On 10 June 2020, the Ministry of Planning, Finance and Industry (“MOPFI”) issued Notification 62/2020 (“Notification 62”) which amends the Income Tax Regulations in Myanmar. This Notification extends the deadline of the payment of withholding tax (including personal income tax or “PIT”) and clarifies the depreciation procedures for certain types of assets. This Notification is effective from 1 October 2019 or the beginning of fiscal year 2019-2020.
Prior to the issuance of Notification 62, the Income Tax Regulations had earlier been amended in 2015 (under Notification 181/2015) and in 2016 (under Notification 19/2016).
We provide below the salient feature of this Amendment to the Income Tax Regulations:
- Extension of the withholding tax deadline (including PIT)
Under Notification 62, the person responsible to withhold tax on salary of employees and payments to suppliers must file the withholding tax information and pay the tax to the relevant tax office within 15 days from the date of deduction. If the payment is made within 15 days after the end of the financial year (i.e. ending 30 September), the payment will still form part of the tax payment for the relevant financial year.
Notification 62 extends the payment deadline of withholding tax (including PIT) to 15 days from the previous “seven days from the date of deduction” if made by a non-government payer, or from the “same day from the date of deduction” if made by a government payer (including state-owned enterprises).
Interestingly, the withholding tax payment deadline is still based on the date of deduction. Although the tax payment deadline has been extended, this may still create a compliance issue for some taxpayers as the deadline for the payment of tax is not based on a fixed date per month or per quarter.
- Changes in tax depreciation procedures
Notification 62 does not provide an amendment on the depreciation rates for buildings, machinery and fixed assets. The tax depreciation rates ranging from 2.5% to 20% (depending on the types of assets) under Notification 19/2016 still apply. If the depreciable asset does not fall within the depreciation schedule under the Regulations, the asset will be depreciated at the rate of 5% per year based on the original cost.
However, Notification 62 provides that the Director General of the Internal Revenue Department (“IRD”), with the approval of the MOPFI, can determine the depreciation rate and the required procedures for the following:
- intangible assets;
- low value fixed assets;
- matters requested by the taxpayer to which higher or lower depreciation rates can apply; and
matters regarding changes in depreciation policy.
This amendment to the Income Tax Regulations did not mention the tax depreciation method or rate to be applied for intangible assets and low value fixed assets. Normally, intangible assets with finite life and used for the production of income are amortized based on the useful life of the asset. A different amortization method can be used such as the declining balance method and unit of production method but this will be subject to approval by the MOPFI/IRD. As regards to low value fixed assets, the Notification does not provide clear guidelines as to what constitutes low value.
In addition, Notification 62 provides an option for taxpayers to use a different tax depreciation rate or method that is more applicable or relevant to their business. However, this will be subject to the MOPFI/IRD’s approval.
If you have any question or interested in knowing 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