KPMG in Myanmar

Foreign Investment Law and

Investment Procedures in Myanmar

July 12, 2013

Ⅰ New Foreign Investment Law
and Its Guidelines
 1. Revision of Myanmar Foreign Investment Law
2011
• The government announced to make revisions in the foreign investment law (FIL) which
was originally issued in 1988。

August, 2012
• The amended bill (New FIL) was approved by the House of Representatives (the lower
house of the Assembly of the Union)

September,2012
•The new FIL was approved by the Assembly of the Union and sent to the president.
•President Thein Sein returned the proposed law back to the Assembly of the Union with 16
further amendments.

November, 2012
•After a careful deliberation of the Assembly of the Union and after the president signed the
proposal, the new FIL was made effective on the 2nd of November, 2012.

January, 2013
•The Ministry of National Planning and Economic Development (MPED) and Myanmar
Investment Commission (MIC) issued detailed regulations of the new FIL. (Notification of
MPDE No.11/2013 and Notification of MIC No.1/2013 )

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 2. Comparison of FIL - Old and New

The major changes in the New Foreign Investment Law are summarized below ;
Old FIL New FIL

(1) Timeframe of MIC Not mentioned • MIC shall notify their acceptance of the
approval application documents within 15 days from the
submission.
• Within 90 days from their acceptance , MIC shall
conclude their review.

(2) Term for land lease Land lease can be done only from • Possible to lease lands both from private
the government. entity/person as well as the government .
Lease term was not mentioned. • Lease term can be 50 years and apply extension
of the next 10 years twice (70 years in total).
(3) Foreign Capital Ratio Not mentioned • Business allowable only for JV with Myanmar
Prohibited business for foreign partners
capital was described ⇒Equity ratio by foreign capital should be less
than 80%（60% for some business)
• Other than the restricted business
⇒Foreign capital can own 100% equity

(4) Tax incentives Corporate tax exemption for 3 years Corporate tax exemption for 5 years

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 2-1. Summary of the Investment Incentive
Old FIL New FIL Special Economic Zone Act (Draft)
• Tax holiday for the first 5 years in the
Promotion Zone, and 7 years in the
Export Processing Zone.
• Half tax-rate reduction for the next 5
Tax holiday for the first 3 years Tax holiday for the first 5 years
Corporate years after the end of tax holiday
from the commencement of from the commencement of
income Tax • For another 5 more years、if the profits
business business
are reinvested in the business within a
year, half tax-rate reduction is available
for the earning from the re-invested
business

•Duty exemption for ; •Duty exemption for all materials/parts,

- imported machinery and machinery and equipment imported by
equipment during the Same as left the companies in the Export processing
construction period Zone.
- imported building material •Duty exemption for imported
Import Duty machinery/equipment and motor vehicle
• Duty exemption for
- imported raw materials and for the first 5 years in the other zones.
parts for manufacturing for the After the period, half tax-rate reduction
first 3 years from the shall be applied for the next 5 years.
commencement of business

•Foreign capital company shall •Leasing of private owned land

lease land only from the as well as government owned
Special land • Lease term for the land in SEZ can be
government.
Privilege on •Possible to sublease it and 50 years with extension of another 25
•By the Notification No. 39 in
Land Lease pledge it as collateral years.
2011, land lease of private-
owned land became available •Lease term can be 50 years with
extension of 10 years + 10 years

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 3. Promoted Businesses by FIL

【Investment-promoting Business】（Old FIL） 【Investment-promoting Business】（New FIL）

1) promotion and expansion of exports; 1) Supporting the main objectives of the economic development
2) development of natural resources that require heavy plan, business which cannot be affordable and which are financially
machinery and technologically insufficiency by the Union and its citizen;
3) manufacturing and production with advanced technology 2) Development of employment opportunities
4) supporting the business of production and services 3) Promotion and expansion of exports;
involving large capital 4) Production of import substituted goods;
5) development of employment opportunities 5) Production of products which require mass investment;
6) bringing out of business which would save energy 6) Acquisition of high technology and development of
consumption manufacturing business by high technology;
7) regional development 7) Supporting the business of production and services involving
large capital;
8) Bringing out of business which would save energy consumption;
9) Regional development;
10) Exploration and extraction of new energy and the emergence of
renewable energy sources such as bio‐basic new energy;
11) Development of modern industry;
12) Protection and conservation of environment;
13) Causing to support for enabling to exchange the information and
technology;
14) Not affecting the sovereign power and the public security;
15) Intellectual enhancement of citizens;
16) Development of bank and banking in accordance with the
international standards;
17) Emergence of the modern services required for the Union and
citizens;
18) Causing to be sufficient the local consumption of the energy and
resources of the Union in terms of short term and long term period;

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 4. Prohibited and Restricted Business for Foreign Capital

＜All Business Areas＞

MIC Notification
Foreign Investment Law No.1/2013
(Cap. 2 Article 4) ListⅡ. Economic activities to
be allowed in the form of
Prohibited Business areas
joint venture

MIC Notification
MIC Notification
No.1/2013
No.1/2013
ListⅠ. Prohibited
Business Areas List Ⅲ. Economic activities
to be approved on special
conditions

Business areas considered to be available for 100% foreign capital

Banking and Financial services, Wholesale and Retail Trading

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 4-1. Economic Activities Prohibited for Foreign Investment
Foreign Investment Law
Chapter 2 Article 4
(a) Business which can affect the traditional cultures
and customs of the national races within the Union
(b) Business which can affect the public health
(c) Business which can cause damages to he natural
environment and ecosystem
(d) Business which can bring hazardous or
poisonous wastes into the Union
(e) The factory which produce or the business which
use hazardous chemicals under international
agreements
(f) Manufacturing business and services which can
be carried out by the citizens by issuing laws
(g) Business which can bring the technologies,
medicines, instruments which is being tested abroad
or not approved
(h) Business of farming agricultures, short-term and
long term agriculture which can be carried out by
citizens by issuing rules
(i) Business of breeding which can be carried by the
citizens by issuing rules
(j) Business of the Myanmar Marine Fisheries which
can be carried out by the citizens by issuing rules
(k) Business of foreign investment to be carried out
within 10 miles from border line connection the
Union territory and other countries except the areas
stipulated as economic zones under the permission
of the Union
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(f)Manufacturing services that Myanmar citizens are able to conduct
according to the enforced regulations
(A) Manufacturing
1. Conservation and management of forests 2. Production of traditional
medicine in Myanmar 3. Oil drilling up to 1,000 feet 4.Small and medium-sized
mining 5. Cultivation of medicinal plants to be used in Myanmar traditional
medicine 6. Manufacture and sale of iron scrap and parts 7.Production of
traditional food 8. Manufacturing of religious antiquities 9. Manufacturing of
materials related to traditional culture 10.Production of handicrafts
(B) Services
1. Private traditional clinic 2. Sale of traditional medicine 3. Development of
traditional medicine 4. Ambulance service 5. Aged care facility 6. Cafeteria,
transportation, laundry, management of railway services 7. Agency services 8.
Electricity supply of 10MW or less
9.Publication in Myanmar language or other ethnic minority language,
newspaper and other media
(h) Short-term and long-term agricultural plantations Myanmar citizens
can conduct according to the enforced regulations
1. Small-scale agriculture firm
2. Cultivation in agriculture firms that does not use modern facilities or
technology
(i) Livestock industry that Myanmar citizens can conduct
1. Small-scale livestock industry
2. Traditional livestock industry that does not use advanced technology
(j) Myanmar fishing in inshore fishing waters that Myanmar citizens can
conduct according to the enforced regulations
1. Deep off shore fisheries for saltwater fish, shrimps and other marine
products in Myanmar territory
the Fishing inofcoasts
KPMG network and
independent firmsrivers
are affiliated with 7
 5-1. Manufacturing Industry (1)
Ⅰ．Prohibited Economic Activities
 Manufacturing and related services of Arms and ammunition for the national defense.
 Agriculture and Manufacturing which are not compliance with Fertilizer Law, Seed Law and Agricultural Laws
promulgated from time to time.
 Production of Ozone-depleting substances
 Production of organic matter that are prohibited by Stockholm Agreement
 Production or use of hazardous substances which are prohibited by environmental and conservation Law, Rules
and Procedures promulgated from time to time.
 Manufacturing and marketing of construction materials whose composition includes asbestos

Ⅱ. Economic Activities to be Allowed only in the Form of Joint Venture with Myanmar Citizens
Manufacture and sale of the following products:  Hides, skins and leathers of all kinds (foot wears,
 Hybrid seeds handbags, etc) except synthetic leather
 High-yield seeds and local seeds  Various paper products
 Grain products (biscuits, various noodles, etc)  Paper, paperboard including carbon paper, waxed
 Confectionary paper, toilet paper, etc.
 Preserving, manufacturing, canning and marketing of  Chemical products using domestic natural resources
other food products except milk and dairy products  Flammable materials, liquid, gas, aerosol
 Malt, malt liquors and non-aerated products  Oxidants (Oxygen, Hydrogen, Peroxide) and
 All kinds of spirits beverages and non-beverages compressed gas (Acetone, Argon, Hydrogen, Nitrogen,
 All kinds of ice Acetylene)
 Purified drinking water  Corrosive chemicals (Sulfuric acid, Nitric acid)
 Cordage, rope, twine of textile fibers  Industrial chemical gases, including compressed,
 Enamelware, cutlery, crockery of all kinds liquefied and solid forms
 Plastic wares  Pharmaceutical raw materials
 Rubber and plastic  High-tech vaccine
 Structural metal framework for buildings, girders,
prefect and precast concrete
 Locomotive wagon, coaches and locomotive engine
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 5-1. Manufacturing Indsutry (2)

Ⅲ．Economic Activities Allowed on Certain Conditions

Type of Economic Activities Condition

 Production of oil and fats from vegetables, animals  Local raw materials must be used at least 80%
and other substances

 Production of soft beverages, aerated and non-aerated  Local raw materials must be used at least 20%
products  Local cropping raw materials must be used at least
60% after 3 years factory completion
 Production of seasoning powder  Local raw materials must be used 100% within first 3
years

 Production of cigarette  Local raw materials must be used at least 50% which
is bought by the income earned after exporting local
Virginia
 Export 90% of products
 The list of local raw materials to be used and exporting
program must be attached in the investment proposal
 Production of perfume and cosmetics  Local raw materials must be used at least 50% within 5
years after the completion of factory

 Manufacturing and marketing of chemical products  Up to 70% of foreign capital is allowed

such as paint, varnish, polish, dye, thinner and lacquer
ware paint

※Business areas which are required to comply the various regulations and to obtain
approvals of specific government ministries are omitted from the above list.
©。
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 5-2. Real Estate Development and Infrastructure Project (1)
Ⅰ．Prohibited Economic Activities
 Management of electricity distribution network
 Trading of electric power
 Inspection services of electrical equipment
 Air navigation services
 Sea navigation services

Ⅱ. Economic Activities Allowed only in the Form of Joint Venture

 Construction of road network and railway such pier, highway, subway, etc.

 Development of international standard resort facilities and golf course

 Development or sale or lease of residential apartment condominium

 Development or sale of commercial building and office building

 Development , sale and lease of residential apartments in the residential areas connected to the industrial zone

 Development of general public housing

 Development of New Town

 Building new ships and repairing services at docks

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 5-2. Real Estate Development and Infrastructure Project (2)

Ⅲ．Economic Activities Approved under Certain Conditions

Economic Activities Condition

 Hydropower and coal-fired thermal power plants  Only in the form of joint venture with Myanmar
government and on BOT contract

 Construction and lease of office buildings and  100% foreign investment can be accepted only on
commercial buildings BOT contract
 In the case of joint venture with Myanmar、Myanmar
partner shall contribute the land lease title as capital in
kind

※ Business areas which are required to comply the various regulations and to obtain approvals of specific
government ministries are omitted from the above list.

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 5-3. Trading and Service Business (1)

Ⅰ．Prohibited Economic Activities

 Integrated management of media and publishing business

 Printing and publishing in Burmese and in other minority ethnic languages

【Financial services and Wholesale and Retail trading is not covered by the Foreign Investment Law. In principal these
business are prohibited for foreign capital investments】

Ⅱ. Economic Activities Approved only in the Form of Joint Venture

 Ship transport services of passengers and freight

 Warehousing and port services by container depot

 Traditional medicine clinics and private hospitals

 Tourism and travel industry

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 5-3. Trading and Service Business (2)

Ⅲ．Economic Activities Approved under Certain Conditions (1)

Economic Activities Conditions

 Marine and water way transport and related services  Only in the form of joint venture with Myanmar
government

 The hospitals and clinics by foreign capital  Only in the form of joint venture with Myanmar
government

 Health Spa services  Operate only in 3-Star and above hotels, or in 5-Star
Boutique hotels

 Casino business for foreigners only  Approval by Myanmar government

 Operate only in hotels in restricted areas
 Myanmar citizens are not allowed to play
 Hotel Business  100% foreign capital shall be allowed only for 3-Star
and above hotels

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 5-3. Trading and Service Business(3)

Ⅲ．Economic Activities Approved under Certain Conditions (2)

Economic Activities Condition

 Large-scale retail trading  Only large-scale retail businesses such as
supermarkets, department stores, shopping center, etc

Floor Area
・Department hypermarket⇒50,000 square feet or more
・Supermarket ⇒12,000～20,000 square feet or more

 Should not be located near to the existing local stores

 Priority in trading of domestic products
 In the case of joint venture, Myanmar capital shall hold
at least 40% interests

 Small and medium-sized retail trading  Government may approve after 2015
 Minimum investment of USD 3 million or more
 Trading of motorcycle and automobile will be
excluded
 Franchise Business  Foreign capital may become only franchisor
（Franchisees shall be local capital only）

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 5-3. Trading and Service Business (4)

Ⅲ．Economic Activities Approved under Certain Conditions (3)

Economic Activity Condition

 Wholesale trading  Require the recommendation from Ministry of
Commerce （It may require large amount of investment,
high technology involvement ）

 Warehouse Business  Only large-scale warehouses

 In the case of joint venture, Myanmar capital shall hold
at least 40% interests
 Restaurant, beverage shop in large-scale retail facility  Require area of 2,000-4,000 square feet in supermarket,
5,000 and above square feet in department store

 Publishing in foreign languages  In the case of joint venture, Myanmar capital shall hold
at least 51% interests
 At least 2/3 of officers and other key staff must be
Myanmar citizen

※ Business areas which are required to comply the various regulations and to obtain
approvals of specific government ministries are omitted from the above list.

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Ⅱ Procedures for Foreign
Investment in Myanmar
1. Types of Foreign Investment

Corporation of 100% Foreign Capital

Corporation in the Form of Joint Venture with Local Capital

Branch of Foreign Corporation

 Business activities can be carried out in the same manner as
corporation of 100% foreign capital

 Representative offices can also be registered as “ Branch of a

Foreign Company” under Companies Act

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2. Registration and Approval Procedure

Branch of a foreign
corporation Registration of company
Service Company DICA
and the business permit
（excluding prohibited or
restricted business)

DICA Registration of company

 Restricted Business by
and the business permit
FIL
 Businesses eligible for
incentives by FIL MIC Approval of MIC

DICA Registration of company

 Business required and the business permit
approval of the relevant
ministries MIC Approval of MIC

Inquiry Approval and Conditions

Relevant ministries

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3. Company Registration and Business Permit

Submission of the
application form
(Form A)

Payment of
Registration Fee
Review by DICA
Company Acceptance of the
Registration / conditions by the
Proposed investor
Conditions for
Business Minimum Capital Business Permit 2 months

Service USD 50,000

Payment of 50%
Temporary Permit
of the minimum
capital
Manufacturing USD 150,000 5 years

Payment of the
Completion of the full capital
Procedures

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4. Myanmar Investment Commission (MIC) Approval

Draft land lease agreement

Preparation of
Application Form
Review by Union Attorney （Form1）
General office and the Business
Plan and other ※ 【Minimum Capital】
attachments In previous FIL, the minimum capital for
Manufacturing - USD500,000 、
Prior explanation to Service Business － USD 300,000
relevant Ministries and In the new FIL, the minimum capital is not explicitly
Agencies Mentioned.
It is assumed to differ on case-by-case basis。

Submission to MIC

Referral to relevant 90 days

Ministries and Agencies

Review of the
Issuance of
application
MIC Certificate
documents

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 Yasuhide Fujii, CPA Japan
Managing Director
KPMG Advisory (Myanmar) Ltd.
yfujii@kpmg.com
+95-1-527-103 / +95-1-514-862

© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated
with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any
other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.