doing business in myanmar by kmpg

Doing BusinessDoing Business in Myanmar

5 February 2013

Myo Aung Lwin

DisclaimerDisclaimer

This brief presentation is intended to provide an introduction to some key issuesThis brief presentation is intended to provide an introduction to some key issues and considerations that is relevant to potential investors.

The information is intended for general information purposes only and should notbe used for decision making purposes Applicability of the information to specificbe used for decision making purposes. Applicability of the information to specific situations should be determined through consultation with professional advisors.

© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Agenda - Doing Business in Myanmar

• Is there any restrictions or privileges for your business?business?

A quick look at New Foreign Investment Law

• In what form you should invest?y

A brief Introduction to Myanmar Tax

Structuring your Investment

• What operational issues to consider?

Starting up the operation

Money matters


A Quick Look at N F iNew Foreign Investment Law

Restriction on Businesses

• 3 forms of investment

100% foreign owned

Joint Venture

BOT system with private or state BOT system with private or state

• 21 Restricted Businesses activities

• 42 Business activities which are allowed only in y

the form of Joint Venture with nationals

• Allowed business activities with certain

conditions/restrictions

With regulations from relevant Ministries

With other requirements/regulations With other requirements/regulations

• Business activities which require Environmental

impact assessment


Tax Incentives

Companies registered under the Myanmar Foreign Investment Law can be granted a number of gincentives, including:

• 5 year tax holiday• CIT exemption on profits that are reinvestedCIT exemption on profits that are reinvested within one year,• Accelerate depreciation,• Reduced CIT for export activitiesReduced CIT for export activities,• 3 years carry forward losses,• Exemption on import duties for machinery, and• Exemption on import duties on raw materials.

The benefits are approved by the Myanmar Investment Commission upon application.


A brief introduction to Myanmar Tax

Corporate Income Tax

• Tax residency based on registration.• Resident companies subject to tax on world wide income

except companies registered under the MFIL that are– except companies registered under the MFIL that are only subject to tax on Myanmar source income

• Corporate Income Tax rates:• Resident companies – 25%• Branch with incentives under the MFIL – 25%• Branches without MFIL incentives – 35%

• Capital Gains Tax rates:• Resident tax payers – 10%• Non-resident tax payers – 40%• Oil and gas industry – 40 to 50%g y

• Withholding Tax for transactions to non-residents:• Dividends – 0%• Interest – 15%Interest 15% • Royalties – 20%


Double Tax Agreements Double Tax Agreements

Myanmar has entered DTA’s with

• United Kingdom,• Singapore,• Malaysia,

Vi t• Vietnam,• Thailand,• India,• Bangladesh,g ,• Indonesia,• South Korea• Laos

Most DTA’s – except UK – has not been “Notified” in accordance with requirements under the Income Tax Law. Thus, from a legal , gperspective there is some uncertainty to the application of the DTA’s.

Recommendable to verify application beforeRecommendable to verify application before arranging structures.


Withholding Tax under DTA’s

Withholding Taxes

Transaction type-payment to Foreigners

Rates applicable to

resident citizens and

Rates applicable to non-resident

foreigners

Thai Residents – DTA Rate

Singapore Resident –DTA Rate

resident foreigners

Interest 0% 15% 10% 8/10%Interest 0% 15% 10% 8/10%

Dividends 0% 0% 0% 0%

Royalties 15% 20% 10% 10/15%

Share Sale Gains 10% 40% Exempt1 Exempt2

Goods Services

2%2%

3.5%3 5%

0%0%

0%0%Services 2% 3.5% 0% 0%

Note 1: If gain relates to sale of shares of company which is not principally owner of immovable property and the shares sold constitute less than 35% of the capital of the company Note 2: Broadly, the same as note 1, but with additional restriction that seller must sell less than 20% of his position of shares.


Structuring your Investment

Structuring considerations:

• Equity• Potential restrictions on level of ownership?• Restrictions on transfer of shares to foreigner?

• LoansLoans• Need approval by Central Bank?• Interest cap?

• Financial instruments• Complex financial instruments not well known• Legal?

• Management fee structures• Indirect allocations not approved?

February 2013Investment in Myanmar© 2013 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Offshore holding structuresOffshore holding structures

• Popular holding regimes for investments to Myanmar are :

• Singapore

• Malaysia• Malaysia

• Thailand

• Easy to structure tax efficient repatriation ofEasy to structure tax efficient repatriation of dividends

• No WHT on distributed dividends from MyanmarMyanmar

• Utilize exemption in holding regime

• Difficult to structure efficient exit structures

• Limitation of 35% position to benefit from capital gains exemption under DTA.


A few comments on acquisitions....A few comments on acquisitions....

• Experience from due diligences in Myanmar

• Quality of accounts variable

• Uncertainty to formal ownership to assets

• Can foreigners buy shares in the target?

• Can foreigners buy the assets?

• Frequently observed structure

• Form a new “joint venture” company

L l t t ib t t• Local partner contribute assets

• Foreign investor contribute capital.

• Nominee structures not recommendable!• Nominee structures not recommendable!


Operational issues

Starting up the Operation....Starting up the Operation....

• Finding the Location

• Getting the people

• Expatriates

• Recruiting the local

• Staff benefits

• Labour Law

• Setting up the facilities

U d t di th l d k t• Understanding the people and market

• Unique culture/market

• Connecting with the community• Connecting with the community

• Where to meet?


Money matters to consider.....Money matters to consider.....

• Opening Bank Account

• Cash Management

• Bookkeeping and payroll

• Accountant

• Outsourced Services


Thank you

Myo Aung LwinAssociate DirectorKPMG Advisory (Myanmar) Limited.

Tel: +95 1 527103T l 66 87 0579998Tel: +66 87 0579998

Email: [email protected]