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Rajah & Tann Regional Round-Up

your snapshot of key legal developments in Asia

Issue 2 - Apr/May/Jun 2022



MYANMAR

Enactment of the New Anti-Trafficking Law

On 16 June 2022, the State Administrative Council enacted a new Anti-Trafficking Law, which repeals the previous Anti-Trafficking Law (2005). The new law, which was drafted in consultation with relevant government departments and local and international experts, amends and updates the previous Anti-Trafficking Law in line with the modern system and international standards. It includes more effective ways to prosecute child trafficking.


The new law highlights the importance of international cooperation and lays down more detailed Standard Operating Procedures (SOPs) in the prevention and abolition of human trafficking activities. It also provides clearer details of criminal procedures. 


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Reconstitution of Ministry of Electricity and Energy

On 2 May 2022, the State Administrative Council has reconstituted the Ministry of Electricity and Energy into two separate ministries, the Ministry of Electric and Power ("MOEP") and the Ministry of Energy ("MOE"), pursuant to Order 32/2022. It is expected that the Ministries will comprise the following departments and/or entities:


  1. MOEP:
  • the Electric Power Generation Enterprise;

  • the Electricity Supply Enterprise;

  • the Department of Hydropower Implementation;

  • the Department of Electric Power and Planning; and

  • the Department of Power Transmission and System Control.

   b. MOE:


  • the Department of Oil and Gas Planning;
  • the Petroleum Products Regulatory Department;
  • the Myanmar Oil and Gas Enterprise; and
  • the Myanmar Petrochemical Enterprise will be under the control of MOE.

U Thaung Han has been appointed as the new minister of both MOEP and MOE.


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Ministry of Planning and Finance Introduces Taxpayer Identification Number

On 29 April 2022, the Ministry of Planning and Finance issued Notification No. 20/2022 requiring all companies and organisations in Myanmar including non-profit organisations to obtain a Taxpayer Identification Number ("TIN") with the Internal Revenue Department (IRD) within the specified deadlines. 


Companies and organisations, as well as non-profit organisations that have been registered with the Directorate of Investment and Company Administration (DICA) and the relevant Myanmar government agency, respectively, before 1 April 2022, must have applied for TIN before 30 June 2022. Failure to comply with this requirement will subject the errant company or organisation to a fine equivalent to 10% percent of the additional tax payable in the relevant assessment year. Companies, organisations and non-profit organisations that are incorporated or registered on or after 1 April 2022 must apply for a TIN within 90 days from the date of their incorporation or registration. The Notification does not specify any penalties for non-compliance and companies which have not yet applied after 30 June 2022 can still apply without any additional cost. 


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Central Bank of Myanmar Updates

Central Bank of Myanmar's Foreign Currency Conversion Requirements


On 4 April 2022, the Central Bank of Myanmar ("CBM") issued Notification No. 12/2022 ("Notification") dated 3 April 2022 stating that foreign currency account holders can no longer hold their foreign currency for more than one day. According to the announcement via Directive No. 4/2022, such foreign currency must be converted into Myanmar Kyat ("MMK") within one working day through any of the domestic and foreign banks holding an Authorised Dealer Licence ("AD Licence") – called "Authorised Dealer Banks" ("AD Banks") – at a fixed rate of 1,850 MMK for US$1 with the AD Banks receiving MMK 3 per US$1 as a service fee. The Notification also stipulates that each foreign exchange transfer must be transacted through an AD-licensed domestic bank and requires the approval of CBM. 


Meanwhile, the Foreign Exchange Supervisory Committee ("FESC") was also established under Order 28/2022. FESC is a regulatory body that scrutinises and approves the use of foreign currency primarily for the purposes of supervising the flow of foreign currencies for domestic and foreign investment, manufacturing, exports and imports, and service businesses. The members of FESC include the Union Government Ministers, a member of the State Administrative Council, the Union Auditor-General and the Chairperson of CBM. 


Procedures for AD Banks in Converting Foreign Currency 


On 5 April 2022, CBM issued Directive No. 6/2022 setting out the procedure for AD Banks in relation to the conversion of foreign currency income based on the type of transfer of payments outside of the country. The types of transfers include payments of export income, other services income, funds for investment, offshore loans for investment and one-side transfers. International remittances also require FESC's approval. 


The Directive also instructs AD Banks to sell US Dollars to customers carrying out the following payments: 


  1. Import payments;
  2. Services and other expenses payments;
  3. Payments of dividends and repatriation of invested capitals;
  4. Transfers of investments abroad;
  5. Principal and interest repayments for offshore loans; and
  6. Payments related to the transfer of expenses as specified under Section 27 of the Foreign Exchange Management Regulations.

Exemption of Currency Conversion on Certain Foreign Direct Investments and Businesses 


Acknowledging the significance of foreign investments in the country, CBM has stepped up on its approach in relation to foreign direct investments ("FDIs") by exempting certain FDI businesses and individuals from the foreign currency conversion requirements as set out in the Notification. This was announced on 20 April 2022 and 16 June 2022 through Letter FE-1/69 and Letter FE-1/540, respectively. The exempted entities and individuals are as follows:


  1. FDI businesses holding a permit issued by the Myanmar Investment Commission (MIC);
  2. Companies which are more than 10% foreign owned and registered with the Directorate of Investment ad Company Administration (DICA);
  3. Direct investment businesses operating in the Special Economic Zones (SEZs);
  4. Foreign diplomats, family members of foreign embassy personnel, members of diplomatic missions of foreign embassies in Myanmar, foreign staff with ranks similar to diplomats and personnel of countries with established diplomatic relations with the Union of Myanmar;
  5. Staff of the United Nations (UN) and its specialised agencies established in the Union of Myanmar, and Myanmar nationals holding a laissez-passers who are employed at missions of the UN and its specialised agencies in Myanmar;
  6. Foreign staff of development agencies involved in aid projects;
  7. Foreign staff of diplomatic rank from international organisations, international non-governmental organisations and development agencies; and
  8. Myanmar state-owned or citizen-owned international airlines.

In addition, CBM issued Directive No. 7/2022 which extends the exemption to exporters and importers conducting trade at the China-Myanmar and Thailand-Myanmar borders. Instead of requiring foreign currency to be converted to MMK within one day, these exporters and importers are given a timeframe of one month from the date of receipt of the foreign currency to carry out the currency conversion. Foreign currency transactions under the border trade programs are to receive approvals from FESC and report the same to the Foreign Exchange Management Department (FEMD). 


Domestic Payments to be Made in MMK


The CBM also issued Notification No. 195/2022 to Union Ministers, Regional or State Governments, City Development Committees requesting them to direct their subordinate departments, organisations and related government and private enterprises to use only MMK in making payments for sales or purchases of goods and services, and to use MMK in describing the contract prices of such good and services. This is aimed at controlling (i) the increase in demand for foreign currency, (ii) the widespread use of foreign currency in Myanmar, and (iii) the instability of the exchange rate. 


This notification is directed at hotels, restaurants, and schools which were established in the country with foreign investment, as well as local accommodations, souvenir shops and similar entities that cater to foreigners and which are still transacting in foreign currency.


Relaxation on Application of Notification No. 12/2022 in the Logistics Sector 


In June 2022, the Ministry of Transport and Communication, together with FESC, issued a letter permitting certain caps on the reserved amount of foreign currency for several logistics services organisations. Set out below are the allowable monthly limits of foreign currency reserves for these organisations.


  1. Members of Myanmar International Freight Forwarders' Association – US$300,000;
  2. Shipping lines under the Myanmar Mercantile Marine Development Association – US$2 million; and
  3. International air freight forwarding and ground handling services for international airlines – US$100,000.


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Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.

 

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