How to expand Myanmar Market?

The XYZ BV is a Dutch company that provides serviced offices to its clients in different countries. After the successful establishment in Singapore the XYZ BV is now seeking for a business opportunity to enter the market in Myanmar.

The XYZ BV is approaching us with the query of Myanmar company incorporation or to start with a market research by sending first a professional to Myanmar. Further points are the company type that would suite best for their investment strategy, obstacles for foreign companies entering the market as well as the rules and regulations on company, tax and labour law regarding foreign and local employment contracts by complying with Myanmar labour law.

To find the right business start-up based on the possibilities in Myanmar we advised XYZ BV on the advantages and disadvantages of the different company types such as representative office, MIC company or a Non-MIC company relating to capital requirements, foreign investment protection and tax issues.

Foreigners like Mr M, the CEO of the XYZ BV, may set up a 100 percent foreign-owned company either under the Myanmar Foreign Investment Law or the Myanmar Companies Act. If the XYZ BV will set up a business according to the Companies Act the minimum share capital requirement is $50,000 for service companies – and $150,000 for manufacturing companies.

Furthermore, it is required for a foreign company to obtain a permit from Directorate of Investment and Company Administration (DICA). A DICA permit is generally renewable every five years. Under the Foreign Investment Law (FIL) it is at the discretion of the MIC (Myanmar Investment Commission) to decide on the minimum share capital and also the decision is based on the desired business activities.

Before a foreign company registration in Myanmar, it is required to apply for Permit to Trade from the Ministry of National Planning and Economic Development before it can apply for registration of the company with the Registrar of the Companies Registration Office.

However, the Permit to Trade shall not be understood in the common sense and rather means "Permit to do business". Although the government did not announce a provision of such permit, no registration certificates or DICA permit for a foreign trading company (distributing and selling products) are issued at present.

Therefore, trading activities are still restricted to Myanmar citizens. For this reason if trading is an important and main part of the XYZ BV. they should consider setting up a 100 percent local-owned company under the Myanmar Companies Act which they can commit to act as agent and/or distributor for their imported goods.

The XYZ BV as a foreign company has to take into account that not all sectors are open for foreign investors. However, the law provides the option to enter into a joint venture with the government for restricted sectors. Providing serviced offices like the XYZ BV is not a restricted sector. Based on the given fact we advise the XYZ BV to form a MIC approved company under the FIL.

Therefore XYZ BV can reach the following incentives and benefits like income tax exemption from the year of starting production or services activities, up to continuous five years and also exemption or relief from income tax on profit which is re-invested within one year and as well as exemption or relief from income tax up to 50 percent of the profit accrued from exports, repatriation of profit and so on.

Furthermore the foreign investor is protected under the FIL against nationalisation and expropriation, which is also guaranteed by law. Additionally, the XYZ BV, if registered under the FIL is eligible to lease not only from the state but from private individuals as well.

Lease periods extend up to 50 years and after this period, the Myanmar Investment Commission may authorise an extension of further 10 years, which is again renewable for another 10 years.

In our following article we will advise the XYZ BV about labour law and immigration issues.

Strohal Legal Group, founded by Dr Theodor Strohal in 1979, is a law firm offering a highly personalised service to its clients. Strohal Legal Group enjoys a well established reputation across Europe, Southeast Asia and the Middle East / GCC region with a strong focus on international and cross border business. In Myanmar, Strohal Legal Group is providing their services in partnership with U Min Sein under the name U Min Sein & Strohal Associates Law Firm.