Investment law sent to parliament
A long-awaited law that seeks to lure foreign investment into specific regions and sectors with a series of tax incentives is expected to be passed soon.
A DRAFT of the long-awaited Myanmar Investment Law has been submitted to parliament and will be passed soon, bringing a more strategic and nuanced approach to tax exemption in addition to simplifying investment, according to U Aung Naing Oo of the Directorate for Investment and Company Administration (DICA).
“We have already put the bill to parliament after finalising the draft, and it will be enacted during the next parliament,” the DICA director said at a press conference in Yankin township last week. The next meeting of parliament will be held in the first week of November.
The new law combines into one document the Myanmar Citizens Investment Law, which governs investment by locals, and the Foreign Investment Law, which governs foreign entities. Drafted with help from the International Finance Corporation, U Aung Naing Oo said the new framework would simplify investing in Myanmar.
One significant point in the draft law is a reduction in the number of investment projects that require permission from the Myanmar Investment Commission (MIC), he said.
“Investors don’t need to apply to the MIC to invest in all businesses,” he said. Application will only be required for projects that are highly capital-intensive, that have potential impact on the environment or that the government deems “strategic”, according to U Aung Naing Oo. This latter category would include key infrastructure projects.
“But all investors [will still] need to inform the MIC about what businesses they are investing in so that there is a record,” he said.
U Aung Naing Oo added that under the existing Foreign Investment Law, foreign investors doing business with an MIC permit qualify for tax benefits, including an income tax exemption. Under the new law, tax benefits will be tailored and strategic rather than automatic, he said.
“Tax exemptions will be granted only to businesses in sectors that the state needs to boost the economy,” he said.
Local firms have argued that they are at a disadvantage because they do not qualify for the same tax exemptions as international competitors. An MIC permit typically requires a high level of investment. Although this differential treatment is concerned with the size of the investment, some observers say it is important to lure international entrants into Myanmar, bringing a higher level of investment than local business in the same sector cannot match.
“Generally local companies reinvesting profits would struggle to satisfy the conditions for an MIC permit required for the tax breaks,” Robin Scott, general counsel of City Mart, told The Myanmar Times. “Their [local firm’s] large set up costs will have been incurred some time ago.”
The duration of the tax exemption will also be tailored under the new law, according to U Aung Naing Oo.
“For example, three years [for investment] in developed regions and seven years in less developed regions,” he added.
The draft also takes seriously the issue of environmental and social impact, and updates long-outdated offences and punishments in the old Myanmar Citizen Investment Law, he said.
‘Tax exemptions will be granted only to businesses in sectors that the state needs to boost the economy.’
U Aung Naing Oo DICA
People use ATM machines at a roadside in Yangon.