On 23 August 2019, the Ministry of Planning and Finance (“MOPF”) issued Notification 69/2019 (“Notification 69”) that clarifies the tax exemptions that would apply to projects that are implemented through Grant Aid and Concessional Loans as approved by the Myanmar Government. This is anchored by Sections 15(a) and 31(b) of the 2018-2019 Union Taxation Law which vest the MOPF (through the approval of the Union Government) with the authority to provide income tax and commercial tax exemptions on projects that are carried out with donations or aid from local and foreign organizations.
The Notification outlines the tax exemptions that would apply to both entities and individuals engaged in those projects, as well as clarifies the manner of obtaining such tax exemptions.
This new Notification, which will take effect starting 1 September 2019 will supersede Notification 38/2018 that the MOPF previously issued on 21 May 2018 with regard to tax exemptions applicable to entities and employees engaged in projects implemented through Grant Aid and Official Development Assistance (“ODA”) Loans.
Tax exemption on Grant Aid projects
Under Notification 69, companies, consultants and service providers working as main contractors or subcontractors on projects implemented via Grant Aid received by the Myanmar Government are entitled to the following tax exemptions:
- Personal income tax (“PIT”) exemption on salaries of employees (except Myanmar citizens) working for the project.
- Corporate income tax (“CIT”) exemption for companies involved on the projects.
- Commercial tax (“CT”) exemption on goods, machinery and associated parts imported for the use in the projects.
- CT exemption levied by companies, consultants and service providers in the course of carrying out project activities.
Prior to this Notification, projects implemented through Grant Aid are also entitled to the same tax exemptions as provided under Notification 38/2018.
Tax exemption on Concessional Loan projects
Under Notification 69, companies, consultants and service providers that work as contractors on projects implemented through Concessional Loans received by the Myanmar Government are entitled to the following tax exemptions:
- Income tax exemption on interest paid for the loan received by the Government.
- Income tax exemption on companies working as main contractors (excluding subcontractors) on the projects.
In addition, employees (except Myanmar citizens) working on projects and that are mentioned in the concessional loan agreement may be granted income tax exemption on salaries received related to the project.
The Notification also mandates the respective ministries or government organization to request for and acquire in advance the CT that will be levied on the project, and pay such CT to the Internal Revenue Department (“IRD”).
Prior to this Notification, projects implemented through ODA Loans were only entitled to income tax exemption on interest paid on loans received by the Myanmar Government. However, Notification 69 expands the tax exemption to cover all Concessional Loan arrangements with the Myanmar Government (not limited to ODA Loans as per Notification 38/2018), to main contractors on the related projects, and to qualified foreign employees working for these projects.
Tax Exemption Application
In order to avail of the tax exemptions, businesses that have projects implemented through Grant Aid or Concessional Loans must apply for a “Certificate of Evidence” and must submit the following documents to the IRD (through the MOPF):
- For PIT exemption of employees (excluding Myanmar citizens) working on the project:
- Letter from the main contractor or subcontractor proving that the employees are working for the project. Main contractors are also required to secure a recommendation from the relevant Government department or Government organization. Similarly, subcontractors are required to secure recommendations from the main contractor as well as from the relevant government department or government organization.
- Letter from the main contractor proving that the project is being implemented through Grant Aid or a Concessional Loan.
- Recommendation from the relevant ministries and recommendation from the Budget Department through the MOPF proving that the project is implemented through Grant Aid or a Concessional Loan.
- For corporate tax exemptions (CIT, CT, and customs duty) of main contractors and subcontractors for Grant Aid projects, and main contractors for Concessional Loan projects:
- Letter from the relevant company, recommendation from the relevant ministries, and recommendation from the Budget Department (through the MOPF) for Grant Aid projects or from the Treasury Department (through the MOPF) for Concessional Loan projects justifying that the business or project is implemented through Grant Aid or a Concessional Loan.
- For main contractors: the agreement with the relevant ministry or department.
- For subcontractors: the agreement with the main contractor and the recommendation from the main contractor.
- For import permits and customs duty exemption: the consent from the Customs Department.
- For the purchase of vehicles, plant and machinery: the consent of the Development Assistant Coordination Unit.
In the event that the project is implemented by both Grant Aid and Concessional Loans, it will be deemed that the project is implemented through a Concessional Loan. In such a case, the tax exemptions under the Concessional Loan will apply.
The Notification clarifies that tax exemptions and the manner of obtaining them will not apply to the following:
- Projects that are not implemented by Grant Aid or Concessional Loans;
- Projects that are implemented by local and foreign organizations or non-government organizations; or
- Projects that are implemented by companies with support from those organizations.
Partner & Head of the Regional Tax Practice Group
Senior Tax Manager
The information provided in this email 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.