Myanmar's newly drafted proposal for independent body promises to earn taxpayers' trust

The draft of the Revenue Appellate Tribunal Law is due to be presented to Parliament for approval in 2018. The law aims to establish an independent legal body in order to comprehensively hear and decide on matters arising from any taxation by government organisations, to foster competent administration machinery for statutory taxation, and to earn taxpayers’ trust by ensuring equity and justice in fulfilling tax obligations. Ostensibly, the board would be empowered to take cognisance of appeal, revise and review cases in respect to applications made by aggrieved taxpayers. The law, if enacted, will provide a legal forum for assessees to seek redress against acts or orders of a relevant revenue authority with which they are not satisfied.

New Law 

On December 6, 2017, the government enacted the Myanmar Companies Law (MCL) 2017 to replace the existing Myanmar Companies Act (MCA) of 1914. Rules for implementation of the MCL are still in process and is tentatively set to be effective on August 1, 2018 after the publication of the rules and establishment of online facilities for filing processes. Meanwhile, the MCA will continue to operate. The MCL aims to overhaul outdated corporate legislation so as to be in line with global standards.

Key Changes

First, under the MCL a company in which a foreign investor owns or controls, directly or indirectly, an ownership interest of more than 35% is defined as a foreign company, whereas under the MCA a foreign company is defined as any company in which one or more shares are owned and controlled by foreigners. According to the administrative practice a foreign company cannot trade or own immoveable properties. Moreover, a foreign company cannot lease land for more than one year at a time unless it is a company operating under the Foreign Investment Law. Therefore, foreign investors with investment up to 35% equity interest in a local company can carry out those activities which are previously restricted to wholly owned Myanmar companies only. Second, under the MCL, foreign companies do not need to obtain a “Permit to Trade” in order to do business in Myanmar.

Third, instead of Memorandum of Association (MOA) and Articles of Association (AOA), which were considered the principal documents of a company, the MOA and AOA of existing companies incorporated under MCA, prior to commencement of the MCL, will be deemed to be the constitution to the extent it is consistent with the MCL.

Fourth, the MCL allows a company to be formed with one shareholder instead of the minimum of two under the MCA.

Fifth, according to current administrative practice, a private company shall have at least two directors. Under the MCL a company in Myanmar must have at least one director who is ordinarily a resident in Myanmar (i.e., a resident in Myanmar for at least 183 days in each 12-month period, beginning from the commencement date of the MCL, in the case of an existing company registered under MCA, or the date of incorporation for companies incorporated under the MCL). A public company must have at least three directors, one of whom must be a Myanmar citizen who is ordinarily a resident in Myanmar. This residence requirement is not provided in the MCA.

Sixth, a company having more than 30 employees and revenue of less than MMK50m ($38,19) in the previous year is defined as a small company”. Small companies may reduce certain corporate compliance obligations if members so elect.

Lastly, company’s objects clause and authorised capital are optional, share par value abolished, and dividends may be paid as long as the company remains solvent (not necessarily out of profit).