On 30th March 2017, the Ministry of Planning and Finance published Notification 35/2017, the final version of the Myanmar Investment Rules (MIR) issued under the Myanmar Investment Law 2016 (MIL). We have already commented on the draft versions of the MIR, click here to read our previous alert on this topic.

Most of the recent amendments are re-phrasing of previous versions, however some changes or additions are of greater significance:

• CBM approval: New provisions for the submission of information to the Central Bank of Myanmar relating to offshore loans or receipt of capital from abroad. [Rule 37]
• Report employees and export earnings: The proposal must contain information of the number of employees and export earnings from the investment (presumably if any). [Rule 38]
• Investing in MIC approved businesses: Investing in an investment that already holds an MIC permit (and presumably an endorsement) does not require an additional permit (although under current practice this would require the approval of the Myanmar Investment Commission (MIC)). [Rule 41(b)]
• Deadline for providing additional information: The MIC may reject the proposal if the investor does not provide additional information within 20 working days or extended timeline provided by the MIC. [Rule 59]
• Proposal assessment criteria: Under the proposal assessment criteria it now makes it clear that relevant business experience, financial commitment and business reputation of the investor, associates and holding companies will also be considered. [Rule 64]
• Endorsement approval timelines: where an endorsement is approved by the MIC or relevant state or regional committee this must be done within 30 days of the date of acceptance, and the endorsement will be issued within 10 days of the date of decision. Note that the period of 30 days has been reduced from 60 in the previous draft. [Rule 72(a)]
• Tax incentive applications: Rules have been introduced to clarify tax incentive application assessment procedure. [Rules 85-90]
• Income tax exemption criteria:

• As in the MIL Section 75(c), to obtain an income tax exemption all investments must be made in a promoted sector. [Rule 91(c)]
• Setting of a financial limit of USD 300,000 capital expenditure in Myanmar before tax incentives will be considered. [Rule 91(e)]

• Exemptions or relief for the expansion of business or in construction period:

• Where the commission has granted exemptions or reliefs for the expansion of the business under MIL Section 77(d), these will lapse if relevant materials are not imported within 2 years from the date of such grant. [Rule 105]
• Exemptions granted under MIL Section 77(a) will be void if not used during the investment construction period or investment preparatory period. [Rule 106]
• If any materials or equipment covered by customs duty exemptions are used for any other purpose other than the construction or implementation of the investment, quite apart from re-paying the applicable customs duties, new wording prescribes that the investor will be liable to the full range of administrative penalties under MIL Section 85. [Rule 108]
• A useful new provision that provides that an investor can authorise another person or company to import materials and enjoy applicable exemptions and reliefs under MIL Sections 77(a) and (d), provided MIC approval is obtained. [Rule 112]

• Revocation of approval: Approval may be revoked if, in the Commission’s reasonable opinion, the approval has been obtained through fraud or other misleading conduct or the investment has not been carried out substantially in accordance with the application. MIL Section 85 grants similar powers to the MIC, with a difference – under the MIL the opinion of the MIC does not have to be “reasonable”, nor is there any mention of failure to carry out the investment substantially in accordance with the application. [Rule 115]
• Land rights applications: A procedure is provided for land rights applications. [Rules 119-124]
• Threshold for state or regional committee authority: The duties and powers of the state or regional committees are established for any investments with the threshold specified by the MIC by notification. Note that MIC Notification 11/2017 specifies USD 5 million or MMK 6,000 million as the maximum size of investments the states or regions may approve. [Rule 155]
• One-stop service: A number of other government departments have been added to the one-stop service. [Rule 163]
• Annual reporting requirements: Provides details of annual reports for permit holders (and presumably endorsement holders) and those who benefit from tax incentives- interestingly the investor has to confirm the zone of the investment. [Rule 196]
• Insurance requirements: The types of required insurance are now listed: (a) Property and Business Interruption Insurance; (b) Engineering Insurance; (c) Professional Liability Insurance (presumably meaning public liability insurance); (d) Professional Accident Insurance (presumably this means some other form of accident insurance); (e) Marine insurance; (f) Workmen’s Compensation Insurance. [Rule 212]
• No double exemptions: Where an investor or an investment has already enjoyed tax exemptions or reliefs under the MIL, it is made clear that they may not enjoy them again. [Rule 235]

Promoted Sectors

As we discussed in our previous legal alert regarding the MIC Zones, under Section 75(a) of the MIL, income tax exemptions partly depend on the zone in which the investment takes place–up to seven years income tax exemption in zone one, the least developed regions, up to five years income tax exemption in zone two, moderately developed regions, and up to three years income tax exemption in zone three, the most developed regions.

However, the income tax exemption also depends, under Section 75(c), on whether the business is in a sector which the MIC designates as a promoted sector. On 1st April 2017 the MIC published the list of promoted sectors in Notification 13/2017 (Notification 13). The list is too long to discuss in detail here, however the following are the broad categories that are promoted:

• Agriculture and its related services (except cultivation and production of tobacco);
• Plantation and conservation of forests;
• Livestock production, breeding and production of fishery products, and its related services;
• Manufacturing (except manufacturing of cigarettes, liquor, beer, and other products harmful to health);
• Establishment of Industrial Zones;
• Establishment of new urban areas;
• City development activities;
• Construction of roads, bridges and railways;
• Construction of sea ports, river ports and dry ports;
• Management, operation and maintenance of airports;
• Maintenance of aircraft;
• Supply and transport services;
• Power generation, transmission and distribution;
• Production of renewable energy;
• Telecommunication business;
• Education services;
• Health services;
• Information technology services;
• Hotels and tourism; and
• Science, research and development business.

The detailed list of all types of businesses can be seen at the DICA website.

Under Notification 13, all such businesses are now entitled to income tax exemption under Section 75 (c) of the MIL. The extent of the exemption, however, will depend on the zone in which the investment takes place.