The Coronavirus (or COVID-19) global pandemic has already caused a slowdown in the overall economy in Myanmar. In response to the economic impact of COVID-19 and the massive disruption to normal everyday life it is causing, the Myanmar Government has issued a number of directives that are intended to provide relief to those businesses being critically affected in Myanmar. We outline these updates below:
Tax relief as provided by the Ministry of Planning, Finance, and Industry (“MOPFI”)
The MOPFI issued Notification 1/2020 dated 18 March 2020 which provides for the establishment of a COVID-19 Fund and provides tax relief for businesses particularly in the Cut, Make, and Pack (“CMP”) sector, hotel and tourism businesses, and Small-and-Medium Enterprises (collectively referred to as “Prioritized Industries”). Under this Notification, the following financial and tax measures will be implemented:
1) Establishment of COVID-19 Fund and Soft Loans to Myanmar Citizens
Under MOPFI Notification 1/2020, the MOPFI will establish a COVID-19 Fund for the Prioritized Industries. The fund, which will be established at the Myanmar Economic Bank, will be for an initial capital level of MMK 100 billion (approx. USD 70 million), equally funded using the State Revolving Fund and the Social Welfare Fund.
The funds will be used to finance Myanmar citizens who own businesses in the Prioritized Industries where they can apply for a soft loan for one year at an interest rate of 1%. The rate and period would be reviewed at a later date once the economic impact of the virus outbreak has been assessed.
2) Removal of 2% Advance Income Tax (“AIT”) on Exports
Under MOPFI Notification 1/2020, exporters will be exempted from payment of 2% AIT on exported goods until 30 September 2020. This will allow companies to manage their cash flow situation as they will not be required to make advance tax payment upon exporting goods.
3) Extension of Tax Payments until 30 September to Prioritized Industries
Under MOPFI Notification 1/2020, the MOPFI extends the tax payment deadline for the Prioritized Industries until 30 September 2020. This will apply to advance corporate income tax (“CIT”) and commercial tax (“CT”) payments. This means that taxpayers in the Prioritized Industries can make their quarterly CIT payments (for the 2nd and 3rd quarters of FY 2019-2020) and their monthly CT payments (from March to August 2020) on or before 30 September 2020 without incurring any penalty. Currently, there is no extension of tax payment for those businesses that are not in the Prioritized Industries.
Social security relief as provided by the Ministry of Labor, Immigration, and Population (“MOLIP”)
The MOLIP issued Notification 63/2020 dated 20 March 2020 which extends the deadline of payment of social security contributions (for both employer and employee contribution) from 15 days after the end of the month to three months after the end of the month. This applies to all businesses that are registered under the Social Security Board and is effective from 20 March 2020.
Reduction of interest rates by the Central Bank of Myanmar (“CBM”)
Earlier this month, the CBM announced a 0.5% reduction in interest rates in order to revitalize and support business and economic development considering the global COVID-19 crisis. Based on CBM Directive No. 1/2020 dated 12 March 2020, the minimum bank deposit rate will be 7.5% (from 8%) while the maximum lending rates for collateralized loans and non-collateralized loans will be 12.5% and 15.5% respectively (previously 13% and 16%). These reduced rates became effective on 16 March 2020.
[Recent Update: The CBM has further reduced the interest rate by 1%. Under CBM Directive No. 4/2020 dated 24 March 2020, the minimum bank deposit rate will be 6.5% while the maximum lending rates for collateralized loans and non-collateralized loans will be 11.5% and 14.5% respectively. These further reduction on interest rates will become effective on 1 April 2020.]
The COVID-19 global pandemic continues to disrupt the fabric of life across the world and has already precipitated an economic slowdown in Myanmar, particularly affecting businesses in the Prioritized Industries. The tax relief and financial assistance being provided by the Myanmar Government would help ease the burden for such businesses at a point where all are living through uncertain times.
Should you wish to seek assistance in availing of soft loans or would like to discuss any tax issues that you may have, please let us know and we will be glad to assist.
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