#1LINCOLN LEGAL SERVICES (MYANMAR) LIMITED THE NEW MYANMAR INVESTMENT LAW - FIRST EXPERIENCES 23rd June, 2017#2THE NEW INVESTMENT LAW ☐ Enacted on 18th October 2016 Combines the Foreign Investment Law 2012 and the Citizens Investment Law 2013 ■ Proposals under the new law submitted since April 2017 Distinguishes between "citizen investor" and "foreign investor" "Citizen investor" includes enterprises established "only" by citizens (which is at odds with the draft of the new Companies Law) - but see Rule 134 (b) LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#3THE NEW INVESTMENT LAW MIC permit MIC endorsement Just set up your company and start your business LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#4MIC PERMIT MIC permit required for investments that: are important to the Union's strategy; have a large environment and social impact; use state-owned land or buildings; are capital-intensive; are classified by the Government as requiring an MIC permit LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#5MIC PERMIT Important to the Union's strategy: Basically any investment of more than USD 20m apart from manufacturing, agriculture and hotels and tourism Investments of more than USD 1m in border or conflict areas or across the national border Investments across Regions and States Investments using more than 1,000 acres (agriculture) or 100 acres (non-agriculture) of land LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#6MIC PERMIT Large environmental and social impact: Investment - requires an environmental impact assessment according to the Environmental Impact Assessment Procedure (MOECF Notification 616/2015); is located in designated protected areas; requires resettlement of, or otherwise adversely affects, at least 100 individuals; requires more than 100 acres and impacts land rights holders LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#7MIC PERMIT Investment uses state-owned land, unless the land is grant land or similar land; leased for not more than 5 years; subleased from an authorized person Investment is capital-intensive: Investment amount > USD 100m Other investments specified by the government from time to time LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#8MIC PERMIT APPLICATION ■ Submitted by the investor or its authorized representative (new: authorized representative can sign application docs) ■ Previously, submitted through the relevant ministry in case of mining, upstream oil & gas, establishment of airlines, provisions of airport services, establishment of ports, provision of port services, or investments using government land LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#9MIC PERMIT APPLICATION ☐ Now, submitted through relevant ministry if government (partly) owns the investor, intends to grant a concession or otherwise required or authorized to submit the proposal ■ Application fee: Ks. 100,000 - 500,000 (depending on the investment amount) LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#10MIC PERMIT APPLICATION Required documents: Depends on the project, but in particular Proposal form Details and financial standing of the investor Explanation ("summary") of the investment Bilingual Land documents, draft lease agreement P/L and cash flow for 10 years, IRR, recoupment period - gone? LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#11MIC PERMIT APPLICATION List of machines, equipment, raw materials purchased (i) locally and (ii) abroad Annual production plan/service plan for 10 years Local/foreign sales ratio for 10 years Income tax/commercial tax forecast for 10 years Gone? Employment opportunities (number of local and foreign employees, their positions and salaries) Fire prevention plan Gone? LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#12MIC PERMIT APPLICATION Social security and welfare plan CSR commitment; commitment to withhold income tax Gone? Location map Conceptual design of the building Gone? Evaluation of environmental impact Electricity and water usage forecast (10 years) Contracts related to the investment Documents can be submitted in English LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#13MIC PERMIT APPLICATION Procedure: Prepare one set of application documents while communicating with MIC officer If the MIC officer is happy, prepare 20 sets and submit to the MIC At the same time, submit application for company registration with DICA Within 15 days, screening by MIC's "Proposal Assessment Team"; investor to attend the PAT meeting LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#14MIC PERMIT APPLICATION If the PAT decides to go ahead, the MIC obtains the opinion of the ministries and other authorities involved In the process, the investor will be asked to amend the proposal Once all amendments are done, the investor has to prepare 10-12 more sets and submit them to the MIC Investor holds a power point presentation at the MIC meeting If everything went well, the MIC will issue the permit LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#15MIC PERMIT APPLICATION Shortly thereafter, DICA issues the company cards Required time from the filing of the application until the issuance of the MIC permit: Theoretically, 85 working days LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#16MIC ENDORSEMENT PROCEDURE Required if Local or foreign investor wants tax incentives, or foreign investor wants to lease land for more than one year and the investment does not require an MIC permit ■ Submitted by the investor or its authorized representative (new: authorized representative can sign application docs) ■ Application fee: Ks. 50,000 LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#17MIC ENDORSEMENT PROCEDURE Required documents: Application form Details and financial standing of the investor Annual production plan/service plan for 10 years Local/foreign sales ratio for 10 years Copies of related contracts (e.g. JVA, CMP contract) Copies of related licenses (if any) LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#18MIC ENDORSEMENT PROCEDURE Tax incentive application form, list of locally purchased and imported machinery and equipment, list of raw materials, standards to be complied with Land rights authorization form, draft lease agreement, land documents, location map LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#19MIC ENDORSEMENT PROCEDURE ☐ Documents can be submitted in English Procedure: Prepare one set of application documents while communicating with MIC officer If the MIC officer is happy, prepare 10 sets and submit to the MIC At the same time, submit application for company registration with DICA LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#20MIC ENDORSEMENT PROCEDURE If, after initial screening, the MIC decides to move ahead, the MIC further screens the application and obtains approval from the relevant authorities Investor may be asked to amend the application, but no attendance at MIC meetings required If everything went well, the MIC will issue the endorsement Shortly thereafter, DICA issues the company cards Required time: Theoretically, 55 working days in total LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#21MARKET ACCESS RESTRICTIONS Section 41 MIL, Rules 12-16: "Harmful investments": prohibited to foreigners + citizens (Rule 13?) Section 42 MIL, MIC Notification 15/2017: Union only Investments prohibited to foreigners Investments requiring foreigners to have JV w/citizen Investments requiring approval of the relevant ministries LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#22MARKET ACCESS RESTRICTIONS Restriction on trade MIC Notification 15/2017 requires MoC approval if a (foreign) investor wants to open a retail or wholesale business MoC Notification 36/2017 dated 12 June 2017: Foreigners can trade in construction materials, seeds, fertilizers, pesticides and hospital equipment (no JV requirement anymore) LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#23IMPORT RESTRICTIONS Rules 230, 231 allow foreign investors to import goods "for their business" without any MIC approval and oblige the Ministry of Commerce to register their companies as importer ■ Ministry of Commerce has, however, not issued internal guidelines yet LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#24INVESTMENT SCREENING PROCEDURE Non-binding information whether: MIC permit required? Parliamentary approval required? Restricted investment? Promoted investment? Prohibited investment? Others LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#25TAX INCENTIVES Application fee: Ks. 100,000-200,000 Minimum investment amount to be eligible: USD 300,000 No more automatic 5 year exemption from corporate income tax Investments in promoted sectors (MIC Notification 13/2017) in (i) less developed, (ii) moderately developed, (iii) developed townships (MIC Notification 10/2017): Exemption from corporate income tax for (i) seven, (ii) five or (iii) three years LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#26TAX INCENTIVES ☐ Exemption from customs duty and commercial tax at the import stage for machines, construction materials, etc., during construction or expansion period (including the import through agents, Rule 112) ▪ Exemption from customs duty and commercial tax at the import stage for raw-materials and semi-finished goods if 80% of the income is in foreign currency from export Exemptions from corporate income tax on profits that are reinvested within one year LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#27TAX INCENTIVES 1.5 x accelerated depreciation Deduction of R&D expenses (max. 10% of the income) Better incentives may be granted to citizen-owned businesses LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#28LAND RIGHTS AUTHORIZATION Required by foreign investors wishing to lease immovable property for more than one year ■ Requires MIC permit or endorsement ☐ ◉ Application filed together with the permit or endorsement application, or later (but in this case tax compliance is checked) Application fee: Ks. 100,000 LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#29LAND RIGHTS AUTHORIZATION Exceptions: Once the new Companies Law is out: Companies with foreign ownership below a harmful threshold (Rule 134 (b)) ■ Already now? Foreign investor leases land or building from another investor with MIC permit or endorsement allowing the sub-lease of such land or building (Rule 135) LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#30LAND RIGHTS AUTHORIZATION Procedural acceleration: MIC does not have to obtain any approval if the land is located in a designated zone (e.g. industrial or hotel zone), Rule 130 For farmland: Permit according to section 30 (a) or (b) Farmland Law not required to apply for land rights authorization (Rule 132) Contractual title chain enough to apply for land rights authorization (Rule 133) LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#31DEVOLUTION ☐ MIC Notification 11/2017: Endorsement applications to be dealt with by State and Regional Investment Committees if the investment amount does not exceed USD 5 million or Ks. 6 billion State and Regional Investment Committees not in place everywhere yet In this case, endorsement applications can be filed with the MIC in Yangon LINCOLN LEGAL SERVICES (MYANMAR) LIMITED#32CONTACT Lincoln Legal Services (Myanmar) Ltd. La Pyi Wun Plaza, Room 409 (4th Floor), 37, Alan Pya Pagoda Road, Dagon Township, Yangon, Myanmar Phone: E-mail: +95-9-262546284 [email protected] Homepage: www.lincolnmyanmar.com LINCOLN LEGAL SERVICES (MYANMAR) LIMITED