On 2 September 2020, the Union Parliament enacted the 2020 Union Tax Law (“2020 UTL”) which clarifies the tax rates and related procedures concerning income tax, commercial tax, specific goods tax, and gemstone tax. This new law is effective on 1 October 2020 or the start of the new financial year in Myanmar.
One of the key highlights of the 2020 UTL is the change in tax rates for undisclosed sources of income for Myanmar citizens, which is currently covered by the tax amnesty program until 30 September 2020. In addition, the new law also provides for updated tax rates on certain specific goods and outlines changes with regard to the tax exemption list for commercial tax.
We provide the salient features of the 2020 UTL below:
1. Increase in tax rates for Myanmar citizens with undisclosed sources of income
The 2020 UTL slightly modifies the tax amnesty rates for Myanmar citizens with undisclosed income or for those who are unable to show the source of income used for buying, constructing or obtaining any assets and establishing a new business. Effective 1 October 2020, the tax rates will be 6% for unassessed income up to MMK 100 million, 10% for income between MMK 100 million to 300 million, 20% for income between MMK 300 million to 3 billion and 30% for income exceeding MMK 3 billion. Prior to this law, the tax amnesty rates ranged from 3-30%.
Below we provide a comparison of the tax rates:
|Income (in MMK)||Old Tax Rate (2019 UTL)||New Tax Rate (2020 UTL)|
|100 million + 1||300 million||5%||10%|
|300 million + 1||1 billion||10%||20%|
|1 billion + 1||3 billion||15%|
|3 billion + 1 and above||30%||30%|
This tax amnesty was first introduced in the 2019 UTL (effective from 1 October 2019 to 30 September 2020) in order to encourage those with undeclared sources of income to settle their unpaid taxes with the Government. The amnesty was originally intended to be given only for one year. After the amnesty period, it is proposed that Myanmar citizens with undisclosed sources of income will be subject to a 30% flat rate starting from 1 October 2020. However, the Parliament considered a gradual increase in tax rates in order to ease the impact on businesses that were affected by the COVID-19 pandemic and to encourage more taxpayers to properly declare their taxes to the Internal Revenue Department (“IRD”). The gradual increase in tax rates will apply from 1 October 2020 to 30 September 2021 and will be subject to the assessment of the Ministry of Planning, Finance, and Industry.
2. Changes to Specific Goods Tax (“SGT”) tax tiers and rates
The 2020 UTL increased the SGT rates for cigarettes, cheroots, alcohol and wine. From this, it is expected that the prices of these specific goods will increase due to the higher level of SGT.
|Old tax rates (under the 2019 UTL)||New tax rates (under the 2020 UTL)|
|Various kinds of cigarettes||If sales price per pack of 20 cigarettes is:||If sales price per pack of 20 cigarettes is:|
|Sales price tier in MMK||SGT in MMK||Sales price tier in MMK||SGT in MMK|
|Up to 600||8 per cigarette||Up to 600||9 per cigarette|
|From 601 to 800||17 per cigarette||From 601 to 800||18 per cigarette|
|From 801 to 1,000||22 per cigarette||From 801 to 1,000||23 per cigarette|
|From 1,001 and above||25 per cigarette||From 1,001 and above||26 per cigarette|
|Cheroots||MMK 0.75 (75 cents) per item||MMK 0.8 (80 cents) per item|
|Various kinds of alcohols||If the liter value is :||If the liter value is :|
|Liter value tier in MMK||SGT in MMK||Liter value tier in MMK||SGT in MMK|
|From 200 to 1,000||170 per liter||From 300 to 1,000||180 per liter|
|From 1,001 to 2,000||424 per liter||From 1,001 to 2,000||449 per liter|
|From 2,001 to 3,000||707 per liter||From 2,001 to 3,000||749 per liter|
|From 3,001 to 4,000||990 per liter||From 3,001 to 4,000||1,049 per liter|
|From 4,001 to 5,000||1,273 per liter||From 4,001 to 5,000||1,349 per liter|
|From 5,001 to 6,000||1,555 per liter||From 5,001 to 6,000||1,648 per liter|
|From 6,001 to 7,000||1,838 per liter||From 6,001 to 7,000||1,948 per liter|
|From 7,001 to 8,000||2,121 per liter||From 7,001 to 8,000||2,248 per liter|
|From 8,001 to 9,000||2,404 per liter||From 8,001 to 9,000||2,548 per liter|
|From 9,001 to 10,000||2,686 per liter||From 9,001 to 10,000||2,847 per liter|
|From 10,001 to 11,000||2,969 per liter||From 10,001 to 11,000||3,147 per liter|
|From 11,001 to 12,000||3,252 per liter||From 11,001 to 12,000||3,447 per liter|
|From 12,001 to 13,000||3,535 per liter||From 12,001 to 13,000||3,747 per liter|
|From 13,001 to 14,000||3817 per liter||From 13,001 to 14,000||4,046 per liter|
|From 14,001 to 15,000||4,100 per liter||From 14,001 to 15,000||4,346 per liter|
|From 15,001 and above||60% of one liter’s value||From 15,001 and above||60% of one liter’s value|
|If the liter value is:||If the liter value is:|
|Liter value tier in MMK||SGT in MMK||Liter value tier in MMK||SGT in MMK|
|Various kinds of wines||Up to 750||81 per liter||Up to 750||87 per liter|
|From 751 to 1,500||244 per liter||From 751 to 1,500||264 per liter|
|From 1,501 to 2,250||406 per liter||From 1,501 to 2,250||438 per liter|
|From 2,251 to 3,000||569 per liter||From 2,251 to 3,000||615 per liter|
|From 3,001 to 3,750||732 per liter||From 3,001 to 3,750||791 per liter|
|From 3,751 to 4500||894 per liter||From 3,751 to 4500||966 per liter|
|From 4501 to 6000||1,138 per liter||From 4501 to 6000||1,229 per liter|
|From 6,001 to 7,500||1,463 per liter||From 6,001 to 7,500||1,580 per liter|
|From 7,501 to 9,000||1,788 per liter||From 7,501 to 9,000||1,931 per liter|
|From 9,001 to 10,500||2,113 per liter||From 9,001 to 10,500||2,282 per liter|
|From 10,501 to 13,500||2,600 per liter||From 10,501 to 13,500||2,808 per liter|
|From 13,501 to 16,500||3,250 per liter||From 13,501 to 16,500||3,510 per liter|
|From 16,501 and above||50% of one liter’s value||From 16,501 and above||50% of one liter’s value|
In addition, the new law clarifies that the SGT on importation must be computed based on landed cost. Previously, the SGT was imposed on the higher of the landed cost and value provided by the IRD’s Management Committee.
3. Changes to Commercial Tax (“CT”)
There are no major changes for CT under the 2020 UTL. The CT rate is maintained at 5% except for the sale of jewelry (at 1%), sale of buildings built and sold in Myanmar (at 3%) and export of electricity (at 8%).
The 2020 UTL enumerates 43 exempt goods and 33 exempt services. The changes in the CT exemption list are mainly with respect to milk substitute products and creamers, as well as goods and services purchased locally by United Nations (“UN”) organizations. We provide a comparison of the changes below:
|Under the 2019 UTL||Under the 2020 UTL|
|CT exempt goods||
(Under Food Products)
“Sure Cane, Sugar, Palm Jaggery, Sugar Jaggery/ Slab-Sugar, Various kinds of milk and dairy products, condensed milk, evaporated milk, various kinds of milk powder, yogurt, soy milk.”
(Under Food Products) – rephrased to:
“Sure Cane, Sugar, Palm Jaggery, Sugar Jaggery/ Slab-Sugar, soy milk, Various kinds of milk and dairy products, condensed milk, evaporated milk, various kinds of milk powder, yogurt.” (excluding creamer and milk substitute products which are not produced from cow milk, buffalo milk, goat milk)”
“X-ray films, plates, other X-ray equipment, and medical equipment which are specified by the Department of Health xxx”
(Health-related goods) – rephrased to:
“X-ray films, plates, other X-ray equipment, and medical equipment which are specified by the Department of Food and Drug Administration xxx”
(General goods) – new item
“Goods purchased domestically or imported under the name of UN organizations in the Union.”
|CT exempt services||(Foreign Affairs Sector)||
(Foreign Affairs Sector) – new item
“Service received locally by UN organizations in the Union.”
(Transportation and Communication Sector)
“Inbound and outbound air transport services”
(Transportation and Communication Sector) – rephrased to:
“Air transport services for domestic and foreign passenger trips in exchange for consideration.”
In addition, the 2020 UTL clarifies that for goods imported under the Temporary Admission system and Drawback system, the tax must be repaid back if the goods are not exported within the prescribed timeframe and used domestically.
4. No changes in income tax and gemstone tax
There are no changes for income tax other than the undisclosed sources of income as mentioned in item 1. The corporate income tax rate is maintained at 25% (20% if the company is listed in the Yangon Stock Exchange) and the personal income tax rates remain at 0-25% graduated tax rates. Similarly, there are no changes for gemstones and the corresponding tax rates. The gemstone tax rates ranging from 5% to 11% (depending on the type of gemstone) remain the same.
If you have any questions or wish to know more about the topic, please do not hesitate to contact us.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
Partner & Head of the Regional Tax Practice Group
Senior Tax Manager, Myanmar