PwC Myanmar brings you regulatory update on doing business as well as working in the country, answering frequently-asked questions pertaining to transfer of shares in Myanmar companies, the country trading sector, employment income tax, and legal permits for foreign individuals to work there.
Are shares in a Myanmar incorporated company transferable?
The most recent development in Myanmar's legislation will have many foreign investors nodding their heads in approval. Previously, the shares of a local Myanmar company are prohibited from being transferred to a foreigner. Any acquisition of local Myanmar companies is likely to be structured via an asset deal which throws up many legal and tax issues. Where the target owns or leased land from the government, the transfer of land ownership usually tops the list of problems. Furthermore, it is interesting to note that tax authorities have recourse to the target if there are outstanding taxes owed on transferred assets and the seller is not contactable. In the few deals that managed to complete in the past year, most relate to Myanmar companies that are already structured with a foreign shareholding.
Now, shares in companies that are either registered with the Myanmar Citizen Investment Law or the Myanmar Foreign Investment Law, subject to certain conditions, are allowed to be transferred from local to foreigners. This will definitely help from a deal structuring perspective. While shares in local companies that are not registered remain restricted (i.e. they cannot be sold to non-Myanmar citizens), it is still a welcome move that can certainly broaden the number of prospective investment targets in Myanmar. Companies that are formed under these laws are typically companies of sizeable operations, which are incentivised by the government and will be more attractive to foreign investors.
How accessible is Myanmar’s trading sector to foreign investors?
The new Myanmar Foreign Investment Law (MFIL) that came into force on 2 November 2012 sets out land-use terms, legal structures and incentives for foreign companies. Among the incentives include a five year tax holiday from the start of commercial operations, demonstrating the government’s commitment to attract long term foreign investments.
Recent updates made to the MFIL on 31 January 2013 have seen the government liberalising various sectors, which were previously tightly controlled or closed to foreign investors. Foreign investors can now participate in the country’s large-sized retail trading industry (e.g. supermarkets, departmental stores and shopping centres) through a joint venture with at least 40% of local participation, subject to conditions. Wholesale trading is also allowed, provided that the recommendation is sought from the Ministry of Commerce.
Are all employment income taxable in Myanmar?
The definition of taxable employment income is broad under the Myanmar Income Tax Law. Generally, any form of salary/wages, allowances and perquisites are subject to tax. Specific valuation guidelines are provided in respect to the accommodation benefits provided by the employer, whereby the taxable benefit is calculated at 10% of the employee’s gross salary if the accommodation is unfurnished; and at 12.5% if the accommodation is furnished. Furthermore, if the employer pays income tax on behalf of the employee, the same would be treated as a taxable benefit (on a tax-on-tax basis). In case concessional tax treatment/tax exemption is proposed to be taken in respect of certain components (for example: relocation benefits, destination services etc), this may require specific discussion and agreement with the Myanmar tax authorities.
Do foreign individuals need to apply for a permit to work Myanmar?
A foreign individual will need to apply for a ‘business visa’ before entering Myanmar. A typical single-entry business visa is valid for 3 months with the period of stay in Myanmar restricted to 70 days from the date of arrival. A multiple-journey-entry business visa may also be issued to a foreign individual upon his/her request and is granted on a case by case basis. The validity of a multiple journey entry visa varies from a minimum of 6 months to maximum of one year from the date of issue.
If the individual would like to stay in Myanmar for a longer term (for example, more than 3 months), he/she may consider applying for a ‘permit to stay,’ and a local sponsorship will be required. The permit to stay allows its holder to work for three months to one year without re-entry into Myanmar.
The concept of a work permit has also been recently introduced and is available to foreign individuals working for companies set up under the Myanmar Foreign Investment Law.
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