Hong Kong: Myanmar - Permit To Trade

Last Updated: 20 November 1995
Most Read Contributor in Hong Kong, October 2018
1. Requirement

Any enterprise which has obtained a permit from the Commission can start its business, constituting itself as a sole proprietorship, partnership or a limited company. However a limited company with one hundred percent foreign capital, a joint-venture limited company or a branch company is deemed as a foreign company under Section 27A of the Myanmar Companies Act, and accordingly it is required to obtain a permit to trade by applying to the Ministry of Trade. Thus every foreign company or branch in existence or newly set up in Myanmar is required to apply for a Permit to Trade to the Ministry of Trade before it can apply for registration of the branch with the Registrar of the Companies Registration Office. A Myanmar company or branch becoming a foreign company by virtue of a share transfer to a foreigner is also required to apply for a Permit to Trade. Similarly a company carrying on international trade, defined as a company having a subsidiary or branch in a foreign country for the purpose of trading, is also required to apply for a Permit to Trade. However, a limited company which is a joint-venture with a State-owned Economic Enterprise is exempted from obtaining a permit to trade.

2. Application procedure

The application is to be made in Form A for Permit to Trade. A court fee stamp to the value of K16 must be affixed to Form A.

The following documents must accompany Form A:-

(a) A copy of the company's Memorandum and Articles of Association or of the Charter, Statute or other instruments constituting or defining the constitution of the company;

(b) Copies of the company's balance sheets and profit and loss together with accounts for the last two years preceding the application;

(c) "Questionnaire" form duty completed:

- for a foreign company incorporated in Myanmar;

- for a branch of a foreign company incorporated outside Myanmar;

- List of intended economic or business activities to be carried out in Myanmar.

- List of estimated expenditure of the foreign branch or foreign company to be newly set up for the first year of operations.

- If a foreign company or branch whose objects require the operation of public utility services or exploitation or development or utilisation of any natural resources within Myanmar, a certificate of the Ministry concerned authorising such operations in the Union of Myanmar.

The application Form A together with the above documents are to be submitted to the Chairman of the Capital Structure Committee, through the Registrar of the Companies Registration Office.

3. Capital Structure Committee (CSC)

(a) A Capital Structure Committee, with the Director General of the Directorate of Trade as Chairman, has been formed by the Minister for Trade to review applications in Form A, and to submit its recommendations to the Minister, whose decision to issue or not to issue is final.

The working procedure of the Capital Structure Committee, including the technical guidelines for determining and fixing the amount of capital to be brought into Myanmar by a foreign company, or a foreign branch, have been prescribed. According to this procedure and guidelines, applications will be scrutinised in line with the following basic principles which are not contrary to existing laws, regulations etc.:

- compatibility with the economic policies and objectives of Myanmar;

- exploitation of natural resources and promotion of exports;

- compatibility with existing laws in force especially the Union of Myanmar Foreign Investment Law;

- supporting and assisting economic development;

- supporting and assisting export and import business;

- development of production and commercial technology;

- opening up of more employment opportunities; and

- earning of more foreign exchange.

(b) Capital to be brought into Myanmar,

- Every foreign company or branch which has been granted a Permit to Trade is required to bring capital into Myanmar in foreign currency acceptable to the Myanmar Foreign Trade Bank. For this purpose, the Capital Structure Committee will fix, for each foreign company or branch, the amount of capital required for business in Myanmar, determined on a uniform, reasonable and acceptable basis.

- The capital to be physically brought in as determined by the Ministry of Trade would be:-

(i) The "Issued and Paid Up Capital" (in the case of a foreign company incorporated in Myanmar).

(ii) The "Head Office Fixed Capital Account" (in the case of a branch of a foreign company incorporated outside Myanmar).

The methodology for fixation of capital will be tailored to and made relative to the following aspects:

(i) In the case of a foreign company incorporated in Myanmar, the "Issued and Paid Up Capital" would be based on:

- the scope of economic activities to be carried out in Myanmar;
- the objects as defined in the Memorandum of Association;
- the types of business contracts, i.e., either direct by the parent company with customers in Myanmar, or direct by the company in Myanmar. Total shareholders' equity, which includes Issued and Paid Up Share Capital Revenue Reserves and Retained Earnings.

(ii) In the case of a branch of a foreign company incorporated outside Myanmar, the "Head Office Fixed Capital Account" would be based on:

- the scope of economic activities to be carried out;
- the accounting system;
- types of business contracts, i.e. either direct by Head Office with customers in Myanmar, or direct by the branch office; financial status of the Head Office; and status of the branch office, i.e. whether it is still in business, or restricted from carrying on business, or in the process of liquidation.

The minimum amount of capital which must be physically brought into Myanmar in acceptable foreign currency in respect of both categories of foreign companies, i.e. a branch or a company incorporated in Myanmar is as follows:-

The equivalent in foreign currency of:

- K 1,000,000 for an Industrial company (including Trading and Services);

- K 500,000 for a Trading company (including services); and

- K 300,000 for a Services company (services only).

Amounts which may be permitted to be deducted from the capital fixed for the branch company or a company incorporated in Myanmar, which are in existence, are as follows:

- in the case of a foreign branch, the amount of "Head Office Fixed Capital" already brought into Myanmar.

- in the case of a foreign company incorporated in Myanmar, the amount of the present" Issued and Paid Up Capital".

Note : For a foreign branch or a foreign company incorporated in Myanmar which is in the process of liquidation and carrying on business only for its beneficial winding up, a new Permit may be issued requiring no additional capital to be brought into Myanmar.

(c) Remittance of Capital. The amount of capital fixed by the Capital Structure Committee must be physically brought into Myanmar in equivalent foreign currency acceptable to the Myanmar Foreign Trade Bank, Yangon, as follows:

- minimum of fifty percent (50%) of fixed capital as an initial remittance within thirty (30) days of the date of the issue of the Permit;

- balance of fifty percent (50%) as a final remittance within one hundred and eighty (180) days of the date of issue of the Permit.

If the foreign branch or company can prove, in writing, to the satisfaction of the Capital Structure Committee, that the final remittance is not yet required for the scope of activities in Myanmar, the branch or company may be allowed to defer the final remittance but not for more than twelve months from the date of issue of the Permit to trade.

Note : No domestic or foreign debt can be incurred while the balance of capital prescribed remains pending remittance to Myanmar.

- Fixed Capital is to be kept intact. The Capital determined and prescribed must remain intact however it is not blocked but can be used for expenses within Myanmar.

- In the case of a branch office, its Head Office Fixed Capital Account must remain intact and not reduced by any deficit on Head Office Current Account. If the Head Office Current Account is in defect, immediate arrangements must be made to remove the deficit.

- In the case of a foreign company incorporated in Myanmar, it must always remain solvent, and steps taken to increase the Issued and Paid Up Capital.

(d) Maximum indebtedness. The ceiling figure for domestic debt is prescribed as follows:

- Domestic debts and other liabilities are not to exceed the amount of "Head Office Fixed Capital Account" in the case of a branch office; and "Issued and Paid Up Capital" in the case of a company incorporated in Myanmar.

- Domestic Debt/Head Office Fixed Capital Account ratio is not to exceed 1:2 in the case of a foreign branch.

- Domestic Debt/Equity ratio is not to exceed 1:2 in the case of a foreign company incorporated in Myanmar.

4. Issue and Form of Permit

After the amount of capital is fixed and prescribed, the Capital Structure Committee will make recommendation to the Minister for Trade for the issue of a Permit to Trade. The form of Permit will be Form 1 set out in the Third Schedule of the Myanmar Companies Act.

The conditions which under which a Permit is granted are attached to the Permit, and are listed. The conditions may be amended if a company makes any alterations in its Memorandum and Articles of Association, or its constitution. Otherwise the conditions cannot normally be amended during the term of the Permit.

The Permit to Trade will be for a fixed period which, under normal circumstances, is one year from the date of issue of the Permit. However, it is renewable.

Notwithstanding the above procedures and rules to be adopted regarding the fixing of capital to be brought into Myanmar, the issue of a Permit and the setting of conditions to be attached to the Permit, the Minister for Trade may make exceptions in certain cases, if it is in the interest of the State.

5. Renewal

Application for renewal of a Permit to Trade is to be made thirty (30) days prior to the date of expiry of the Permit.

In the case of a renewal the same procedure relating to the issue of a new Permit to Trade as outlined above should be followed wherever applicable. In addition the following requirements are also to be complied with:

- In the case of a foreign branch whose books of account are maintained on a cash basis of accounting, the application for renewal should be accompanied by an annual statement of total sales into Myanmar, whether by Head Office or by the branch, and also a statement of total worldwide sales, together with an annual report and financial statement for the Head Office.

- Documentary evidence must be submitted relating to the last completed year of assessment, taxes paid, and returns of pending assessments and advance tax paid under the Myanmar Tax Laws on the profits of business (not income tax and other taxes paid on imported equipment, etc.)

- Any alteration to the Memorandum and Articles of Association should also be notified.

- A certified statement that the conditions under which the last Permit to Trade was granted have been fully complied with.

- Form of certificate to be attached to the application for renewal as regards Issued and Paid Up Capital or Head office Fixed Capital Account prescribed by the Ministry of Trade.

- Myanmar Balance Sheets and Profit and Loss Accounts for the last two years, duly audited by a Registered Accountant or a Certified Public Accountant as provided in the Myanmar Companies Act, must be attached to the application.

6. Cancellation or suspension

A permit to Trade may be cancelled or suspended at any time if the foreign branch/company or any of its officers or agents, knowingly commits any of the following:

(a) an offence under the Myanmar Tax Laws;

(b) an offence under the Foreign Exchange Regulations Act 1947;

(c) any other offence in respect of which the company is liable to punishment under any law for the time in force; and

(d) breach of any of the conditions provided in the Permit.

Provided an opportunity shall be given to the company to show cause why the Permit granted should not be cancelled or suspended before cancellation or suspension.

Every foreign company must surrender the Permit to the authorities concerned and notify such surrender to the Registrar within one month after the commencement of the winding up of the company or closing down of the branch.

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".

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