MIC confirms disputed tax on FDI

The Myanmar Investment Commission (MIC) has confirmed the corporate income tax rate stands at 25 percent for companies registered under the Myanmar Companies Act or Myanmar Foreign Investment Law (FIL).

The statement follows several months of discussion between various government ministries that corporate rates for some projects such as offshore oil and gas ought to be 35pc.

Section 25 of the 2014 Union Tax Law said all income from foreign investment was to be taxed at 35pc, though previous legislation has routinely pegged the rate at 25pc.

Some energy insiders say the dispute has held up signing of the Production Sharing Contracts for offshore blocks awarded last year, as oil and gas firms await clarity on what taxes they are due to pay.

MIC secretary U Aung Naing Oo said related ministries such as the Ministry of Finance had been invited to discuss the situation with the MIC, but no agreement was reached.

“That’s why we asked for suggestions from the Attorney General’s Office,” he said. “It confirmed today [on January 7] that all FDI should be taxed at 25pc according to the law.”

Investment entering under the FIL law is taxed at 25pc, while non-FIL investment has a corporate tax rate of 35pc, according to a Myanmar tax update from legal firm DFDL released May 2014.

U Aung Naing Oo said the rate of 25pc will apply as per the law.

One senior official from the Ministry of Energy said international companies negotiating the terms of the Production Sharing Contracts had sent letters requesting official clarification from the ministry.

“International oil and gas companies got noisy due to the 35pc tax issue,” he said. “We passed the issue on to the MIC for their input.”

Four of the 20 PSCs for offshore blocks have been signed, with the rest due to be signed soon.

The Ministry of Energy official said foreign companies that really wanted to invest would sign even with tax rates of 35pc. “But in terms of business models, international companies cannot agree to all sorts of immediate changes as they have a long-term model,” he said.

The corporate income tax is only one of the various taxes and fees that must be paid by oil firms. Once the PSCs are signed, companies must pay data fees, signature bonuses and other costs for development. After production begins, other fees kick in, including the corporate income tax.

The Ministry of Energy official said there has been a large dispute on the issue between various government ministries, showing a lack of cooperation between different parts of the government.

“It is not good for the image of the country if it changes its policies so quickly and is not consistent,” he said.

International oil giants declined to directly comment on the dispute on rates, but said they are keen to see the PSCs inked.

“Shell understands and respects that each country has its own approach and processes in managing their natural resources. We are looking forward to signing PSCs soon,” said a spokesperson of Anglo-Dutch energy firm Shell.

Foreign direct investment into Myanmar totaled US$6.3 billion from April 1 to December 31 period last year, 50pc more than the previous year’s total figure of $4 billion.


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