Myanmar’s new law hopes to promote more foreign investment

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Myanmar’s new law hopes to promote more foreign investment

A new Investment Law aimed at attracting foreign investments will be enforced in Myanmar starting from April 2017. Signed by President Htin Kyaw on October 18, the Investment Law represents new key features to direct foreign investment through the use of tax incentives targeting key industries and underdeveloped regions.

According to the Myanmar Investment Commission (MIC), changes to Myanmar’s previous investment regulations include a new approval process for both domestic and foreign investments, updates to the distribution and length of various tax incentives, as well as further easing of foreign access to land leases.

The new approval process will comprise of two procedures used for approving investments. First is the submission of a proposal to the MIC for an MIC Permit, and secondly, to give in an application for an endorsement from the MIC.

The MIC Permit is only applicable to those investors looking to operate in an industry that is deemed strategic to the government, but also needing to benefit the country’s best interest. Only then will the MIC review the proposal and approve the investment.

For those investors who do not require an MIC Permit but looking to benefit from tax incentives or the maximum land lease period, they must submit an application for endorsement from the MIC. The application will then be reviewed by the MIC and have it approved if the investment complies with relevant laws and regulation.

It is important to note that while both MIC Permit and MIC endorsement contain a review process, the endorsement application is expected to involve a simpler and more streamlined process confirming investment compliance rather than having to benefit national interest.

In addition to new approval processes, the new investment law aims to direct foreign investment through the use of tax incentives targeting key industries and underdeveloped regions. Income tax exemptions of up to seven years are given to least developed areas classified as “Zone 1”. The middle stage of development, “Zone 2”, will carry exemptions of up to five years. The most developed areas, “Zone 3”, and have tax exemptions lasting up to three years.

Moreover, tax incentives are offered to promote industries with labor-intensive workforce, such as manufacturing, infrastructure development, agriculture, and food processing. “Special Economic Zones in Myanmar will drive further growth in manufacturing”, asserts Naithy Cyriac, Manager at Asia-focused management consulting firm Solidiance, based in their Yangon office.

According to Naithy, Thilawa special economic zone (SEZ) is set to be a strategic location for export-oriented companies as it is located near to the deep water sea port of Thilawa as well as the Yangon port, which handles >80% of the country’s trade. Solidiance’s white paper titled “Myanmar as the Next Manufacturing Hub” highlights more foreign investment opportunities in three SEZs with regards to tax incentives.

With the enactment of the Investment Law, the government is also offering more generous land leasing rights to foreigners, where they will be able to lease land directly from private owners and potentially for longer than the standard of 50 years, with two 10 year extensions in undeveloped regions.

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