Hacking the SEZ
Like many other Southeast Asian countries, Myanmar has much to offer in terms of natural resources and opportunities for growth and development. It is currently one of the most burgeoning economies in Southeast Asia and has introduced many incentives to c
As discussed in the previous article, Myanmar introduced the Special Economic Zone (SEZ) law in 2014 to support its three SEZs: namely, the Kyaukpu SEZ, the Thilawa SEZ and the Dawei SEZ. The SEZ law provides companies (manufacturing and non-manufacturing alike) located in a SEZ with certain tax and non-tax incentives. Just to recap, these incentives include a five-to-eight year corporate income tax exemption (i.e. tax incentive) and the ability to obtain stay permits for a company’s non-local employees (i.e., non-tax incentive), among others.
In order to apply for an SEZ permit, a foreign investor will first have to contact an SEZ Development Official and discuss the investor’s business and land requirements. Assuming that the required land is available, and that the SEZ Development Official decides that the investor’s business is eligible for an SEZ permit, the investor can begin by signing a Reservation Agreement with the SEZ Development Official and by paying a sizable Reservation Fee for the land.
After the land has been reserved, the investor must file an Investment Application with the SEZ Management Committee – a copy of this application should be sent to the SEZ Development Official for reference. The SEZ permit must be obtained within the time-line stipulated in the Reservation Agreement or else the Reservation Fee paid to the SEZ Development Official will be forfeit.
The Investment Application requires that the investor thoroughly plans the business operations ahead of time and is, thus, able to provide the following information in the application form:
* Location of the reserved land in the SEZ and location of the factory/office within the reserved land
* Water supply plan
* Electricity supply plan
* Building/factory construction plan
* Plan for installation of machinery and equipment
* Environmental management plan (EMP) (can be submitted after investment is approved)
The SEZ Management Committee generally provides its verdict on an Investment Application within 30 days of receiving a completed application. If the Investment Application is accepted, the investor will be issued an Investment Permit. If the Investment Application is accepted with conditions, the investor will be issued an Investment Permit only if it fulfils every condition specified by the Management Committee. Alternatively, if the application is rejected, the investor will not receive an Investment Permit and will be unable to operate in the SEZ.
Once an investor receives an Investment Permit, he has six months to enter into a Land Lease Agreement with the SEZ Development Official – a copy of this agreement should be sent to the SEZ Management Committee for reference. Upon securing the land, the investor can contact the SEZ Management Committee’s One-Stop-Service-Center to set up and incorporate a new company to operate in the SEZ.
Technically, the investor can submit the application for the incorporation of a new company as soon as the Investment Permit application has been submitted; however, the new company’s registration will not be finalized until the investor receives the Investment Permit. In any case, the One-Stop-Service-Center usually only takes two business days to process requests to incorporate new companies. The newly incorporated company may begin construction of its building/factory upon fulfilling two final requirements:
1) Applying for a building permit and fire safety certificate
This application may be submitted along with the Investment Application or once the investment has been approved. This application will be reviewed by the SEZ Development Official to ensure that standards are in compliance with all regulations and then also reviewed by the SEZ Management Committee before final approval can be given. Average application processing time is 30 days.
2) Submitting the Environmental Conservation and Prevention Plan (ECPP)
For certain industries, the ECPP must be supplemented with either an Initial Environment Evaluation (IEE) report or an Environment Impact Assessment (EIA) report. Additionally, the EMP may be submitted along with the Investment Application or once the investment has been approved. The SEZ Management Committee will inform the investor of the exact documentation requirements. Average ECPP processing time is 30 days.
Once these last two requirements have been met, the company can begin its construction in the SEZ. However, unless otherwise agreed with the SEZ Management Committee, commercial operations must begin within three years of receiving the Investment Permit. The company can also collaborate with the One-Stop-Service-Center to apply for any additional licenses and/or permits such as labor registration cards for all employees as well as visas, permits, and any other immigration documents for non-local employees and their families.
The next article will discuss the “Permanent Residency of a Foreigner Rules” Myanmar introduced late last year. These new rules should make it easier for former citizens and skilled foreign individuals to relocate to and work in Myanmar.
Anthony VisateLoh is partner of Tax and Legal Services of Deloitte Touche Tohmatsu Jaiyos.
