As the FY 2019-2020 (ending 30 September 2020) draws to a close, we highlight below a selection of the key announcements from the Internal Revenue Department (“IRD”) that may affect your business in Myanmar and require prompt action to stay in compliance and avoid unnecessary penalties.
1. Renewal of Commercial Tax (“CT”) Registration for FY 2020-2021
Manufacturers, traders, importers and service providers that are subject to CT must renew their CT registration at the relevant tax office before 30 September 2020. Failure to register for CT will be subject to a 10% penalty on the outstanding tax due.
2. Tax amnesty rates for Myanmar citizens with undisclosed sources of income until 30 September 2020
In a recent announcement, the IRD is requesting that local shareholders who have contributed capital into a company to undergo a relevant tax assessment by the IRD before 30 September 2020. This is mainly targeted at Myanmar citizens with undisclosed sources of income who have previously not been subject to any tax assessment. They can still avail of the tax amnesty program as provided under the 2019 Union Tax Law, up until the final deadline of 30 September 2020. The amnesty rate is as low as 3% on unassessed income up to MMK 100 million.
The IRD has formed a special audit team that will handle undisclosed income assessments. Local shareholders/citizens who wish to secure a tax clearance from the IRD must submit the following documents at the assigned tax office (i.e., at No. 163/167, Pansodan Road, Kyauktada Township, Yangon):
- Company registration documents with the Directorate of Investment and Company Administration (“DICA”);
- MyCO Extract;
- Supporting documents to evidence capital contribution;
- Income Tax Demand Note (Pa Ta Kha (Wa Nga)-8) / challans;
- Personal Income Tax booklet or tax payment challans; and
- National Registration Card (“NRC”) and Household List.
These tax assessment/clearance procedures will only be conducted until 30 September 2020. After this period, the tax rate will be increased to a minimum of 6% on unassessed income up to MMK 100 million.
3. Extension of the tax deferral period for Prioritized Industries from 30 September to 31 December 2020
The Ministry of Planning, Finance and Industry (“MOPFI”) has recently extended the tax deferral period for the FY 2019-2020 for Prioritized Industries (i.e., Cut, Make, and Pack sectors, hotel and tourism businesses, and local Small-and-Medium Enterprises) that are affected by the COVID-19 pandemic.
The tax deferral period for Prioritized Industries was originally only valid until 30 September 2020. However, in order to provide additional support to businesses affected by COVID-19, particularly those in the Prioritized Industries, the MOPFI has issued Announcement No. 3/2020 dated 7 September 2020 that extends the deferral of taxes until 31 December 2020. Companies in the Prioritized Industries can therefore still defer the payment of the following taxes until 31 December 2020 without incurring any penalties:
- Quarterly Corporate Income Tax (“CIT”) payments starting Q2 (ending March 2020) until Q4 (ending September 2020) of FY 2019-2020; and
- Monthly CT payments starting from March 2020 until November 2020.
Please note that companies in non-Prioritized Industries are not covered by the tax deferral extension. They must continue to comply with the IRD’s regular tax filing and payment requirements.
With respect to Q4 CIT (for FY 2019-2020) which is due on 12 October 2020 (as the 10th of October falls on a weekend), companies in the non-Prioritized Industries must be able to reasonably estimate their advance tax payment for the year. One of the planning opportunities in estimating advance CIT payment is to consider the COVID-19 tax relief under MOPFI Notification 65/2020. The available relief refers to an additional 25% deduction on incremental wages and salaries, an additional 25% depreciation for incremental investment on capital equipment, a 10% non-refundable tax credit for incremental wages and salaries, as well as a 10% non-refundable tax credit for incremental investment on capital equipment as defined in the Notification. Please refer to our previous alert (here) for additional information on the topic.
If you have any questions or wish to know more about the above, 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