Commonly Used Business Forms
The following common entities are recognized and available forforeign investment/ trade in Myanmar (Burma):
AN ENTITY WITH 100% FOREIGN EQUITY
A foreign investor may:
- Incorporate in Myanmar (Burma) a 100% foreign-owned company;
- Establish and operate as a registered branch of a company incorporated outside of Myanmar (Burma);
- If an individual, establish and operate as a sole proprietor The FIL generally allows 100% foreign ownership of investments in such economic activities as may be prescribed by the government.
As with the MFIL, the list of economic activities will be guided by the principles of job creation, export promotion, local development, application of high technology and large investments, among others. The FIL includes a number of new key activities, including those relating to “import substitution” and the “development of a modern industry”.
The FIL provides that the following sectors may be subject to limitations on foreign ownership:
- Matters that can affect public health, natural resources and the environment;
- Activities related to manufacturing and services reserved for Myanmar citizens which will be specified in the Foreign Investment Rules to be issued by the Ministry of National Planning and Economic Development (the “Rules”);
- Matters that involve agriculture, livestock farming or fisheries as will also be specified in Rules.
The exact limitations on these sectors, if any, will be set by rules promulgated within 90 days of the passage of the FIL. The rules will be made by the Ministry of National Planning with the approval of the Myanmar government. At the time of this writing, the rules have not yet been issued. We recommend that you keep in touch with DFDL for updates.
JOINT VENTURE
A foreign investor may:
- Incorporate in Myanmar a joint venture company
- Establish and operate under a contractual/unincorporated joint venture (i.e. a partnership)
Proposed joint ventures will need to be approved by the MIC under the FIL. The old provision under the MFIL requiring a foreign party to a joint venture to contribute at least 35% of the joint ventures equity has been abrogated. Instead, the FIL provides that minimum foreign investment requirements will be set by the rules mentioned above.
AGENCY OR DISTRIBUTION ARRANGEMENTS
A foreign entity may:
- Appoint a business representative/enter into an agency arrangement with a Myanmar citizen or 100% Myanmar owned company
- Sell to or buy from a Myanmar citizen/company
Main Legal Formalities for Formation of a Company or Registration of a Branch
THE MIC PERMIT
A Foreign Company wishing to register under the FIL must submit a proposal in the prescribed form to the MIC. The MIC evaluates the foreign investment proposal and issues a MIC permit which stipulates certain terms and conditions.For large scale projects, serious thought should be given to investing under the FIL which provides significant tax and other incentives. However, such investments must comply with a rigorous set of criteria and may be subject to significant conditions. For smaller investments, or the foreign investor who does not wish to go through the FIL procedures, a company may be formed under the Myanmar Companies Act and Regulations (the “Companies Act”) without securing a permit under the FIL and the investor may proceed directly to its application for a Permit to Trade.THE PERMIT TO TRADE
Under the Companies Act, all foreign companies seeking to do business in Myanmar (even if the project it will be conducting is already approved under the FIL and has been issued a permit by the MIC) must obtain a ‘Permit to Trade’ (a “Trade Permit”) from the Ministry of National Planning and Economic Development prior to commencing business in Myanmar (Burma). A “Foreign Company” includes companies incorporated in Myanmar (Burma) which have at least one shareholder who is not a Myanmar citizen, but does not include a company in which the Government or a State-owned economic enterprise is a shareholder.Currently, the application for a Permit to Trade is submitted, along with the application for incorporation of the Foreign Company, to the Registrar of the Companies Registration Office. Where an FIL Permit is being applied for, the Permit to Trade application and company incorporation steps are to be followed only after issuance of the FIL Permit.A Permit to Trade is valid for three years from the date of issue and is renewable. There are no express prohibitions against the setting up of foreign-owned trading companies in Myanmar (Burma). However, at present, no Permits to Trade for trading companies are being issued. This situation has evolved as a matter of practice, not of law.CAPITAL REQUIREMENTS
Every Foreign Company granted a permit is required to bring into Myanmar (Burma) in foreign currency “Issued and Paid Up Capital” (“Capital”) in the amount prescribed by the Capital Structure Committee of the Ministry of National Planning and Economic Development.The FIL provides that the minimum investment of a foreigner is to be determined by the rules mentioned above. The minimum Capital for investments outside the scope of the FIL for companies under the Companies Act is:- USD 150,000 for an industrial company
- USD 50,000 for a services company
For company formation, at least 50% of the Capital must be deposited in a bank in Myanmar after the preconditions to issuance have been notified and prior to the issuance of the Permit to Trade. The balance of the Capital must be brought into Myanmar within the specified period; generally one to three years.REQUIREMENTS FOR FOREIGN INVESTORS
A Foreign Company incorporated in Myanmar (Burma) must:- Appoint an external auditor soon after incorporation;
- Hold its first annual general meeting within 18 months of incorporation;
- File an annual return with the Office of the Registrar of Companies Registration within 21 days of the company’s annual general meeting, which is to include:
- a list of members and directors;
- details of the capital structure of the company;
- details of any mortgages over the company’s property;
- a certificate to the effect that the company has not issued any invitation to the public to subscribe for shares;
- Keep proper books of account and statutory records (such as a register of members, shareholders, share transfers, directors, mortgages, charges, etc.);
- Present the company’s audited financial statements (in the prescribed form) for each accounting period to the members at the company’s annual general meeting.
CURRENCY/MONETARY RESTRICTIONS
The Myanmar currency is known as ‘Kyats’ and is denominated as ‘K’ or MMK. The Central Bank of Myanmar (the “CBM”) has floated the Kyats from 1 April 2012 and the average exchange rate is approximately MMK 850 to the United States Dollar. Prior to 1 April 2012, Myanmar had a two-tiered exchange rate regime involving an “official rate” and a “market rate”.ACCOUNTING/FINANCIAL REPORTING FOR COMPANIES AND BRANCHES OF FOREIGN COMPANIES IN MYANMAR
Financial Statements
Financial statements must be prepared in accordance with Myanmar Accounting Standards (“MAS”). The MAS are based on the International Financial Reporting Standards and International Accounting Standards issued by the International Accounting Standards Board.Audit Requirements
A corporate taxpayer is required to submit its audited financial statements together with its annual tax return. For the purpose of tax returns, the financial statements of companies must be audited by a Certified Public Accountant licensed by the Myanmar Accountancy Council.Financial Year-end
The tax assessment year is from 1 April to 31 March and cannot be varied. This is mandatory even for branches of foreign companies that may have a different financial year-end.Reporting Currency
The statutory reporting currency is in MMK.
