Structuring your Investment in Myanmar 14 November 2012 Ola Nicolai Borge

Disclaimer Disclaimer This brief presentation on structuring investments in Myanmar is intended to provide an introduction to some key issues and considerations that is relevant to potential investors. The information is intended for general information purposes only and should not be used for decision making purposes. Applicability of the information to specific situations should be determined through consultation with professional advisors. © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Structuring your investments in Myanmar November 2012Investment in Myanmar Different scenarios for: Setting up new business Investing in existing business Perspective on investment Long term running operations? Exit strategy? Optimal investment structure based on: Legal issues and restrictions Tax issues: Myanmar tax aspects Foreign tax aspects © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

A brief introduction to Myanmar Tax

Corporate Income Tax November 2012Investment in Myanmar Tax residency based on registration. Resident companies subject to tax on world wide income – except companies registered under the MFIL that are only subject to tax on Myanmar source income Corporate Income Tax rates: Resident companies – 25% Branch with incentives under the MFIL – 25% Branches without MFIL incentives – 35% Capital Gains Tax rates: Resident tax payers – 10% Non-resident tax payers – 40% Oil and gas industry – 40 to 50% Withholding Tax for transactions to non-residents: Dividends – 0% Interest – 15% Royalties – 20% Services and goods – 3.5% WHT paid to non-residents to constitute final CIT payment for the recipient. © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Double Tax Agreements Double Tax Agreements November 2012Investment in Myanmar Myanmar has entered DTA’s with United Kingdom, Singapore, Malaysia, Vietnam, Thailand, India, Bangladesh, Indonesia, South Korea Laos Most DTA’s – except UK – has not been “Notified” in accordance with requirements under the Income Tax Law. Thus, from a legal perspective there is some uncertainty to the application of the DTA’s. Recommendable to verify application before arranging structures. © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Withholding Tax under DTA’s Withholding Taxes Transaction type- payment to Foreigners Rates applicable to resident citizens and resident foreigners Rates applicable to non-resident foreigners Thai Residents – DTA Rate Singapore Resident – DTA Rate Interest0%15%10%8/10% Dividends0% Royalties15%20%10%10/15% Share Sale Gains10% 40%Exempt 1 Exempt 2 Goods Services 2% 3.5% 0% Note 1: If gain relates to sale of shares of company which is not principally owner of immovable property and the shares sold constitute less than 35% of the capital of the company Note 2: Broadly, the same as note 1, but with additional restriction that seller must sell less than 20% of his position of shares. November 2012Investment in Myanmar © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Tax Incentives November 2012Investment in Myanmar Companies registered under the Myanmar Foreign Investment Law can be granted a number of incentives, including: 5 year tax holiday CIT exemption on profits that are reinvested within one year, Accelerate depreciation, Reduced CIT for export activities, 3 years carry forward losses, Exemption on import duties for machinery, and Exemption on import duties on raw materials. The benefits are approved by the Myanmar Investment Commission upon application. © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Commercial Tax November 2012Investment in Myanmar Commercial Tax Turnover based Certain mechanisms to prevent aggregation Also applies to entities that are non-resident Changes from April 2012 Includes new reference to services little guidance from tax authorities © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Commercial Tax - Goods Tax Rate Essential and basic commodities0% Other goods8% to 25% Luxury goods (liquor, pearls, cigarettes)30% to 100% Goods produced and sold from industrial zones ( Tax department issue exemption order annually) Up to 20% of applicable rates November 2012Investment in Myanmar © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Commercial Tax - Services Activity – Some ExamplesTax Rate Trading Businesses5% Tourism5% Passenger Transportation5% Hotels, including Restaurants5% Public Entertainment5% Cinemas/Movies5% Brokerage5% Land, Building (Design, Drawing, Landscaping and Decoration, Renovation)5% Services, Auditors, Practicing Accountants, Practicing Lawyers5% November 2012Investment in Myanmar © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Taxation of Individuals November 2012Investment in Myanmar Individuals resident in Myanmar if they stay for 183 days – or more – during the fiscal year. Resident tax payers subject to tax on world-wide income. Non-residents subject to tax on Myanmar source income. Tax rates - salaries: Resident foreigner - 1% to 20% Non-resident – 35% Social security contribution Applicable if 5 employees or more 4% (1.5% + 2.5%) of salary or wages © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Structuring considerations: November 2012Investment in Myanmar Equity Potential restrictions on level of ownership? Restrictions on transfer of shares to foreigner? Loans Need approval by Central Bank? Interest cap? Financial instruments Complex financial instruments not well known Legal? Management fee structures Indirect allocations not approved? © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Offshore holding structures Offshore holding structures November 2012Investment in Myanmar Popular holding regimes for investments to Myanmar are : Singapore Malaysia Thailand Easy to structure tax efficient repatriation of dividends No WHT on distributed dividends from Myanmar Utilize exemption in holding regime Difficult to structure efficient exit structures Limitation of 35% position to benefit from capital gains exemption under DTA. © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Some structures for illustration

Investment structure – Singapore Holding - Dividends Investment structure – Singapore Holding - Dividends November 2012Investment in Myanmar Investor HoldCo TargetCo Third countries Singapore Investor Myanmar CIT25% (possible tax holiday) WHT - Distributed dividends0% Singapore Received dividends CIT0% WHT - Distributed dividends0% Third Countries ?? © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Investment structure – Singapore Holding – Capital gains Investment structure – Singapore Holding – Capital gains November 2012Investment in Myanmar Investor HoldCo TargetCo Third countries Singapore Investor Myanmar Capital Gains - CIT0%* WHT - Distributed dividends0% Singapore Capital Gains - CIT0% WHT - Distributed dividends0% Third Countries ?? *Application of DTA subject to several conditions – in particular HoldCo holds less than 35% of the shares of TargetCo HoldCo sells less than 20% of their balance; and TargetCo is not primarily holding immovable property. © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

A few comments on acquisitions

A few comments on acquisitions.... A few comments on acquisitions.... November 2012Investment in Myanmar Experience from due diligences in Myanmar Quality of accounts variable Uncertainty to formal ownership to assets Can foreigners buy shares in the target? Can foreigners buy the assets? Frequently observed structure Form a new “joint venture” company Local partner contribute assets Foreign investor contribute capital. Nominee structures not recommendable! © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

KPMG in Myanmar November 2012Investment in Myanmar KPMG first of Big4 to re-open office in Yangon Mix of experienced locals and expatriates Backed by KPMG Thailand and KPMG Singapore – in addition the rest of our network. Initially to provide Tax and Advisory services KPMG’s “Investment in Myanmar” available! If you are interested to receive this or have any other questions - please contact Ola Nicolai Borge, © 2012 KPMG Advisory (Myanmar) Limited, a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Thank you Ola Nicolai Borge Executive Director KPMG Phoomchai Tax Ltd. Mobile: +95 (0) (Myanmar) Mobile: +66 (0) (Thailand) Skype: nicolaiborge