International Turnkey Contracting in ASEAN: EPC-Projects in Myanmar

published on 16 March 2022 | reading time approx. 3 minutes

The importance of turnkey or EPC-projects (short for: Engineering, Procure­ment and Construction) has increased significantly in the Southeast Asia region – this also applies to Myanmar. Various factors play an important role in the realisation. In the following article, we take a closer look at tax, investment and manpower conside­rations in Myanmar.

• Tax Considerations »

• Investment Considerations »

• Labour law Considerations »

Tax Considerations

When is a permanent establishment (PE) generally established for on-site works?

Under the Myanmar Companies Law, every foreign natural person or legal entity that conducts any business activity in Myanmar for more than 30 days and/or with more than one transaction being involved, will have to register a legal entity with the Directorate of Investment and Company Registration in Myanmar.

This also applies to activities which do not generate profit, such as quality control.

Does a double taxation agreement (DTA) between Myanmar and Germany affect this aspect?

There is no double-taxation agreement in place between Germany and Myanmar.

Is it a common approach in Myanmar to split EPC-contracts in on- and offshore parts to mitigate tax risks?

Due to the transition period and changing legal frame­work as well as the current political situation, there is no common approach for split contracts yet.

Are there any specific taxes to be observed for EPC-contracts in Myanmar?

Other than the Commercial Tax of mostly 5 per cent on goods and services, Corporate Income Tax at a rate of 22 per cent (since 1. October 2021), Withholding Tax (between 2 and 15 per cent) and Specific Goods Tax (between 5 and 60 per cent), Personal Income Tax calculated by layers, ranging between 0 and a maximum of 25 per cent, and Stamp Duty which should be considered, no specific other taxes for EPC-contracts apply.

Investment Considerations

Are there specific investment conditions or permits/licenses required for EPC-works in Myanmar?

Depending on the business sector, investment amount, necessity of long-term property lease agreements and other factors, permits and licenses may be required or beneficial from a tax perspective.

Would a mere tax registration of a PE be sufficient or is a certain investment vehicle required in Myanmar?

Despite the statutory registration with the tax authorities, for most activities the registration of an Overseas Branch Office or Company Limited is necessary if the project exceeds 30 days.  

Certain kinds of investment require additionally a permit from the Myanmar Investment Commission, the

so-called MIC-Permit. The MIC-Permit is required for large capital investments and investments which

• are strategic to the Union,
• have a potential large ecological impact and/or strong impact on local communities,
• involve state-owned land or
• are described as mandatory by the government.
  

Can the PE get own bank accounts and handle local currency payments as well as FOREX transactions for the project?

Opening and handling of local as well as foreign currency accounts for PEs is possible, but the banking sector provides very limited services, especially after the military takeover. Transactions to and from Myanmar are still very cumbersome, if possible at all.

Labour Law Considerations

Which immigration requirements commonly apply for foreign staff temporarily deployed to work on-site in Myanmar?

A business visa needs to be applied for in advance with a passport validity of at least 6 months. Due to the ongoing pandemic as well as the current political situation in Myanmar, an additional recommendation letter from the responsible line ministry needs to be acquired in order to apply for a business visa. There are currently no scheduled flights available for the time being but so called “relief-flights”. A work permit is usually not yet required nor is it available but depending on the place of employment (e.g. Special Economic Zone or restricted areas) foreign employees may be obliged to further registrations despite those with the Social Security Board and labor department.

After arrival of the Employee in Myanmar, the Form C needs to be applied for. Depending on the course of the ongoing pandemic and the unresolved political situation, requirements for the immigration of foreigners may change quickly.

Are there taxes or social security contributions applicable for foreign staff temporarily working on-site in Myanmar? Under which conditions are foreigners required to pay income tax?

Foreigners earning income derived from work in Myanmar are generally subject to income tax in Myanmar. When a foreigner stays/works in Myanmar for more than 183 days per domestic financial year (1 April to

31 March of the following year), the status of non-resident changes to resident-foreigner which entitles the employee to tax deductions such as the basic relief amount, spouse and children relief amounts, among others. For resident foreigners, theoretically the world-wide income becomes taxable in Myanmar.

When a company has 5 or more employees, both the entity as well as the employees need to be registered with the Social Security Board, and the regular monthly social security contributions have to be filed. This also applies to non-resident foreigners.