Myanmar does not have a framework of legislation governing real estate. Rights and obligations pertaining to real property (including transfer, sale or disposition) are therefore scattered in the provisions of various laws.
These laws include but are not limited to the following:
In addition to the laws mentioned here, government agencies and ministries also issue subordinate legislation from time to time which may be applicable to real estate and real rights.
The Condominium Management Committee (CMC), which has the authority to register and approve condominium projects under the Condominium Law was formed in January 2019. However, considering that the Condominium Law and related regulations are fairly new, the CMC has been slow in instituting the registration process for condominium projects. It is expected that the procedures and registration process will be in place some time in 2020.
The Land and Property Bank
Last year, the Myanmar government introduced a new initiative in proptech with regard to land administration. The President’s Office issued Directive 2/2019 on 18 October 2019 concerning the Land and Property Bank, which is an interactive online database that consolidates information on land and properties owned by the government. The initiative aims to facilitate investments through providing a centralised database, as well as accurate information to potential investors with respect to Myanmar’s most valuable asset – land.
Real Estate Online Platforms
Additionally, there is notable use of technology in the real estate sale and lending market owing to the extreme popularity of the internet and social media – chiefly Facebook. The real estate market in Myanmar has adopted cyberspace as the preferred medium for information-sharing and client outreach. Previously, Myanmar real estate information and transactions occurred in the traditional manner through word of mouth and personal recommendations. Now, with the unprecedented growth of the internet and social media, there are many dedicated real estate platforms on which all buyers and sellers can freely browse, search and compare availability and market price. The popularity of such platforms, due to their transparency and ease of access compared to traditional media, has helped stimulate the real estate market.
Similarly, most primary lending banks have now adopted new financial technologies which facilitate real estate transactions. Borrowers can now apply for home loans and make monthly payments via their mobile phone apps.
Expectations were high when the Myanmar Companies Law, which redefined what constitutes a foreign company, was enacted. These expectations have, however, been tempered in the short period since the law was implemented. Presently, several government ministries (including the Yangon City Development Committee) still subscribe to the position that a company with foreign ownership, no matter how small, is prohibited from owning rights over land. This may change over time, as different state and regional governments and ministries align their policies with the Myanmar Companies Law. Additionally, the CMC’s registration process for condominium projects must be finalised so that applications can be accepted/approved.
With the limited exception of freehold land, all land in Myanmar is owned by the state. Nevertheless, rights over land may be acquired by individuals and companies through grants, leases or licences issued by the relevant authorities (eg, Yangon City Development Committee (YCDC), the Department of Urban and Housing Development) or other ministries. Some of these rights may be assigned, transferred or disposed of by the holder, others require the approval of the issuing or other relevant authority prior to any such assignment, transfer or disposition, while others may not be assigned, transferred or otherwise disposed of. These property rights depend on the type or classification of land involved and may be categorised as follows:
The TPA governs the transfer of real property in Myanmar in the absence of any other special law governing the particular plot of land involved. The TPA defines “transfer of property” as an “act by which a living person conveys property, in the present or in the future, to one or more other living persons, or to himself or to himself and one or more other living persons”. The TPA stipulates, among other things, who may transfer property, what may be transferred, and the consequences of such transfer.
The TIPRA, on the other hand, contains restrictions on land transfers or deals involving foreigners.
The Condominium Law
The Condominium Law governs the transfer of units in developments which have been successfully registered as a condominium, and the transfer of the underlying land into the collective ownership of the subsidiary proprietors of the units.
Land rights in Myanmar are generally conveyed through a written deed duly executed by the parties, stamped by the Myanmar Stamp Office, and registered with the Registration Office. Title insurance is currently unavailable in Myanmar.
Given the lack of a publicly accessible central land record or registration database in Myanmar (although there are currently efforts to digitise land records through a Land Property Bank, as mentioned in 1.3 Impact of Disruptive Technologies), the land grant, land lease and/or other land rights certificate, land map and land history/record for a particular plot of land maintained and issued by the relevant authorities are usually examined and relied upon in connection with any investigation into title.
The land grant, land lease and/or other land rights certificates typically provide information on the land including its particulars; the landholder; the land grantee; the duration of the grant, lease or use; any fees/charges payable for the grant lease or use; and conditions for the renewal of the grant lease or right to use. They also set out the relevant covenants, obligations and terms and conditions to be complied with by the land grantee or tenant.
Typical representations and warranties in real property contracts generally involve the capacity of a seller and the status of the subject real property. As regards the real property itself, relevant representations and warranties include those relating to integrity of title, pending disputes and litigation, encumbrances, classification and permitted uses of the land, and payment of land revenue and other taxes and fees chargeable on real property. These representations and warranties are important given the absence of a publicly accessible central land record or registration database in Myanmar.
Depending on the type of land involved and the particulars of the buyer and seller, a complaint regarding violation of contractual representations and warranties involving real property may be lodged with the Land Investigation Commission, the Rule of Law and Stabilisation Committee, or the Land Utilisation Management Committees at district and township levels and, in accordance with the Specific Relief Act (1877) and the Code of Civil Procedure (1909), the relevant courts.
With the exception of condominiums, foreigners (ie, non-Myanmar citizens) are prohibited from purchasing and owning real property in Myanmar. At most, a foreign individual or entity may only obtain land-use rights as discussed in 2.1 Categories of Property Rights by agreement either with a grantee of such rights or the government of Myanmar. Moreover, the TIPRA prohibits foreigners from acquiring immovable property or interests in immovable property, apart from through short-term leases not exceeding one year, with the following exceptions:
There is no existing ruling or clear precedent in Myanmar in respect of the liability of an innocent buyer with regard to soil pollution or environmental contamination. That being said, it would not be fair for a transferee of real property rights to be made responsible for soil pollution or environmental contamination if the same was not caused or contributed to by the transferee.
Given the lack of a publicly accessible central land record or registration database in Myanmar, the land grant, land lease and/or other land-use certificate, land map and land history/record for a particular plot of land, maintained and issued by the relevant authorities, are usually examined and relied upon in connection with any investigation into title.
It is possible to enter into specific development agreements with the relevant authorities for the development of land in Myanmar through publicprivate partnerships, joint venture agreements or other forms of concessions.
The taking or expropriation of land by the government for a public purpose is currently permitted under the Land Acquisition Act. This Act, however, will soon be replaced by the Land Acquisition, Resettlement and Rehabilitation Law.
The Land Acquisition, Resettlement and Rehabilitation Law builds on the procedure initially established by the Land Acquisition Act by requiring the inclusion of a resettlement and rehabilitation plan in addition to the payment of due compensation.
The prevailing stamp duty should be paid. The Stamp Act further provides that a 2% additional stamp duty will be applied for the transfer of properties located within the Naypyitaw Development territory, the City of Yangon Development territory, and the City of Mandalay Development territory.
In addition, income arising from the sale of capital assets such as land is typically subject to a 10% capital gains tax (CGT) imposable on either local or foreign currency. Unless otherwise agreed, CGT is generally borne by the seller while stamp duty is generally shouldered by the buyer.
Rent arising from long-term leases is chargeable as income in the hands of the lessor. A company which is a lessor has to account for such rent as part of its income for the purposes of computing corporate income tax. A natural person who receives rental income, is subject to a tax rate of 10% on their receipts.
In a share transfer or share deal in respect of a property-owing company, CGT is imposed on the gains arising from the sale of shares. Stamp duty is imposed at the rate of 0.1% on the value of the shares.
Foreigners are generally precluded from acquiring real property in Myanmar, with the same exceptions as set out in 2.6 Important Areas of Law for Investors. As mentioned there, the TIPRA generally prohibits foreigners from acquiring real estate or interests in real estate except for short-term leases for a term not exceeding one year.
To reiterate, foreigners are not allowed to purchase and own land in Myanmar. However, use and possessory rights over land may be obtained by a foreign investor through long-term leases either from the government or a landholder or grantee who is allowed to sublease a particular plot of land. It is common for the rent in such long-term leases to be paid upfront by the lessor.
In this instance, to finance the rent and the development of the real property, an entity may use its onshore funds, obtain shareholder loans, call for more capital, or publicly offer its shares. Such entity may also obtain a loan onshore – through local or foreign banks licensed by the Myanmar Central Bank – or offshore. It is possible for mortgages to be created over such long-term leases for raising finance with licensed financial institutions in Myanmar. Similar modes of financing real estate acquisitions are available to Myanmar citizens and companies.
The following may be used as security in Myanmar financing transactions:
Mortgages are recognised in Myanmar. The TPA defines a mortgage as the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of a loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.
It should be noted, however, that in the case of offshore loans an onshore security trustee (typically a local bank) is required before real property may secure such an offshore loan. Moreover, investments made to companies operating under the auspices of the MIC (whether through an MIC permit or endorsement) are required to be notified to the MIC before the relevant land is mortgaged to any person during the permitted investment period.
Pledge as security for payment of a debt or performance of a promise is recognised in Myanmar. Under Myanmar law, the goods pledged may be retained not only for payment of the debt or performance of the promise, but also for the interest of such debt, and reimbursement of all the necessary expenses incurred by the lender in respect of the possession or preservation of the goods pledged.
In practice, shares in an onshore borrowing company are sometimes pledged to a foreign lender, although there is doubt as to whether a pledge may be created over shares through a deposit of share certificates, since share certificates are not strictly documents of title. Share charges are becoming more common as such. Some lenders also require share charges in the offshore special purpose vehicle holding the shares of the onshore borrowing company. Hence, in case of default by the onshore borrower, the lender may enforce either onshore in Myanmar or offshore against the special purpose vehicle. Any such charge or other security over shares should be registered with the Companies Registration Office.
In the case of offshore loans, an onshore security trustee (typically a local bank) is required before real property may be used to secure such an offshore loan. Moreover, companies operating under the auspices of the MIC (whether through an MIC permit or endorsement) are required to notify the MIC before any mortgage of the relevant land to any person during the permitted investment period.
The Stamp Act provides that all instruments chargeable with duty and executed by any person in Myanmar must be stamped before or at the time of execution of the said instrument. It also provides that, if an instrument is not duly stamped, the stamp duty and revenue officer will require payment of the duty or the amount required to make up the same, together with a penalty of MMK500 or, if they think fit, an amount not exceeding ten times the amount of the proper duty or of the deficient portion (whether such amount exceeds or falls short of MMK500).
Approval from certain relevant authorities may be required before an entity can give valid security, depending on the chosen financing structure. These authorities may include, among others, the Directorate of Investment and Company Administration (DICA), Central Bank of Myanmar, MIC, certain government ministries, and local authorities. Moreover, as previously mentioned, for offshore loans, an onshore security trustee (typically a local bank) is required before real property may secure such an offshore loan.
Depending on the type of land involved and the particulars of the buyer and seller, a complaint may be lodged with the Land Investigation Commission or the Rule of Law and Stabilisation Committee, Land Utilisation Management Committees at the district and township levels and, in accordance with the Specific Relief Act (1877) and the Code of Civil Procedure (1909), the relevant courts. That said, it is unclear as to how exactly security over real property may be enforced by Myanmar courts due to the lack of legal guidance on the matter. In this respect, where the parties to a contract have put their agreement in writing, the courts are likely to treat such a written contract as a conclusive statement of the intentions of the parties and thus apply its provisions.
Registration under the Registration Law and the Myanmar Companies Law, as applicable, in accordance with the timing provided under their respective provisions, is critical to the validity and enforceability of any security over land.
It is unlikely for any properly created and registered security to become subordinated to a newly created debt except for debts in favour of certain creditors who are given special preference under applicable laws. Such creditors include the Myanmar tax and revenue authorities in respect of taxes, cesses and rates due, and employees in respect of salaries and payments due within two months prior to winding up.
There appear to be no existing rulings or clear precedents regarding a lender’s liability for environmental contamination of land. In the absence of any express rules or precedents, the lender should not be liable for pollution of the real property provided that it did not cause or contribute to such pollution.
The Insolvency Law (2020) governs the rules relating to insolvency proceedings in Myanmar. Generally, any charge on property made in good faith and for valuable consideration should not be affected by insolvency proceedings.
The effect of the expiration of the LIBOR index should be examined on a case-by-case basis. To mitigate potential risks, parties to a contract may seek to agree on a transitional clause or a replacement rate. Moreover, given that Myanmar’s financial market is still in its infancy, it is unlikely that the Myanmar government will enact legislation suggesting a replacement rate to be adopted by the contracting parties.
The Myanmar National Building Code provides that all major land use developments, which include new construction, extension, retrofitting, increase of floor area, and changes in usage of buildings/land, must conform with zoning classifications. In this respect, the laws discussed in 2.1 Categories of Property Rights, concerning the various classifications of land in Myanmar and the respective conditions applicable to them, effectively apply as zoning laws as well. In addition, specific notifications and issuances by local authorities relating to zoning of urban areas may also apply.
For instance, the YCDC has drafted a Yangon Zoning Plan which is intended to provide a comprehensive height control and zoning plan for the Yangon region.
The Myanmar National Building Code applies to both new builds and refurbishments. It has seven sections pertaining to:
However, it should be noted that the provisions of the Myanmar National Building Code do not prevent the installation of any material or prohibit any design or method of construction not specifically prescribed by it, provided that any such alternative has been approved.
The applicable laws, restrictions, and the regulating authority would generally depend on the classification of the land. Moreover, depending on the location of the parcel of land, the issuances of the relevant local authorities may also apply (eg, YCDC for the Yangon region and Thilawa Management Committee for the Thilawa Special Economic Zone).
The Myanmar National Building Code provides that all major land-use developments, which include new constructions, extensions, retrofitting, increase of floor area, and changes in usage of buildings/land require a planning permit issued by the Development Planning and Building Authority. This Development Planning and Building Authority has not yet been established, however, and to date, Myanmar's Ministry of Construction has been responsible for issuing such planning permits. In the Yangon region, such building permits may also be issued by the YCDC.
An appeal against an administrative authority’s decision in Myanmar is generally made by:
For instance, insofar as the Myanmar National Building Code is concerned, an applicant for a planning or building permit has the right to revise their application and/or reapply based on the reasons for denial given by the relevant authority. Similarly, at the DICA, an appeal against a denial by a frontline officer may be made by appealing to the officer that is next in rank.
Theoretically, the Supreme Court of Myanmar has the power to issue writs based on common law tradition (eg, certiorari, prohibition, mandamus) against administrative bodies, based on the Supreme Court’s powers under the Myanmar Constitution and the Union Judiciary Law. This, however, is untested and it is unclear how a decision of the Supreme Court against an administrative body and in favour of an investor (whether local or foreign) would be enforced.
Depending on the project structure, developers may enter into public private partnership agreements, joint ventures, concession agreements and lease agreements with the relevant authorities.
Construction or work for which a permit is required will be subject to inspection by the relevant building authority and such construction or work must remain accessible and open for inspection purposes until approved. Approval as a result of an inspection will not be construed as approval of a violation of the provisions of all relevant laws or of other issuances or ordinances in Myanmar.
It may also be necessary to obtain a building completion certificate issued by the regional authority that has administrative jurisdiction over the location of a particular development.
Investors (whether foreigners or Myanmar citizens) who wish to invest and conduct business in Myanmar may rely on the investment framework enshrined in the Myanmar Companies Law (2017), Myanmar Investment Law (2016) (MIL), and its implementing rules (MIL Rules) and notifications. Outside of these mainframe investment laws, specific investment activities may also be subject to special laws, regulations, and/or relevant government policies.
In order to conduct business activities in Myanmar, an investor must establish a private limited company with the Companies Registration Office (CRO) of the DICA under the Ministry of Planning and Finance. A foreign investor may also establish a branch office. There is no separate concept of a representative office in Myanmar (except in the banking and insurance sectors), and foreign companies that wish to establish a representative office typically register non-revenue generating branch offices with business activities that are limited to representative-office type activities (such as marketing, liaison services and market research services).
A private limited company established by foreigners in Myanmar may be wholly foreign-owned or constituted as a joint venture. The Companies Law defines a foreign company as “a company incorporated in [Myanmar] in which an overseas corporation or other foreign person (or combination of them) owns or controls, directly or indirectly, an ownership interest of more than thirty-five per cent”. Nevertheless, it should be stressed that the definition of a foreign company under the Companies Law should not be interpreted to mean that foreigners will automatically be allowed to invest in a particular sector in Myanmar (such as real property) up to the prescribed 35% threshold – this will further depend on laws and policies covering each specific sector/activity.
A company constitution functions as the standard constitutive document for companies incorporated in Myanmar. A company is not required to state its object or purpose in the constitution. In this respect, a company has full legal capacity to carry on any business or activity, perform any act, or enter into any transaction within and outside Myanmar, as long as it is lawful and all the necessary permits and licences are obtained.
There is no minimum capital requirement for companies incorporated in Myanmar under the Companies Law.
For a company applying for an MIC permit or endorsement, the minimum amount of capital that has to be committed to a project for the purposes of securing an MIC permit would have to be proposed by an investor in its application for a permit. This would need to be commensurate with the project in question and subject to the review and assessment of the MIC.
For the purposes of being considered for any tax incentives under the MIL in connection with any capital expansion plans, which would include, for instance, tax incentives allowing the right to import materials and equipment during the construction period, the MIR requires a minimum commitment in terms of capital in the amount of USD300,000. The MIC has the right to specify the timing of such injection.
Finally, and before any company may bring shareholders’ loans from offshore into Myanmar, there has to be at least a paid-up capital of USD500,000. This is a requirement of the Central Bank of Myanmar.
Myanmar does not have a separate code of corporate governance for business organisations. As such, the provisions of the Companies Law relating to corporate governance generally apply. The Companies Law similarly has provisions governing the management, administration and governance of business organisations. It also provides that a company must have a name and registered office and it outlines the procedures for meetings of a company’s board of directors. Notably, the Companies Law exempts small companies from complying with certain corporate governance requirements. For this purpose, a small company is defined as a company, other than a public company or subsidiary of a public company, which satisfies the following conditions:
The costs relating to the maintenance and accounting compliance of a Myanmar company depend on the type of entity involved and the number of transactions in which it is engaged.
For instance, compliance costs will certainly be less if an entity is a normal company registered with the DICA. Such costs will substantially increase if the company is either a public company, a listed company, a company in a Special Economic Zone, or a company with MIC-level investment.
Commercial leases are recognised in Myanmar. However, as mentioned, the TIPRA prohibits foreigners from leasing immovable property for a term exceeding one year, with the following exceptions:
Parties to a lease agreement are free to negotiate and agree on the terms. In this respect, commercial lease agreements may range from a base or net lease (where rent is charged by the landlord solely for the use of the space and other costs are paid by the tenant) to a gross or full-service lease (where the rent covers not only the use of the space but also utilities, janitorial services and insurance, among other costs).
Rent is generally negotiable among the parties. While the Urban Rent Control Act (1960) provides that the President of Myanmar or his duly appointed inspector has the right to determine the standard rent in urban areas, this particular provision of the Act is not currently enforced. Moreover, the Myanmar government previously expressed an intention to impose rent controls to curb rental prices but has not yet done so as of the time of writing.
The TIPRA prohibits foreigners from leasing immovable property for a term exceeding one year unless the exceptions discussed in 2.6 Important Areas of Law for Investors apply (eg, if the foreign investor has obtained an MIC permit or endorsement). Lease contracts involving foreign companies without an MIC permit or endorsement therefore typically have a one-year term with an option to renew annually. Similarly, rent is also generally paid annually although due to several economic and political factors, foreign investors can now negotiate bi-annual or even quarterly payments with local lessors.
Regarding the maintenance and repair of real estate, this is typically stipulated and agreed upon by the parties in the contract.
The rent payable generally remains the same throughout the duration of a lease (especially for annual leases). It should be noted, too, that lease payments may be paid upfront (at the beginning of the lease period) whether the lease is annual or for a longer period. If the lease term is longer than one year (eg, 25 years), however, the lease agreement may reflect incremental increases in lease payments over time.
Changes or increases in rent are determined by agreement of the parties unless a lease agreement or contract otherwise provides a mechanism for such an increase (eg, a provision in the lease agreement stating that the rent shall increase by 10% annually).
There is no VAT in Myanmar. However, a 5% commercial tax typically shouldered by the tenant is payable on rental payments.
Any extra costs other than rent at the start of a lease will depend on the contractual arrangement between the parties, eg, whether the lease is a net lease, gross lease or a mixture of both. Typically, in addition to the amount of rent due, a security deposit is payable at the beginning of the lease, as well as stamp duty, in order that the landlord may have the lease stamped.
Maintenance and repair of common areas are generally paid for by the developer, who will impose maintenance fees on its tenants. If the real property involved is a condominium, a condominium association will be constituted and it will be responsible for the management, maintenance and repair of such collectively-owned premises.
This would generally depend on the contractual arrangement between the developer/landholder and its tenants.
The insurance sector in Myanmar is relatively underdeveloped and it is not uncommon for a lease contract not to contain provisions relating to insurance. In the case of a large-scale development, the developers would typically be the party responsible for insuring the building against fire and other usual risks.
The landlord may impose contractual restrictions and/or conditions on the tenant relating to the use of real property. Moreover, the classification of the subject property and its location are also relevant in determining the permissible uses of said property and the restrictions applicable to it.
The contractual arrangements between parties will stipulate whether a tenant may alter or improve the real estate. The parties may agree on the conditions, if any, for implementing such alteration or improvements provided that the same does not violate applicable laws.
Specific laws and regulations apply to certain types of real estate (eg, the SEZ Law, the Condominium Law). The relevant ministries, such as the Ministry of Hotel and Tourism, may also have specific notifications and issuances governing properties within their jurisdiction. These laws, notifications and issuances affect the real property and construction sectors in that they may prescribe certain usage and/or construction requirements to entities within the scope of their regulatory authority.
The insolvency of a tenant should not generally affect the right of a landholder to receive rental payments but it is not uncommon for lease agreements in larger scale developments to provide that the tenant’s insolvency constitutes a breach of the lease agreement, which would allow the landlord to reclaim possession.
As mentioned in 6.5 Rent Variation, lease payments are often paid upfront by a tenant to cover an entire lease term. Moreover, security deposits intended to cover any damage to the property caused by the tenant are quite common in Myanmar.
Unless the relevant lease agreement or contract provides otherwise (eg, through automatic renewal clauses), a tenant generally does not have the right to occupy a piece of real estate after the expiry or termination of the lease. In this respect, to ensure that a tenant leaves the property on the date originally agreed upon, a landlord may send notices, at least 30 days prior to the expiry or termination of the lease, reminding the tenant to vacate. If the tenant does not vacate the premises by the termination date, after being requested to do so, the landlord may initiate eviction proceedings against the tenant.
The tenant's right to assign leasehold interest would depend on the contractual agreement of the parties. Typical conditions would include compliance with all applicable laws (such as the TIPRA) and obtaining the relevant consents.
The parties to a lease may generally terminate the contract upon mutual agreement. Unilateral termination rights are usually not granted except in favour of the landlord in relation to non-payment of rent and other material breaches of the lease agreement by the tenant.
The Deed Registration Law (2018) provides that it is mandatory for certain instruments to be registered with the Registrar of Deeds and Assurances. Such instruments include:
Under the Registration Law, an unregistered instrument will not affect any immovable property or stand as evidence of any transaction affecting such property. This means that, generally, instruments purporting to create any rights, title or interest in and to a piece of land will not be effective unless they are registered. Registration fees and stamp duties on the lease would have to be paid.
The TPA notably recognises that the lessor may institute a suit of ejectment against the lessee for non-payment of rent. In this regard, Myanmar’s Code of Civil Procedure also provides the remedy of delivery of property, which may apply to both movable and immovable property.
A decree of delivery of immovable property compels the party against whom it was adjudged to vacate and deliver possession of immovable property to another. While this remedy is theoretically available to any party, whether public or private, it has generally been used against persons occupying state-owned or administered land.
Lease agreements executed in accordance with the provisions of the MIL and Special Economic Zone law may be terminated by the MIC and the Special Economic Zone Management Committee if it is found that a tenant has violated the conditions of the relevant investment permit.
When looking at how to price a construction project, there appears to be a preference towards lump-sum fixed pricing, subject only to variations based on certain stipulated conditions in a construction contract. That said, some parties adopt other pricing methodologies, such as dynamic pricing, for their construction projects.
Assignment of rights and obligations are generally enforceable in Myanmar. There is a recent trend for big-ticket projects in Myanmar to follow the International Federation of Consulting Engineers (Fédération Internationale Des Ingénieurs-Conseils, or FIDIC) suite of standard construction contract templates, which provides standardised terms on different types of construction contracts (eg, the Conditions of Contract for Construction, Conditions of Contract for Plant and Design-Build, Conditions of Contract for EPC Turnkey Projects, and the Short Form of Contract) and includes provisions on general responsibility for design and construction, the determination of liability in case of breach, and the transfer of unforeseeable physical conditions. For smaller construction projects that do not necessarily follow the FIDIC suite of construction contracts, parties are free to assign liability, although it is common for the employer to be generally liable for design, while the contractor is liable for construction.
A mixture of indemnities, warranties, limitations on liability and waivers may be used to manage construction risks. The usual contractual clauses are generally enforceable and are not subject to any legal limitations.
Parties may include a penalty clause in their contract to manage schedule-related risks, which may be enforced to the extent that the same is deemed reasonable by the relevant court. Moreover, depending on the reason for delay (whether it is caused by a contractor or by some other third party, eg, the authorities), liquidated damages may be imposed against a designer/contractor.
Forms of security, such as letters of credit, parent guarantees, performance bonds, escrow accounts and third-party sureties, are not uncommon in Myanmar.
There does not appear to be any provision in law prohibiting contractors and/or designers from agreeing to lien or otherwise encumber a property in the event of non-payment. It therefore appears that a lien or encumbrance on property is acceptable, provided that the same is contractually agreed upon.
In this regard, it is worth noting that the Myanmar Contract Act analogously provides that bankers, factors, wharfingers, attorneys, and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account any goods bailed to them; but no other persons have a right to retain goods bailed to them, as a security for such balance, unless there is an express contract to that effect. Moreover, the TPA provides that where the immovable property of one person is by act of parties or operation of law made security for payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property. In this case, the rules governing simple mortgage apply.
Before a project may be inhabited or used for its intended purpose, a building completion certificate needs to be issued by the relevant authority (eg, the YCDC for projects located in the Yangon region).
There is no VAT in Myanmar. An equivalent tax, called commercial tax, does not typically apply to the sale of real property, as real property is not captured by the definition of goods or services under the Commercial Tax Law (1990). A 5% commercial tax is, however, levied on the lease of real property.
There are structuring options and methods to mitigate the transfer, recordation, stamp or other tax liability on the acquisition of large real estate portfolios. These options may be assessed on a case-by-case basis and would depend on, among other things, the transaction structure.
The Yangon City Development Law provides for property taxes on real property situated in Yangon. Similar property taxes are also imposed by local government on other cities and municipalities, such as Mandalay, Bago, and Taunggyi. Property taxes are generally based on the Revenue Department’s assessed value of the relevant property.
Income arising from the sale of capital assets, such as land, is typically subject to a 10% CGT imposable in either local or foreign currency and on both foreigners and local sellers. Unless otherwise agreed upon, CGT is generally borne by the seller.
Rent arising from long-term leases is chargeable as income in the hands of the lessor. A company which is a lessor has to account for such rent as part of its income for the purposes of computing corporate income tax. A natural person who receives rental income is subject to a tax rate of 10% on their receipts.
In a share transfer or share deal, CGT is imposed on the gains arising from the sale of shares. Stamp duty is imposed at a rate of 0.1% on the value of the shares.
Foreign investors who receive rental income in Myanmar would generally have established an entity in Myanmar to conduct business. Such entity, being considered a local entity in Myanmar, would not be liable for any withholding tax in respect of any rental income to which it is entitled.
Tax benefits arising from owning fixed assets such as buildings, plants and machinery may include a depreciation allowance, which may be extended by the MIC under the MIL.