatethefollowingworksinthefollowingorderofpriority:

1. Hightechnologyindustries;

2. Businesses which will further promote the economicdevelopmentoftheState;

3. Businesseswhichwillfurtherpromotetradeandservices;

4. Businesses which will further promote infrastructuredevelopment;

5. BusinesseswhichwillcreatemoreemploymentopportunitiesforMyanmarcitizens;

6. Businesses which include investment in foreign investmentbusinessesbyMyanmarcitizens;

7. Businessesfocusedontheconservationandprotectionofthenaturalenvironment;and

8. OtherbusinessesprescribedbytheCentralBodyoftheMSEZfromtimetotime.

InvestorswhoinvestandoperateintheSEZmayapplyforthefollowingexemptionsandincentives:

a) Investmentbusinessanexemptedzoneorexemptedbusiness:Income tax exemption for the first 7 years from the date ofcommencementofcommercialoperations;

b) Investmentbusiness inapromotionzoneorotherbusinesseslocated in the special economic zone: Income tax exemptionfirst 5 years from the date of commencement of commercialoperations;

c) Investmentbusiness in anexempted zoneorpromoted zone:Reductionoftheincometaxrateby50%forthesecond5years;

d) Investmentbusinessinanexemptedzoneorpromotionzone:Ifprofits,duringthethird5years,arere-investedwithinoneyear,50%reductionofthe incometaxrateforprofitsderivedfromsuchre-investment.

Developersareentitledtothefollowingrelief:

a) Income tax exemption for the first 8 years from thecommencementofcommercialoperations;

b) 50%reliefofthestipulatedincometaxrateinaccordancewiththeexistinglawsforsecond5years;

c) Ifprofits,during the third5years, are re-investedwithinoneyear,50%reductionofthe incometaxrateforprofitsderivedfromsuchre-investment.

Relieffromcommercialtaxandimportduties:

a) Importdutyexemptionandreliefshallbeavailableasfollows: Exemption from customs duty and other taxes,when the

developerimports

construction materials, machinery and equipment, heavymachineries, vehicles andmaterialsused to construct theinfrastructureandofficerooms;

Exemption from customs duty and other taxes, whenthe investor in an exempted zone imports rawmaterials,machinery, equipment and spare parts used in theproduction,andconstructionmaterialsandvehiclesusedintheconstructionofthefactories,warehousesandoffices;

Exemption from customs duty and other taxes,when theinvestor inanexemptedzone importsmotorvehiclesandother goods for wholesale trading, export trading andlogisticservices;

Exemptionfromcustomsdutyandothertaxes,or50%relieffromcustomsdutyandothertaxesforupto5yearsinarow,whentheinvestorinapromotionzoneimportsmachinery,equipmentandrequiredspareparts,constructionmaterialsforthefactory,warehousesandoffices,vehiclesandothergoods.

b) Commercialtax Anexemptionfromcommercialtaxorvalueaddedtaxmay

begrantedtoinvestorsinanexemptedzone;

Anexemptionorrelieffromcommercialtaxorvalueaddedtaxexemptionmaybegrantedtoinvestorsinapromotionzoneduring the reliefperiodstipulated in this law.Commercialtaxorvalueaddedtaxshallbepaidinaccordancewiththerelevantlawsafterthesaidreliefperiod;

Anexemptionfromcommercialtaxorvalueaddedtaxmaybe applied for by investors with regard to the export ofgoodsmanufactured;

Anexemptionfromcommercialtaxorvalueaddedtaxmaybeappliedforbyinvestorsinanexemptedzonewithregardtogoodsimportedintotheexemptedzonefromtheinlandorapromotionzone.

c) Others

GoodsExportedorre-exportedfromthespecialeconomiczoneshallbeexemptedfromtaxandotherdirectorindirectlevy;

Thedeveloperandtheinvestorsmayapplyforanexemptionfromincometaxoneachshareholdersshareoftheprofitifdividendsarepaidfromtaxedincome.

Investors inanexemptedzonemaybeallowedtodeduct,from the taxable income, expenditures actually incurredfor training of skilled workers, unskilled workers, ormanagementstaff,orforresearchanddevelopmentrelatedtotheinvestmentproject.

* Large,MediumandSmallarenotdefinedintheSEZL.

6. OTHERCOMPLIANCEREQUIREMENTS

a) Social Security

TheSocialSecurityActof2012providesthatprivateenterprisesemployingfiveormoreworkersmustcontributethelesseramountbetween3%oftheir insuredwagesor3%ofMMK300,000tothesocialsecurityfund.The employees contribution is 2% of their insured wages or 2% ofMMK300,000.

b) WorkPermits/Visa

Myanmardoesnothaveaworkpermitconcept.Foreignnationalswhoneedtoresideforlongperiodsforemploymentpurposesmustobtainastaypermitandamultiple-journeyspecialre-entryvisa.

7. TAXATION

a) Overview

Thecurrentmajortaxlawsinclude:

TheamendedIncomeTaxLaw(1974)(theITL); TheamendedCommercialTaxLaw(1990)(theCTL); TheUnionRevenueLawof2014.

The ITL is supplemented by the Income Tax Rules, the Income TaxRegulationsandNotificationsissuedbytheIRD(definedbelow)fromtimetotime.

TheInternalRevenueDepartment(IRD),undertheMinistryofFinanceandRevenue(MFR),administerstaxationinMyanmar.

b) TaxationofCompanies

i) TaxablePresence

Thetaxationofacompanyisdeterminedbyitstaxresidency.

Aresidentcompanyis:

A company formed under theMyanmar Companies Act (theCompaniesAct);or

Acompanyformedunderanyotherexisting lawofMyanmar,includingtheSpecialCompanyAct(companywithStateequity)andtheFIL.

Residents are subject to tax on income accrued, or derived from, orreceived from any sources in and outside Myanmar. A non-residentforeignerisliabletopaytaxonlyforMyanmar-sourcedincome.

CorporateIncomeTaxRates

Thetaxrates,effectivefrom1April2014undertheUnionRevenueLaw,areasfollows:

TypeofEntity/Company Rate

ResidentCompany(FILornonFIL) 25%

Non-residentBranchoperatingunderFIL* 25%

Non-residentBranchnotoperatingunderFIL 35%*Non-residentbranchesregisteredundertheFILwillbesubjecttoarateof25%providedthatapprovalisobtainedfromtheMICtobetaxedasacitizen.

c) TaxationofIndividuals

i) General

Incometaxisleviedonresidentandnon-residentindividuals.Foreignerswho reside in Myanmar for at least 183 days during an income year(1Aprilto31March)areconsideredresidentforeigners.

Residentsaresubjecttoincometaxonallincome*derivedfromsourceswithinandoutsideofMyanmar.Non-residentforeignersaretaxedonlyonincomederivedfromsourceswithinMyanmar.

* Income is categorized as income from salary, professional, business,property,capitalgains,othersourcesandundisclosedsources.Incomefromsalaryandcapitalgains(seeSection7.d.ivbelow)areassessedseparately.

ii) IncomefromEmploymentResidents

Effective from1April2014, the incometaxonsalary, incomefromtheexerciseofaprofession,businessincomeorpropertyincomeofaresidentreceivedinlocalcurrencyorforeigncurrencyisdeterminedinaccordancewiththefollowingbands:

Annualtaxableincomenetofallowances*(MMK)

Tax Rate

From To

1 2,000,000 0%2,000,001 5,000,000 5%5,000,001 10,000,000 10%

10,000,001 20,000,000 15%20,000,001 30,000,000 20%

>30,000,001 25%*Allowancesinclude:

Basic relief of 20% of total income, up to a maximum ofMMK10,000,000;

Spouse relief of MMK 500,000, provided the spouse has noassessableincome;

Lifeinsurancepaymentsontaxpayerandspouse; ChildreliefofMMK300,000perchildforanyunmarriedchild

whoisbelow18yearsofage.Ifachildisabove18yearsofage,hemustbereceivingfulltimeeducation.

Othertaxpayers:

Non-residentcitizen 10%offoreign-sourceincomeNon-residentforeigner 35%ofMyanmar-sourceincome

Anon-residentforeigneremployedwithanFILcompanyistaxedatbandratesapplicabletoaresident.

iii) IncomefromEmploymentPerquisitesandBenefits

Salaryincomealsoincludesperquisitesandanybenefits.Iftheemployerpays the employees tax, a tax on tax basis of assessment is adopted.Income tax iswithheldmonthly andpaidwithin sevendays to the taxoffice.

iv) IncomefromEmploymentWithholdingTax

The employer is responsible for withholding and claiming deductionson the income tax on salary at the time of payment to employees. Astatementofmonthlydeductionsmustbefurnishedtotherevenueofficewithin7daysfromdateofdeductions.Theemployermustalsoprovideanannualfinalizationstatementofsalariespaidtoemployees.

d) IndirectandOtherTaxes

i) Commercial Tax

ThereisnoValueAddedTax(VAT)systeminMyanmar.However,thereisaCommercialTax(CT)imposedonvariousitemsassetoutinvariousschedulesintheCTL.CTappliestogoodsproducedinMyanmar,servicesrenderedinMyanmarandgoodsimportedintoMyanmarthatarelistedintheCTLsschedules.

ThecurrentCTratesareasfollows:

Typeofgoodsandservices CT Rate

GoodsproducedandsoldinMyanmar(Section11[a]) 5%

GoodssubjecttoahigherrateofCT(Section11[b])8%-100%

Certainagriculturalproductsifproducedorimportedintothecountry(Section11[c])

0%or5%

Certainproducts if producedor imported in the country(Section11[d])

0%

Services (now includes all types of services except 26services)

5%

Exports(none);crudeoil(5%);naturalgas(8%);teak(50%);jadeandrubies(30%);andjewelry(10%)

ImportedgoodsGenerally

5%

The CT is payable on a monthly basis before the 10th of the monthfollowingthemonthofthesale.AquarterlyandanannualreturnforCTaretobefiledwithinonemonthfromendofthequarterandwithin3monthsoftheendofyear,respectively.

Commercial taxes also levied on imported goods based on the landedcost,which is thesumofCIFvalue,portduescalculatedat therateof0.5%ofCIFvalueofgoods,andcustomsduties.Collectionismadeatthepointofentryandtimeofclearance,alongwithcustomsduties.

WhileCommercialTaxisnotaValueAddedTaxwithfullcreditsavailable,thereisapartialoffsetsystemfortradingofgoodsandservices,whenthetaxisshownonsupplierinvoicesandotherrequirementsaremet.

ii) StampDuty

StampDutiesarecollectedfromtheaffixingof judicialandnon-judicialstamps. Judicial stamps are for use in judicial proceedings while non-judicialstampsareforgeneralpurposes.

1. JudicialStampDutyJudicialStampDutyiscollectedfromtheaffixingofjudicialstampsand represents fees payable under the Court Fees Act. The ratesvary depending on the subject matter of the document. Taxabledocuments include complaints, probates of a will, letters ofadministration, succession certificates, petitions, applications forleavetosue,memorandaofappeal,bail-bonds,etc.

2. Non-JudicialStampDutyNon-JudicialStampDuty is leviedonvariouskindsof instruments,whicharerequiredtobestampedundertheMyanmarStampAct.Instruments chargeable to duty and the corresponding rates arementionedinthescheduleannexedtotheAct.

iii) PropertyTax

Foreign companies areprohibited fromowning immovableproperty inMyanmar,hencepropertytaxwouldnotberelevanttoforeigninvestors.

Immovable properties (land and buildings) situatedwithin the Yangondevelopmentareaaresubjecttopropertytaxasfollows:

Generaltaxnotexceeding8%ofannualvalue; Lightingtaxnotexceeding5%ofannualvalue; Watertaxnotexceeding6.5%ofannualvalue;and Conservancytaxnotexceeding3.25%ofannualvalue.

Theannualvaluepertainstothegrossannualrentforwhichthelandandbuildingmaybeexpectedtobeleasedunfurnished.Italsoincludesthevalueofresultofapercentagedeterminedbythelocaldevelopmentcommitteefromtimetotimeonthevalueofpropertytobetaxed.

Propertytaxesareimposedbythelocaldevelopmentcommittees,hence,mayvaryfromplacetoplacewithinthecountry.

iv) CapitalGainsTax

PursuanttoaNotificationissuedbythetaxauthoritiesin2006,gainsfromthesale,exchangeortransferbyanymeansofcapitalassets,inkyatsorforeigncurrency,aretaxedattherateof10%,iftheproceedsofallassetsdisposedexceedMMK5,000,000.Inthecaseofanon-residentforeigner,taxatarateof40%istobepaidinthesamecurrencyasthedisposalortransfertransaction.

CompaniescarryingonbusinessesintheoilandgassectorinMyanmararetaxedataprogressiveratefrom40%to50%ongainsrealizedfromthesale,exchangeortransferbyanymeans,ofanycapitalassetsincludingshares,capitalassets,ownershipandbenefits.Thetaxoncapitalassetsistobepaidintheforeigncurrencyofthedisposalortransfertransaction.

Taxreturnsoncapitalassetsmustbefiledwithinonemonthfromdateofdispositionortransfer.

v) WithholdingTax

Thefollowingwithholdingtaxes(WHT)areapplicableto:

WithholdingtaxWHTrateforpaymentto

residents

WHTrateforpaymentstonon-residents

Interest None 15%

Royaltiespaidforuseoflicenses,trademarks,patentright,etc.

15% 20%

Paymentsofcontractsandbuyinggoodswithinthecountryunderrelevantcontracts,agreementoranykindsofagreement,performedforStateorganizations,citydevelopmentcommittees,cooperativesocieties,registeredcompaniesandnon-governmentorganizations.

2% 3.5%

PaymentsofcontractsandbuyinggoodsinsideMyanmarbytheconsistentcontractsoragreementperformedfortheunregisteredforeignentitiesandforeigncompanies.

2% 3.5%

TheaboveWHTarefinaltaxesifpaymentsaremadetonon-residents,butarecreditableifpaymentsaremadetoresidents.

Thereisnowithholdingtaxonthepaymentofdividendstobothresidentsandnon-residents,andoninterestpaymentstoresidents.

vi) CustomsandImportDuties

InlinewiththelatestCustomsTariffofMyanmar,customsdutyispayableaccordingtothetariffschedulesbasedonassessablevalue.Ratesrangefrom 0% to 40%. Cars, luxury items, and jewellery are subject to thehighestrates.

According to the FIL, exemption or relief from customs dutiesmay begrantedonmachinery,equipment,components,spareparts,andmaterialsimportedforuseduringtheconstructionperiodforacompanyreceivingbenefits under the FIL. Similar exemption or reliefmay be granted forsuch companies on rawmaterials imported in the first three years ofcommercial production. The Sea Customs Act, 1878, inter alia, makesprovisionforrefunds.Forexample,itprovidesthatofthecustomsdutypaidongoodswillberefundedwhensuchgoodsarewithdrawnfromthecountryagainunderadrawbackfacility.

e) TaxAdministration

i) TaxPayment-Currency

UnderthUnionRevenueLaw,taxesarepaidinMMKorinforeigncurrencyasfollows:

Tax RuleunderUnionRev-enueLaw

Conversionrateused

CITandCT TaxpaidinMKK Section35ofUnionRevenueLawreferstoSection8oftheIncomeTaxRegulations

Ifreceivedinasingleday,theconversionrateatthetimeofreceipt;

Ifreceivedovermorethanasingleday,theaverageconversionrateoftheperiodcovered.

Non-residentforeigner

Taxpaidinforeigncurrencyiftheincomeisearnedinforeigncurrency.

Non-residentcitizen

Incomeinforeigncurrency,taxpaidinMKK

Capitalgains TaxpaidinMKKevenifincomeisearnedinforeigncurrency

ii) TaxPayment-DueDates

Anenterprisemustpaytaxinadvance,onamonthlyorquarterlybasis,forincomeearnedinataxyear.Thetaxinadvanceisbasedonprojectedincomeforthewholeyear.

Themonthlyorquarterlypaymentsmustbemadewithin30daysofeachmonthor quarter. Any additional tax to be paid, as determined in theannual tax returns,mustbepaidwithin threemonthsof taxyearend.

Any credits are carried forward to be utilized for the following yearsadvancetaxpayments.

iii) TaxReturnsDueDates

IndividualandCorporateAnnualtaxreturnsmustbefiledwiththe IRDwithinthreemonthsofeachtaxyearend(i.e.by30June).

Ifabusiness isdiscontinued, the tax returnsare tobefiledwithinonemonthfromthediscontinuationofthebusiness.

Incometaxreturnsoncapitalgainsaretobefiledwithinonemonthfromthedisposalofthecapitalassetsconcerned.

f) TaxIncentives

SeeSection4(ForeignInvestmentLaw)andsection5(SpecialEconomicZone).

g) TaxLosses

Taxlossesfromanysourcemaybesetoffagainsttaxableincomeaccruingfromanyothersourceinthatyear,exceptwherethelossisfromcapitalassetsorashareoflossfromanassociationofpersons.

Unutilized tax losses can be carried forward and set off against futuretaxableprofitsuptoamaximumofthreeconsecutiveyears.

Tax losses fromcapitalassetsora shareof loss fromanassociationofpersons cannotbe set off against taxable gains fromother sources, orcarriedforward.

ItisunclearwhetherthereareanyrestrictionswherethereisachangeofownershipasthereisnoclearprovisionintheITL.

h) GroupRelief

ThereisnoprovisionintheITLforgrouprelief.

i) TaxAudits

Taxauditsaregenerallyconductedannually.

j) ThinCapitalization

TherearenothincapitalizationrulesinMyanmar.

k) TransferPricingRules

TherearenotransferpricingrulesexceptforthosecontainedinDTAswithothercountries.

TheITLempowerstheIRDto:

Adjustfornon-marketvalueofcapitalassetssold,exchangedortransferred;

Re-assesstaxanddisallowexpensesthatareextravagantornotcommensuratewiththetypeofbusiness.

l) LimitationsofDeductibleExpenses

There are certain limitations on the deductibility of expenses. Thelimitationsincludethefollowing:

Interestexpenses: ononshore loans aredeductible up to the interest rate

limitsetbytheCBMfromtimetotime;

onoffshore loansaredeductibleprovided the loansareapprovedbytheMICandtheCBM;

Donationstoapprovedcharitableinstitutionsaredeductibleuptoamaximumof25%ofthetotaltaxableincome.

Badordoubtfuldebtsrelatedtotaxableincomearedeductibleonlywhenwrittenoff.

m) StatutoryLimitations

Taxpayers are required tomaintain their records for a period of threeyears.

n) InternationalTax

TaxtreatieshavebeenconcludedwithBangladesh,India,Indonesia,LaoPDR,Malaysia,RepublicofKorea,Singapore,Thailand,UnitedKingdomand Vietnam. But the treatieswith Bangladesh and Indonesia are stillpendingratification.

Taxpayers need to apply administrative procedures for claiming a taxexemptionbasedonaDTAwiththeInternalRevenueDepartment(IRD).Inpractice,MyanmartaxauthoritiesandMFRneedtobeconsultedbythepayerofthefeeonacase-by-casebasisinordertoobtaintaxtreatyrelief.Theauthoritieswillexaminethecontractsandthefactsofthecasebeforerenderingitsdecision.

o) Anti-avoidanceRules

Therearenoanti-avoidanceprovisionsintheITL.Thetaxauthoritiescantaxbothdirectandindirecttransfersofcapitalassets.

UndertheITL,ifitisfoundthatthereisafraudulentintentiontoevadetax,theassessmentorre-assessmentofincometaxcanbemadeanytimeontheincomethathasescapedassessmentoftax.Failuretofileareturnofincomeknowingthatassessableincomehasbeenobtained,andfailuretocomplywiththenoticeoftheIRDtosubmitaccountsanddocumentsincluding the tax return and profit and loss accounts within the timeprescribed,orsubmittingforgedinstrumentsandotherdocuments,areincludedwithinthemeaningoffraudulentintentions.

Taxpayers are required to fully disclose the facts within a specifiedtime if thetaxauthoritiesfindthatthetaxpayerhasconcealed income

orparticularsrelatingto income. Inaddition,thetaxpayermustpayanadditional penalty equal to 50%of the tax increase on account of theconcealment.

Shouldthetaxpayerfailtodisclosewithinthespecifiedtimeordiscloselessthantheincomeconcealed,thetaxpayerwillbesubjecttoprosecution,inadditiontopayingthetaxandpenalty.Iffoundguilty,thetaxpayermaybeimprisonedforatermofbetween3and10years.

p) ForeignExchangeControls

A new Foreign ExchangeManagement Law (the FEML) was recentlyenacted and is intended, among other things, to liberalize transferpaymentsrelatingtorevenueaccount(e.g.trade,servicesandsettlementof short-term bank loans) which are to be unrestricted and will alsogovern transfer payments relating to capital account capital, interest,dividends(whichwillremainsubjecttoproofthatthefundshaveactuallybeenbroughtintothecountry).Howthisnewlawisappliedinpracticeremainsuncertainatthistime.

Prior to enactment of the FEML, Myanmar and foreign citizens andcompanies in Myanmar need to obtain permission from the ForeignExchange Management Department under the CBM, through theMyanmarForeignTradeBankorMyanmar InvestmentandCommercialBank in connectionwith borrowing foreign exchange fromabroad andrepayment of principal and interest thereof,making a payment to anypersonabroad,openingaccountsatforeignbanksabroadandremittanceofprofits.

Foreign Exchange Authorized Dealer Licenses have been issued bytheCentralBankofMyanmaron25November2011 toelevenprivatedomestic banks. Thus those private domestic banks can offer inwardremittanceservices.Theelevenprivatedomesticbanksare:

i) MyawaddyBankLtd,ii) Co-operativeBankLtd(Public),iii) MyanmarOrientalBankLtd,iv) KanbawzaBankLtd,

v) MyanmarIndustrialDevelopmentBankLtd,vi) InnwaBankLtd,vii) TunFoundationBankLtd,viii) AsiaGreenDevelopmentBankLtd,ix) MyanmarApexBankLtd,x) United Amara Bank Ltd and xi) AyeyarwaddyBankLtd.

q) SpecialExemptions

TheMICortheCentralBodyoftheMSEZmaygrantspecialexemptions,pursuant to the FIL and MSEZ, on a case-to-case basis should theinvestment project be of significant interest and in accordance withMyanmarscurrentgovernmentpolicies.

8. DFDLTAXSERVICES

DFDL is the first leading international lawfirm specialized in emergingmarkets with regional legal and tax expertise developed throughouttheMekongregion(Cambodia,LaoPDR,Thailand,Myanmar,Vietnam),Singapore, Indonesia, Bangladesh and other developing markets, withadedicatedfocusonotherSoutheastAsia jurisdictions,SouthAsiaandbeyond.

Withateamofover300foreignandlocallawyers,advisersandsupportstaffworkingcloselytogetherwithinafastgrowingnetworkof12officesandpracticesinAsia,weprovidepersonalizedandcost-effectivelegal,taxandconsultingservicesandsolutionswithparticularexpertisein:

Taxation and Customs Energy,MiningandInfrastructure RealEstateandConstruction CorporateandCommercial MergersandAcquisitions EnglishLawGovernedTransactions

Founded in 1994, DFDL has acquired an outstanding reputation forproviding seamlessly integrated and solutions-oriented legal andtax services to establish, structure and protect our clients businessinterests.DFDLisalsoactivelyinvolved,intandemwithlocaljurisdictionstakeholders,indevelopingthelegalandregulatoryenvironmentoftheemergingmarketsinwhichweoperate.

Our experts are committed to standard state of the art legal and taxsolutionsthroughouttheMekongregion,SouthAsiaandbeyond.

DFDLTaxServices

a) Our Services

i) TaxAdvisory

Internationaltaxplanningandlegalstructuring; Corporatetaxoptimizationsolutions; Regional tax structuring of shareholding, financing, licensing

servicesandotherarrangements;

TransferPricingAdvisory; M&Aandrestructuring;and RealEstatetaxandlegalstructuring.

ii) Compliance

Preparationofmonthlyandannualtaxreturns; Personalincometaxes;and Expatriatetaxservices.

iii) Customs&FreeTradeAgreement

Consulting with customs authorities on valuation, tariffs andexemptions;

Adviceoncustomsdutiesclassificationsandvaluations; Strategic Free Trade Agreement planning, advice on rules of

origin(ROO);

Advice and government liaison services on market access,barrierstotradeandprotectionofinvestors.

iv) MarketEntryAdvice

Research on market opportunities, restrictions, corporate intelligenceandbackgroundchecks.

v) DueDiligence

OurservicesincludeTaxDueDiligenceontargetcompaniesinMyanmarcoveringalltaxandcustomsissuesandcanbetailoredtosuityourneeds.Wehighlighttaxrisksandopportunitiesinacquiringbusinessesorcompanies.

b) OurPeople

AtDFDL,ourmostvaluableassetsareourpeople.Wearededicatedtohiring,developingandretainingexperiencedandefficientadvisers.KeypeoplewhocompriseourMyanmarTeamare:

JACKSHEEHANPartner,RegionalTaxPracticeGroup

As a Partner and head of the regional tax practice, Jack specializes inprovidinginternationaltaxplanningandconsulting,corporatestructuringand restructuring, M&A and cross-border tax advisory services. He isadvising clients in sectors ranging from telecommunications, mining,oil&gas,manufacturing,aviation,bankingandfinancial institutions toGovernmentandaid-fundedprojects.

Jack is regularly invitedasaspeakeron international taxation issuesateventsintheAsiaRegion.HeandhisteamarethecountrycorrespondentsforInternationalBureauofFiscalDocumentation(IBFD)intheLaoPDR,MyanmarandCambodia,memberoftheeditorialtaxtreatiesboardforBloombergBNA,memberof InternationalFiscalAssociation(IFA)andregularlyauthorpublicationsoninternationaltaxintheregion.JackisamemberoftheAssociationofCharteredCertifiedAccountants.

[email protected]

RICHARDBUCHANAN

TaxPartner,RegionalTaxPractice

RichardisaTaxPartnerbasedinMyanmar.Heisacareertaxadvisorwithover40yearsofexperienceworkingin internationaltaxatBig4firmsinAsia,AustraliaandtheUnitedStates.HisAsiaexperienceincludesworkingasaTaxPartner inThailand,VietnamandMyanmarandadvisingclients

acrosswiderangingsectorsincluding:oilandgas,telecoms,bankingandfinance,manufacturingandservices. Richard isoneof themost soughtafter tax experts in Asia. He is amember of the Institute of CharteredAccountantsinAustralia.

[email protected]

BERNARDCOBARRUBIAS

TaxDirector

Bernardhasover12yearsoftaxand legalexperience inthePhilippines,Vietnam, and Myanmar. He also handles Lao PDR and Cambodian taxengagements. Bernard specializes in international tax services withfocus on cross-border transactions, corporate restructuring, mergersand acquisitions advisory and implementation. He also deals with localbusinesstaxadvisoryservices,corporatestructuresandlicensing,aswellasregulatoryandtaxcompliance.

[email protected]

ADAMMcBETH

Legal&TaxAdviser

Adam is a Legal andTaxAdviserbased inourYangonoffice.He focusesonemployment,corporateandtaxationlaw.Hisspecificareasofexpertiseincludeprovidingsuchadvicetoabroadrangeofbusinesssectorsincludingtelecommunications, oil and gas, energy, real estate, construction andautomobiledistribution,amongothers.HeholdsanLL.MinTaxation(NewYorkUniversitySchoolofLaw,NY),aJ.D.(StJohnsUniversityLawSchool,NY)andaB.A.inPoliticalScience(TheColoradoCollege,CO).

[email protected]

_GoBack1.MYANMAR REGULATORY OVERVIEW2.SETTING UP BUSINESS IN MYANMARa)Commonly Used Business Formsb)Main Legal Formalities for Formation of a Company or Registration of a Branchc)Requirements for Foreign Investorsd)Currency/Monetary Restrictions

3.ACCOUNTING/FINANCIAL REPORTING FOR COMPANIES AND BRANCHES OF FOREIGN COMPANIES IN MYANMARa)Financial Statementsb)Audit Requirementsc)Financial Year-endd)Reporting Currency

4.THE FOREIGN INVESTMENT LAW5.SPECIAL ECONOMIC ZONE 6.OTHER COMPLIANCE REQUIREMENTSa)Social Securityb)Work Permits/Visa

7.TAXATIONa)Overviewb)Taxation of Companiesc)Taxation of Individualsd)Indirect and Other Taxese)Tax Administrationf)Tax Incentivesg)Tax Lossesh)Group Reliefi)Tax Auditsj)Thin Capitalizationk)Transfer Pricing Rulesl)Limitations of Deductible Expensesm)Statutory Limitationsn)International Taxo)Anti-avoidance Rulesp)Foreign Exchange Controlsq)Special Exemptions

8.DFDL TAX SERVICESa)Our Servicesb)Our People

dfdl myanmar tax pocket guide 2015

Documents