1. Hot Tax and Investment Issues when Structuring Investment into Myanmar

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Corporate tax planning strategies
Tax-efficient market entry advisory services
Real estate tax structuring
Oil, gas and mining tax services
Customs and excise advisory
Mergers & acquisitions and tax due diligence
International and regional tax optimization
Transfer pricing advisory and benchmarking
Taxation of banks, insurance & financial services
Controversy and litigation in tax matters
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Legal Advisory
Mergers & acquisitions (cross-border and single market)
Real estate projects (including legal structuring)
Corporate & commercial law
Investment licensing and market entry
Capital markets
Compliance (including FCPA and regulatory compliance)
Trade (treaty analysis and anti-dumping)
Infrastructure, mining and energy (including project financing)
Intellectual property
Corporate Advisory
Expatriate employee tax services
Payroll administration
Corporate tax compliance
Accounting services

4. Contents Forms of Entity for Foreign Investment / Residency
Holding Structures for Investments in Myanmar: Labuan vs. Singapore
Investment Licensing
Example: Tax Efficient Holding Structure
Tax Incentives (MIC Permit)
Corporate Income Tax Features
Financing Structures: Case Study
Withholding Taxes
Profit Extraction
Commercial Tax
Alternative Structures to Repatriate Income
Personal Income Tax
Income Derived from Myanmar: No presence in Myanmar
Treaties and Agreements
Withholding Tax and Capital Gains
Permanent Establishment
Capital Gains on Myanmar Shares and Oil & Gas Interests
Withholding Tax
Taxing right under the DTAs?

5. Forms of Entity for Foreign Investment / Residency
The forms of business for foreign investment in Myanmar are:
Foreign-owned company (in the form of an LLC, sole proprietorship, partnership)
Joint venture
Branch
The most common forms for foreign investors are an LLC or branch
A resident company is a company as defined and formed under the Myanmar Companies Act of 1913 or any other existing law of Myanmar (i.e. the Myanmar Foreign Investment Law)
A branch is a non-resident

6. Investment Licensing DICA
Directorate of Investment & Company Administration
Company set up for locally owned or foreign-owned companies and branches
MIC
Myanmar Investment Commission
List:
Agriculture
Livestock and Fishery
Forestry
Mining
Industry
Construction
Transport
Road transport and repair services
Hotels and tourist industries

7. Tax Incentives (MIC Permit)
Mandatory: 3 Year Income Tax Exemption
Discretionary: Extension of Income Tax Exemption 
Income Tax Exemption for Reinvested Funds
Accelerated Depreciation
Export Income Tax Relief
Right to Pay Foreign Employee Income Tax
Deduction for R&D Expenses
Loss Carry forward
Customs Duty Exemption

8. Corporate Income Tax Features
25% CIT for Myanmar companies, foreign-owned resident companies, joint ventures and non-resident foreign companies engaged in special State sponsored projects
35% CIT for branches, except if granted an Investment Permit by the Myanmar Investment Commission (25% CIT)
Tax exemption under the Foreign Investment Law (FIL): 3 years; expected to be extended to 5 years under the new FIL (not 8 years, as was incorrectly reported)
Losses may be carried forward for 3 consecutive years following the end of the exemption period

9. Withholding Taxes Payment type Paid to Residents Paid to Non-Residents
Dividends 0%
Interest
15%
Royalties
20%
Procurement of goods
(excluding imported goods) 2%
3.5% 
Services
(performed in Myanmar or abroad)
3.5%
Notes:
Rates amended effective 26 August 2011 (Notification 167/2011)
Tax is triggered by receipt of payment or accrual
WHT on payments to residents in not a final tax, but tax on payments to non-residents is a final tax

10. Commercial Tax Was significantly amended in 2012
Old: 6 rates (exempt, 5%, 10%, 20%, 25% and 30%-200%)
New: exempt, 5% or 8%-100%
Schedule 1: 70 types of goods
Domestic production or domestic sales are exempt
Importation subject to CT at 5%
Schedule 6: Specific goods
Including alcohol, fuel and cigarettes
CT applies for both importation and domestic sales
Schedules 2, 3, 4, 5 and 7 now at 5% including 14 types of services
Including hotel, restaurant, transport, entertainment, trading services, tourism, insurance (except life), broker, advertising/movie distribution and agent/accounting/legal services

11. Commercial Tax
Threshold for operators to apply CT was introduced this year
Credit system
Yes, but not for all operators (depends on activity)
Recent update: credit possible for downstream petroleum products (Notification 323/2012)
Exemptions for agriculture sector (Notification 288/2012)
Special Economic Zones

12. Personal Income Tax
Foreigners who reside in Myanmar for 182 days or more during the financial year are considered as resident foreigners.
Previously, resident foreigners were taxed at a flat rate of 15%.
From 1 April 2012, progressive rates of 1% to 20% now apply to both resident foreigners and resident Myanmar citizens.
In addition, an expatriate working for a foreign-owned company incorporated under the FIL is deemed to be a tax resident of Myanmar, regardless of period.
Non-residents are taxed at a flat rate of 35%, except under certain circumstances. 
Myanmar Income Tax
Rates on Salary
Residents and Citizens
Non-Residents
1%-20%
35%
Progressive rate, allowances
Flat rate

13. Treaties and Agreements
Double Taxation Agreements
Bangladesh (signed, but not in force)
India (in force)
Indonesia (signed, but not in force)
Korea (in force)
Malaysia (in force)
Singapore (in force)
Thailand (in force)
United Kingdom (in force)
Vietnam (in force)
Laos (signed, but not yet in force)
Note: negotiations in process with 4 more countries
Bilateral Investment Treaties concluded
China
Philippines
Laos
Thailand
India
Kuwait
ASEAN Comprehensive Investment Agreement (ACIA)
Member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam

14. Withholding Tax and Capital Gains
Myanmar Tax Rates Non-residents
Dividends 0%
Gains 40% (oil/gas %)
Interest
15%
Royalties
20%
Services/ goods
3.5%
DTA with Thailand
Dividends
10%
Gains on shares: Myanmar may tax if (1) participation is at least 35% or (2) company consists principally of immovable property
Interest
Royalties %
Service
10% (deemed as royalty)
DTA with Singapore
Dividends
5-10%
Gains on shares: Myanmar may tax if (1) participation is at least 35% and the alienated shares amount to at least 20% of the holding or (2) company consists principally of immovable property
Rate reduced to 10%
Interest
8% - banks; 10% -others
Royalties
10-15%
Service
PE if > 6 months, no general WHT
DTA with Korea
Dividends
10%
Gains on shares: Myanmar may tax if (1) participation is at least 35% or (2) company consists principally of immovable property
Interest
Royalties
Service
PE if > 6 months
DTAs in force at 1 August 2012

15. Withholding Tax and Capital Gains
Myanmar Tax Rates Non-residents
Dividends 0%
Gains 40% (oil/gas %)
Interest
15%
Royalties
20%
Services/ goods
3.5%
DTA with UK
Dividends 0%
No article on capital gains
Interest
No DTA article
Royalties
Service
DTA with Vietnam
Dividends
10%
Gains on shares: Myanmar may tax
Interest
Royalties
Service
DTA with India
Dividends 5%
Gains on shares: Myanmar may tax
Interest
10%
Royalties
Service
10% (deemed as royalty)
DTA with Malaysia
Dividends
10%
Gains on shares: Myanmar may tax if (1) participation is at least 35% or (2) company consists principally of immovable property
Interest
Royalties
Service
DTAs in force at 1 August 2012

16. Capital Gains on Myanmar Shares and Oil & Gas Interests
Tax on Capital Gains
Residents
10%
Non-residents
40%
Oil & gas sector
40% for gains up to US$100M;
45% for gains between US$100M and US$150M; and
50% for gains above US$150M
Income Tax Law Capital assets include
Assets of an enterprise 
Land
Shares
Compliance: tax return is due within 1 month following execution of the transfer or the date of delivery of the asset, whichever is earlier.

17. Capital Gains on Myanmar Shares and Oil & Gas Interests Taxing right under the DTAs?
Myanmar-Singapore DTA Article 13: Capital Gains
Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.
Gains from the alienation of ships or aircraft operated in international traffic, boats engaged in inland, waterways transport of movable property pertaining to the operation of such ships, aircraft or boats shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

18. Capital Gains on Myanmar Shares and Oil & Gas Interests Taxing right under the DTAs?
Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that State.
Gains from the alienation of shares of a company other than those mentioned in paragraph 4 may be taxed in the Contracting State of which the company is a resident but only if:
The shares held or owned, directly of indirectly, by the alienator amount to at least 35 percent of the entire share capital of such company at any time during the fiscal year in which alienation takes places: and
The total of the shares alienated by the alienator during the fiscal year in which the alienation takes places amounts to at least 20 percent of the aggregate of his holding in the share capital of such company at the beginning of such fiscal year and any acquisition of the shares in that year.

19. Capital Gains on Myanmar Shares and Oil & Gas Interests Taxing right under the DTAs?
The tax on the gains from the alienation of property referred to in paragraphs 1,2,4 and 5 shall not exceed 10 percent of such gains.
Gains from the alienation of any property other than that referred to in paragraphs 1,2,3,4 and 5 shall be taxable only in the Contracting State of which the alienator is a resident.
Notwithstanding the provisions of the preceding paragraphs, gains derived by the government of a Contracting State from the alienation of property referred to in paragraphs 1,2,4 and 5 shall be exempt from tax in the other Contracting State. The term “Government” shall have the same meaning as provided in paragraphs 4 of Article 11.

20. Capital Gains on Myanmar Shares and Oil & Gas Interests
Myanmar-Singapore DTA Article 13(6):
The tax on the gains from the alienation of property referred to in paragraphs 1,2,4 and 5 shall not exceed 10 % of such gains.
MOGE
Singapore Holding Co
PSC
Singapore SPV
100%
Interest in PSC

21. Capital Gains on Myanmar Shares and Oil & Gas Interests
Cap. gain 40/45/50%
Includes non-residents
Oil & Gas Myanmar Income Tax Law
MOGE
Oil Companies Shareholders of SPV
SPV
PSC
BLOCK
Tax rate?
Refers to Myanmar Income tax law
Calculation of gain?
Impact of recovery petroleum?
Oil & Gas PSC & Side letter
Myanmar DTAs
Article 6 & 13(1)
Article 5
Article 13(4)
Article 13(5)
Is a block “immovable property”?
Does holding rights to a block trigger a PE?
Is disposal of an interest in a block equivalent to disposal of a PE?
Is a company that holds an interest in a block principally holding “immovable property”?

22. Holding Structures for Investment in Myanmar: Labuan vs. Singapore
Malaysia (Labuan)
DTA with Myanmar: cap gains taxed at 0-40%
0%: alienated shares > 35% and not principally holding immovable property
40%: others
Malaysia does not tax capital gains
Labuan taxes by means of a fixed fee or at 3% rate
Singapore
DTA with Myanmar: cap gains taxed at 0-10%
0%: alienated shares > 20% and participation held > 35% and not principally holding immovable property
10%: others
Singapore does not tax capital gains (but some short term gains may be deemed profit)

23. Example: Tax Efficient Holding Structure
Key points of attention:
Obtain a “Certificate of Residence” from Singapore IRAS, which may depend on substance and shareholding
Myanmar dividends not taxed in hands of Singapore Co (“tax sparing”)
Stamp duty
Obtain approval from Myanmar IRD (CCTO) for application of DTA
Cayman Co
100%
Singapore Holding Co
Myanmar Foreign Invested Company
In case of divesting Singapore Holding Co: no tax in Singapore
Dividend No WHT
PROJECT
In case of divesting Myanmar Co: cap. gain at 10%

24. Financing Structures: Case Study
Financing Structure A:
SPV lends directly to Project Co
Myanmar WHT = 15% on interest
Fund LLP Cayman
Cayman SPV
Project Co, LLC Myanmar
100%
HOSPITALITY PROJECT
Loan
Capital 100%

25. Financing Structures: Case Study
Financing Structure B:
SPV provides cash pledge to Singapore Bank
Bank provides back-to-back loan to Project Co
Myanmar WHT = 8% on interest
Acceptable to Myanmar tax authorities?
Fund LLP Cayman
Pledge
Cayman SPV
Project Co, LLC Myanmar
Loan
100%
HOSPITALITY PROJECT
Singapore Bank
Capital 100%

26. Myanmar Project Co (foreign invested LLC)
Profit Extraction
Corporate Income Tax
25% tax rate (35% for branch)
3/5 year tax holiday
Reinvestment reserve
50% reduction on export profits
Accelerated depreciation possible
Shareholders
Holding Company
Myanmar Project Co (foreign invested LLC)
Dividend
Dividend Distribution
No withholding tax
Approvals for dividend needed
Foreign exchange issues

27. Alternative Structures to Repatriate Income
Corporate Income Tax
25% tax rate (35% for branch)
3/5 year tax holiday
Reinvestment reserve
50% reduction on export profits
Accelerated depreciation possible
Shareholders
Holding and Procurement Company
Myanmar Project Co (foreign invested LLC)
Purchase price for supplier and dividend
100%
Supplier
Dividend Distribution
No withholding tax
Approvals for dividend needed
Foreign exchange issues

28. Income Derived from Myanmar No presence in Myanmar
Malaysia
Singapore
Thailand
3 Questions?
Permanent Establishment
Withholding Tax
Personal Income Tax
Myanmar WHT on Payments to Non-Resident Foreign Companies
Services performed in Myanmar
3.5%
Services performed outside Myanmar
Goods (excluding imports)

29. Permanent Establishment
Malaysia
Singapore
Thailand
From Art. 5 (2)
“A PE shall include especially […] a drilling rig, ship or aircraft used for exploration or exploitation of natural resources”
“A PE shall include especially […] an installation, structure, drilling rig or ship used for the exploration or exploitation of natural resources but only if such exploration or exploitation is not preliminary or preparatory in nature”
“A PE shall include especially […] drilling rig, ship or aircraft used solely for exploration or exploitation of natural resources (and not specifically for the purposes of international traffic as referred to in Article 8)”
Art. 5 (3) (b) Myanmar-Singapore -
“The term "permanent establishment" likewise encompasses: […] (b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than six months within any 12-month period.”

30. Malaysia [Art. 13 on Technical Fees] Thailand [In royalty article]
Withholding Tax
Malaysia [Art. 13 on Technical Fees]
Singapore
Thailand [In royalty article]
“Technical fees derived from one of the Contracting States by a resident of the other Contracting State who is the beneficial owner thereof and is subject to tax in that other State in respect thereof may be taxed in the first-mentioned Contracting State at a rate not exceeding 10 per cent of the gross amount of the technical fees. The term "technical fees" as used in this Article means payments of any kind to any person, other than to an employee of the person making the payments, in consideration for any services of a technical, managerial or consultancy nature.“ -
“10 per cent of the gross amount of the royalties for the consideration for any service of a managerial or consultancy nature”

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