Myanmar tax structure
Myanmar has 18 kinds of taxes under the following 4 major heads:
Each tax has specific laws. The Government enacts the Union Tax Law on a yearly basis for new tax rates starting from 2014. Income tax, commercial tax, stamp duty and lottery tax are administered by the Internal Revenue Department (IRD) under the Ministry of Planning and Finance.
The Union Tax Law 2017 came into force on 1 April 2017, and repeals the Union Tax Law 2016. The provisions in the Union Tax Law 2017 deal with special goods tax, commercial tax and income tax.
Special goods tax
The Union Tax Law 2017 increases the tax rate for special goods and number of types of special goods subject to special goods tax from 16 to 17. “Wood log and wood cutting” is one the new categories in special goods subject to a 5% tax rate. Special goods tax shall not be levied on production of tobacco, cheroots and cigars if the total sale proceeds is not more than Kyats 20 million within a financial year. A person in possession of special goods without paying special goods tax is subject to a fine of 100% of the value of such goods and confiscation. The informer and seizing authority will be entitled to 20% and 30% of the fine respectively.
The Union Tax Law 2017 exempts 87 items of goods and 29 types of services from commercial tax. Apart from those items, 5% commercial tax shall be paid on the sales price of goods produced and sold in Myanmar or on the landed costs of imported goods. There are no changes in the commercial tax rates for domestic airway services and proceeds from the post-construction sale of a building in Myanmar – these will remain at 3%. However, a new commercial tax rate of 1% shall be paid on the sale proceeds of gold jewellery.
No commercial tax shall be levied if the sales proceeds or the service revenue do not exceed the following thresholds in the cooperative sector and private sector:
Any person who has an annual income of more than Kyats 48 million shall pay income tax after deducting the allowance according to Section 6 of the Income Tax Law. A non-resident foreigner (being a person who resides in Myanmar for less than 183 days) has no right to deduct these allowances. The following allowance can be deducted from total income before income tax assessment:
The income tax rates to be applied to anyone’s income from salary, profession, property, business and other sources are as follows:
Corporate income tax
A corporate income tax rate of 25 % of total net profits before deducting allowance under Section 6 of the Income Tax Law shall apply to the following:
In order to foster and develop the publically-listed stock share market, the Ministry of Planning and Finance may provide income tax exemptions or relief for listed public companies
Housing and transportation paid by the employers for its employees shall not be subject to personal income tax for the financial years 2016 and 2017 onwards.
The Ministry of Planning and Finance issued Notification No. 2/2017 which revokes Notification No 41/2010 and Notification No 67/2011 in relation to withholding tax (WHT). This notification is effective from 1 April 2017. Payments made to off-shore non-resident corporations are subject to a deduction of withholding tax, as follows:
15% WHT shall apply to non-resident foreigners for interest payments on savings, loans or debts or similar matters.
10% for resident citizens or foreigners and 15% for non-resident foreigners for royalties for the use of license, trademarks, patents etc.
2% WHT shall be paid by residents for goods, services and payment for leasing within Myanmar
2.5% shall be paid by non-residents for goods, services and payment for leasing within Myanmar.
WHT is not required to be deducted when total payment within an income year does not exceed Kyats 500, 000. However, WHT must be deducted when the first payment does not exceed the threshold but exceeds the threshold in next payment within an income year. Note that the payer has the obligation to deduct WHT from payments regardless of whether the payee has agreed to deduction or not.
Deduction of WHT will be considered as final tax for non-resident foreigners. However, WHT can be used to offset against the payable corporate income tax, if the non-resident foreigner has a local branch which files corporate income tax.
Countries with Double Taxation Agreement (DTA) with Myanmar
WHT shall be deducted according to a Double Taxation Agreement (DTA) if the non-resident taxpayer is a resident taxpayer of a country which has DTA with Myanmar. But the tax payers must provide Certificate of Resident issued by the relevant tax authority of their country. Myanmar currently has DTAs with 8 countries (India, Laos, Malaysia, Republic of Korea, Singapore, Thailand, United Kingdom, Vietnam) and DTAs (in draft stage) with 2 countries, Indonesia and Bangladesh.
If you have any questions or require any additional information, please contact Sam Britton or Su Wai Phyo or the ZICO Law partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.