Article

Posted On November 2018

The IMF projects Myanmar to be the world’s fastest growing economy in 2016, with GDP forecast to advance by 8.6 percent. Still considered a frontier economy, Myanmar is at a young but developing stage for foreign direct investment (FDI) within ASEAN.

Not only does the nation offer fertile land, bountiful resources, and a strategic geographic location, the Government is also increasingly committed to encouraging foreign investment through major economic and political reforms.

The reform process began in 2011 and has successfully increased trade and FDI, contributing to 8.3 percent real GDP growth in the 2013/14 fiscal year, which topped the preceding year’s 7.3 percent growth.

Although reforms have been successful in augmenting Myanmar’s economic growth and attracting foreign investment, the regulatory environment remains complex. In 2012, Myanmar released the Myanmar Foreign Investment Law to address the rights and duties of foreign investors. More recently, Myanmar has seen the passage of the Special Economic Zone Law which was passed in 2014, offering numerous FDI incentives. Further, the Myanmar Companies Law was recently updated as well.  

In the midst of an evolving economic and regulatory climate, it is crucial for prospective investors to understand their responsibilities in Myanmar. Government agencies, namely the Directorate of Investment and Company Registration (DICA), as well as private advisors can play a key role in successful business establishment in Myanmar.

Options for Investment

Below, the steps for registering a private limited foreign company and a foreign company branch office are outlined. These are the two best vehicles for foreign investors to establish profit generating operations in Myanmar. Deciding between a private limited foreign company and a branch office is largely influenced by the desired business function of the company.

Private limited foreign companies can be 100 percent foreign owned and engage in nearly all service provision and manufacturing activities. The industries that allow only limited foreign ownership are listed in Notification No. 26/2016. In most cases, foreign companies must engage a fully domestic company to conduct trade activities in Myanmar. All foreign investors must register their companies with the DICA in order to receive a registration license and Permit to Trade, which allow businesses to commence activity in Myanmar. Foreign companies are also required to register with the Myanmar Investment Commission (MIC) under the Myanmar Foreign Investment Law of 2012 (MFIL) if they plan on receiving investment incentives, which include long term land leases. Small companies that will strictly provide services in Myanmar are not required to register with the MIC.

Branch offices are also allowed to generate profits within Myanmar and represent a viable investment vehicle for certain endeavors. Companies using branch offices are restricted from participation in any of the industries listed in Notification No. 26/2016. However, branch offices are not required to register under the MFIL. Thus, they can register strictly under the Myanmar Companies Act of 1914 and skip approval from the MIC. Because they will use the name of their parent company, branch offices can also bypass a name check. The necessary documentation to register a branch office, however, is more extensive than that for establishing a private limited company.

Option 1: Private Limited Foreign Company Registered Under the MFIL

Step 1 – Name Check

In order to establish an entity in Myanmar, a foreign company must first ensure their desired name is available and appropriate by submitting a name check form to the DICA.

Step 2 – Staffing

Foreign companies must have a minimum of two directors and two shareholders. Unless specified in Notification No. 26/2016, the directors and shareholders can all be foreigners. A maximum of 50 shareholders are allowed.

Step 3 – Register with the MIC

Foreign investors need to submit a project proposal to the MIC in order to receive a Foreign Investment Permit. The MIC should accept or reject the proposal within 15 days of submission. If accepted, the proposal will be reviewed and either approved or denied within approximately 90 days. According to the MIC, proposals are evaluated using three main criteria:

• Compatibility with the policies set out in the Foreign Investment Law
• Financial trustworthiness
• Economic solidity of the company and conformity with existing laws

Before submitting a proposal, foreign investors should secure a land lease and consult the DICA.

The DICA provides a detailed outline of the MIC application process as well as a list of documents required for the application. All forms must be submitted in English.

Step 4 – Register with the DICA

Foreign investors must also register with the DICA in order to officially operate in Myanmar. Once getting MIC approval, DICA registration will be virtually automatic. The documents needed for registration with the DICA and the MIC can be submitted simultaneously. However, the forms for each registration vary. The documents necessary for DICA registration are listed in a detailed outline of the registration process.

If the DICA approves an application, a temporary license will be issued. Before a permanent Registration Certificate and Permit to Trade are issued, foreign investors must confirm their registered office address within one month of receiving approval. Proof of the minimum capital transfer into a Myanmar bank account as well as a signed letter of conditions must also be submitted before the DICA issues a permanent Registration Certificate and the Permit to Trade. The Internal Revenue Department (IRD) will assist with confirming inward capital remittance.

Step 5 – Licensing and Compliance

If no further licensing is required for its intended business activities, a foreign company is allowed to commence business upon receipt of the MIC permit and the DICA permanent license. Inquiries concerning further licensing can be directed to the Company Registration Division of the DICA.

Company Registration Certificates are valid for five years and must be renewed in order to continue business operations in Myanmar.

The DICA provides a general list of investors’ rights and obligations to facilitate fair treatment and compliance with Myanmar law.

Option 2: Branch Office Registered Under the Companies Act

Step 1 – Lease Land

For successful registration, investors must provide the information for their branch office’s future address.

Step 2 – Staffing

Using Form 18, investors must appoint a minimum of one resident of Myanmar to be their authorized person who is able to accept any notices intended for the company. Investors are also required to appoint someone the power of attorney.

Step 3 – Register with the DICA

To receive a Registration Certificate and Permit to Trade from the DICA, investors must submit registration forms available on the DICA’s website. These include the company’s annual report or audited financial statements for the previous two years, the Memorandum and Articles of Association and the appointment letter/power of attorney for authorized persons, all three of which need to be notarized by the company’s resident authorities and local Embassy of Myanmar. All forms must be delivered in English.

If the DICA approves the application, a temporary license will be issued. Before a permanent Registration Certificate and Permit to Trade are issued, foreign investors must confirm their registered office address within one month of receiving approval. Proof of the minimum capital transfer into a Myanmar bank account as well as a signed letter of conditions must also be submitted before the DICA issues a permanent Registration Certificate or Permit to Trade. The IRD will assist with confirming inward capital remittance.

Step 4 – Licensing and Compliance

If no further licensing is required for its intended business activities, a branch office is allowed to commence business upon receipt of their DICA permanent license and Permit to Trade. Inquiries concerning further licensing can be directed to the Company Registration Division of the DICA.

Company Registration Certificates are valid for five years and must be renewed in order to continue business operations in Myanmar.

The DICA provides a general list of investors’ rights and obligations to facilitate fair treatment and compliance with Myanmar law.