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The economic landscape of Myanmar has undergone significant transformations in recent years, with the government implementing market-oriented reforms to attract foreign direct investment. This has resulted in a surge of opportunities across various sectors, including manufacturing, infrastructure development, tourism, energy, and telecommunications.
Myanmar’s young and dynamic workforce, coupled with a large domestic market, creates a favorable environment for business growth. As the country embraces digitalization, it offers immense potential for technological innovation and e-commerce ventures.
One of the greatest assets of Myanmar is its strategic location in the center of Asia, between China and India. Myanmar’s position gives the country direct access to two of the largest markets in the world, with a total of more than 2.5 billion consumers.
In addition to a growing population, various parameters show that poverty levels are falling and the economic condition of the nation’s residents is improving. According to the World Bank, in 2005, nearly half of Myanmar’s population lived below the national poverty line.
Myanmar’s wages are another great attraction for foreign companies that want to invest in Myanmar. Compared to other countries in the region, the minimum wage in Myanmar is significantly lower.
Myanmar is gradually becoming a more open economy. Rich in resources, the country’s chief exports include natural gas, agricultural products, precious and semi-precious stones, garments, and rice. The European Union is a significant export destination. Buyers include H&M, a Swedish multinational clothing-retail company, Primark, an Irish fashion retailer, Indicted, a Spanish clothing firm, and Adidas, the German shoe giant.
All enterprises that do not enjoy tax incentives are subject to income tax at 22% (as of March 2023). The residence status of a company is determined by the place of its incorporation. Companies incorporated in Myanmar are treated as residents of Myanmar for tax purposes. Companies incorporated outside Myanmar are treated as non-residents of Myanmar for tax purposes.
Capital gains tax is levied on gains from the sale, exchange, or transfer of capital assets. However, no capital gains tax will be levied if the total value of such capital assets within a year does not exceed Myanmar Kyat “MMK” 10 Million. Capital gains are taxable at 10% for resident and non-resident taxpayers. Capital gains for taxpayers in the oil and gas industry are subject to capital gains tax between 40% and 50%.
Stamp duty applies to several transactions. Some of the most relevant stamp duties are as follows: Sale or transfer of immovable property (outside Yangon) – 4% of the value, Sale or transfer of immovable property (inside Yangon) – 6% of the value, Rental of immovable property (contract for between one year and three years) – 0.5% of the annual average rent, Rental of immovable property (contract for more than three years) – 2% of the annual average rent, Sale or transfer of shares – 0.1% of the value.
Immovable property situated in Yangon is subject to property taxes, covering general tax, lighting tax, water tax, and conservancy tax. Due to the restrictions on foreign ownership of land, these taxes are usually not a direct issue for foreign investors.
Most imported goods, with a few exceptions, are subject to customs duties on importation and are required to be declared to the Myanmar Customs Department accordingly.
Currently, the customs duties levied on the import of machinery, spare parts, and inputs generally range from nil to 40% of the value of the goods imported. For exports of goods, export duty is levied on certain commodities.
For private companies to be set up, only one director and one shareholder are required. The sole director can also be the sole shareholder of a private company. The number of shareholders is restricted to 50 members. Additionally, the liability of shareholders is limited to the amount unpaid on their shares. The private company limited by shares is the most common type of company used in Myanmar as well as in international business.
In a public company limited by shares, it needs at least three directors and one of them must be a Myanmar citizen. The liability of members is limited to the shares that the member contributes if the company is liquidated and there are insufficient assets to pay any outstanding debts. Most importantly, the shares of the company can be freely traded on the stock exchange in line with the standards and criteria set out by the stock exchange.
Foreign companies that carry on business in Myanmar may have to be registered as an overseas corporations with the Directorate of Investment and Company Administration “DICA”. Otherwise, an overseas corporation is a Myanmar branch of a company that has been incorporated outside Myanmar.
A partnership is formed by a group of individuals. The partnership’s rights and obligations are based on the agreement entered into between the partners. All partnerships formed in Myanmar are of unlimited types. Registration of a partnership is not compulsory and the business ends when all partners agree to dissolve the partnership.
Joint Venture is a business entity formed by two or more organizations from different countries from the same or diverse industry to undertake a specific goal or task. The companies or businesses or individuals can form a joint venture by pooling their resources, expertise, and domain knowledge to develop a JV and work together as a single organization towards achieving the objectives. The directors/shareholder’s limit is according to the Joint venture agreement.
Myanmar, a captivating country in Southeast Asia, presents a compelling business destination for entrepreneurs and investors alike. With its strategic location between India, China, and the Association of Southeast Asian Nations (“ASEAN”) markets, Myanmar offers access to a vast consumer base and abundant natural resources.
Author: Chandrawat & Partners
Topic: Doing Business in Myanmar
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