Legal issues to watch

The draft Union Tax Law 2015 was released in the last week of January. It is also a subsequent update of the Union Tax Law 2014, which was previously introduced as a sort of new legislative change. Among the proposed updates in this draft to be approved by Myanmar's Parliament (Pyidaungsu Hluttaw), we noticed the reduced income tax rate on non-resident foreigners to 25% from 35%.
This 10% reduction means the non-resident tax rate is the same as the resident tax rate, but the relief and exemptions given to residents are unlikely to be given to non-resident foreigners.
By following the announcement of the Permanent Residence of a Foreigner Rules (PR Rules) in November 2014, this proposed non-resident income tax rate change is likely a right move to attract foreign expatriates who bring expert knowledge to fill the skill gaps within Myanmar when some investors may have concerns about the domestic skilled labour shortage.
With the aim of retaining contributors and therefore creating long-term benefits for the state, the PR Rules define four applicant categories. Within these categories, foreign experts and investors are allowed to apply for permanent residence by meeting the provisions of the application. Among the provisions, the length of stay is likely to be a critical factor for applicants for the following reasons:
- Before the date of application, foreign applicants must have accessed and resided in Myanmar for no less than three consecutive years within a ten-year period and hold a type of visa that entitles them to settle in Myanmar.
- If applicants depart Myanmar during their residence, the period abroad must not exceed a consecutive 90 days within one year.
Though we assume the above changes could support the progress of the economy, we are also aware that other areas, such as the Foreign Exchange Management Act, might have some room for improvement, especially in the case of foreign-financed transactions.
Any type of foreign loan currently needs the approval of the Central Bank of Myanmar (CBM). If the borrower is an entity registered under the Myanmar Investment Commission (MIC), the security agreements and approval from MIC are also required. Moreover, as is necessary in some cases, another relevant ministry may also need to give approval. Common requirements include all relevant agreements, purposes for loans, interest rates, documents, and translations of documents into the Myanmar language. Significant processing time must also be allowed.
Nevertheless, we are hopeful for many positive changes for Myanmar in 2015, and we do appreciate the current transition of the regulatory framework, given the challenge of limited resources.

PhyoWai Lynn is Senior Manager at Grant Thornton in Myanmar.