Situated in Southeast Asia, Myanmar enjoys a unique strategic position for foreign investors. The country allows direct access to the markets of India and China that offer more than 2.5 billion consumers. Also, the country’s extended coastline on the Bay of Bengal is home to some of the world’s major shipping lanes and provides outstanding conditions for trading.
Myanmar is witnessing one of the fastest economic expansions in Asia, with a rapid increase in the middle-class consumer base and the International Monetary Fund (IMF) predicting an average GDP rise of 7.02% between 2019-2023.
The country’s competitive labor costs and on-duty and quota-free basis export to European Union (EU) countries under the EU’s Everything But Arms (EBA) scheme also promises a game-changer for business owners looking to invest here. The government also allows 100% foreign ownership opportunities in most thriving sectors. It has introduced various benefits to facilitate foreign investment, making Myanmar a key place to invest in.
One of the easiest ways to enter Myanmar’s market is to establish a subsidiary business there. Read this article to understand subsidiary businesses in Myanmar.
What are the Types of Subsidiaries in Myanmar?
Subsidiaries in Myanmar can take the following forms as per business requirements:
Public Company Limited by Shares
- Must have a minimum of three directors, where one is a Myanmar citizen
- The minimum share capital of MMK 500,000
- The shares can be freely traded on the stock exchange line
Private Company Limited by Shares
- It is mandatory to have a minimum of one shareholder and one director.
- The minimum share capital of MMK 500,000
- Cannot offer shares to the public or have more than 50 shareholders
- Shareholders’ liability is limited to the amount unpaid on shares
- Must have at least two partners, one of which must be a Myanmar citizen or company
- Investors have to comply with Myanmar Companies Law (MCL) and Myanmar Investment Law (MIL)
- Local investors involved in establishing joint ventures should have 20% of business activity ownership
How to Set Up Subsidiary in Myanmar
While the process of setting up a subsidiary in Myanmar differs with each entity, some of the common steps required in all of them are as follows –
- Decide on the type of legal entity for the subsidiary, such as a private limited company or others.
- Obtain approval from the Myanmar Investment Commission (MIC) to establish the subsidiary.
- Reserve a company name with the Directorate of Investment and Company Administration (DICA).
- Prepare incorporation documents, such as the articles of association, memorandum of association, and shareholder agreement.
- Obtain a tax registration number by applying to Myanmar’s Ministry of Planning and Finance and open a bank account in Myanmar for the subsidiary.
- Obtain necessary permits and licenses, such as business licenses, trading licenses, and permits for import/export activities.
- Register with the social security board and obtain necessary visas and work permits for foreign staff.
Benefits of Setting Up a Myanmar Subsidiary
Setting up a subsidiary in Myanmar offers the following benefits:
Strategic location & access to a growing market
- Myanmar has a rapidly growing economy with a young and educated population that drives demand for new products and services.
- Strategically located between China and India, giving access to two of the world’s largest economies.
Lower labor costs & favorable investment environment
- A large, young, and increasingly skilled workforce with lower labor costs than many other countries in the region.
- Government-implemented various economic and regulatory reforms designed to attract foreign investment.
- Foreign-owned subsidiaries are permitted in various sectors, and restrictions on foreign investment are significantly reduced.
Incentives for foreign investors
- A wide range of incentives to foreign investors, including tax holidays, import duty exemptions, and accelerated depreciation allowances.
- Reduced cost of setting up and operating a subsidiary business in Myanmar.
Documents to Prepare When Opening a Subsidiary in Myanmar
Here is the document checklist for the incorporation of a foreign subsidiary in Myanmar:
- Form A of the Myanmar Companies Regulation 1957
- Memorandum and Articles of Association draft
- Duly completed questionnaire form
- Intended activities to be performed
- Estimated expenditures in Myanmar for the first year’s operations
- Financial credibility of the company/individual
- Board of Directors resolution, if the subscriber is a company
- Declaration of registration
- Two copies of the Memorandum and Articles of
- Association duly stamped and printed both in Myanmar and English
- Declaration of the legal and official versions of the documents
- Declaration of the situation of the registered office
- Translation certificate by a competent translator
- List of Directors
- List of person(s) authorized to accept services of process and notice in Myanmar on behalf of the company (i.e., for a branch office of a foreign company.)
Business licenses and permits
- Business License
- Trading license
- Import/export permits
- Tax registration certificate
- Commercial tax registration certificate
- Work permits and visas
- Social Security registration
- Bank account opening documents
- Property lease agreement
- Environmental permits
What Business Forms Can Myanmar Subsidiaries Take?
Myanmar allows subsidiary businesses to take different forms, including Private Company Limited by Shares and Public Company Limited by Shares. Private Company Limited by Shares in Myanmar is the standard form appropriate for small to medium-sized enterprises. Public Company Limited by Shares is ideal for larger businesses looking to raise capital from the public.
Myanmar Subsidiary Laws
When establishing a subsidiary in Myanmar, companies have to follow the following subsidiary laws:
- Companies must fulfill minimum shareholders’ and directors’ requirements to set up a subsidiary business in Myanmar. For example, if a subsidiary takes the form of an LLC, it must have at least two shareholders and directors.
- Another important aspect is the minimum capital requirement. While registering a subsidiary in Myanmar, companies must submit the minimum capital required in the bank account.
- Subsidiaries have to submit annual financial statements and make quarterly corporate taxes.
- Foreign-owned subsidiaries have to undergo an audit.
Post Incorporation Compliance
After the initial registration process, here are the next steps entrepreneurs need to follow to set up a subsidiary in Myanmar:
Business licenses and permits
- Renewal of business license and trading license on an annual basis
- Renewal of import/export permits as required
- Obtaining additional permits as required for specific activities
- Filing of annual tax returns with the Internal Revenue Department (IRD)
- Payment of commercial tax, income tax, and other taxes as required
- Compliance with transfer pricing regulations and other tax laws
- Renewal of work permits and visas for foreign employees
- Comply with Myanmar labor laws, including minimum wage and working conditions
- Social Security registration and compliance with related regulations
- Prepare and submit annual financial statements and other required reports to the Myanmar Companies Registry and other regulatory bodies
- Compliance with Myanmar Accounting Standards and other relevant regulations
- Holding annual general meetings and other required meetings
- Maintenance of accurate and up-to-date records, including share registers and minutes of meetings
Taxes on Subsidiaries in Myanmar
While setting up a subsidiary in Myanmar, entrepreneurs must be aware of various taxes, including commercial, income, and withholding taxes.
- Myanmar imposes income tax on all applicable profits at a rate of 25%, though some revenues are eligible for lower rates as per government regulations.
- Most goods and services attract a commercial tax rate of 5%, with specific items going for higher rates of up to 30%.
- Withholding tax applies to payments made to non-residents, such as dividends, interest, and royalties, depending on payment type and the country of residence of the receiver.
Myanmar has double taxation agreements with multiple countries, which may lower the tax burden on subsidiaries engaging in cross-border transactions. Businesses must comply with all relevant tax regulations to avoid penalties and legal ramifications.
Tax Incentives for Businesses Setting Up a Subsidiary in Myanmar
The government offers several tax incentives to businesses setting up a subsidiary in Myanmar.
- A five-year tax holiday is provided to businesses in priority sectors, such as manufacturing, agriculture, and export-oriented businesses. Additionally, companies in these sectors can enjoy a reduced tax rate of 15% for an additional five years.
- There are exemptions from customs duties and commercial tax for importing raw materials and machinery for priority sectors, as well as a 50% reduction in commercial tax for goods produced for export.
To qualify for these incentives, companies must meet certain criteria, such as investing a minimum amount of capital and meeting environmental and social compliance standards.
Other Important Considerations
Businesses operating in Myanmar must be aware of the political situation and economic sanctions imposed by different countries. Companies should ensure compliance with all relevant laws and regulations. Engaging with local stakeholders and building strong relationships with the community can also help mitigate risks and build a positive reputation.
How Can Multiplier’s Employer of Record Help You Hire & Expand in Myanmar?
With the help of Multiplier, entrepreneurs can simplify this process and focus on expanding their business further. Our expert team can handle all the legal formalities, including managing payroll and hiring local staff. We also provide access to a global talent pool to help businesses find the right talent for their needs.