Myanmar Union Tax Law 2018 – 2019

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The Union Taxation Law 2018 (UTL 2018) was approved on 30 March 2018, and came into effect on 1 April 2018. As the Union Government enacted a change in fiscal year end from 31 March to 30 September, the Union Taxation Law 2018 – 2019 (UTL 2018-19) has now been enacted to provide further clarification to state-owned enterprises and other taxpayers.

The President signed the UTL 2018-19 and the Pyidaungsu Hluttaw passed the new law on 25 September 2018, with its effective date on 1 October 2018.

We set out the key clarifications/changes made in the UTL 2018-19 below.

1. Tax Year and Applicable Law

Under the UTL 2018-19, there are new provisions on the definition of ‘tax year’. Tax year is defined as:

  • the fiscal year (i.e. from 1 October to 30 September) for state-owned enterprises; and
  • the period from 1 April to 31 March for all other taxpayers apart from the state-owned enterprises.

The UTL 2018-19 stipulates provisions relating to the Income Tax Law, Commercial Tax Law and Specific Goods Tax Law with effective dates as follows:

  • State-owned enterprises: effective from 1 October 2018 to 30 September 2019
  • All other taxpayers: 1 April 2019 to 30 September 2019

Although not stated in the UTL 2018-19, financial institutions, which are governed by the Central Bank of Myanmar (CBM) may have to follow the same guidance as state-owned enterprises through a notification issued by the Internal Revenue Department (IRD). This position may be subject to further change depending on the CBM.

Notification 72/2018 issued on 5 September 2018 provides guidelines for state-owned enterprises (that may include relevant financial institutions) on the change of financial year during the transition period i.e. 1 April 2018 to 30 September 2018. According to the notification, the six-month transition period is a stand-alone financial period. In this regard, tax returns and the corresponding tax payments shall be submitted no later than 31 December 2018.

Personal income tax filing shall still be computed from 1 April to 31 March. For purposes of offsetting the tax depreciation and tax losses, the tax depreciation computed for the six-month period using the prescribed tax depreciation rates under the Notification No. 19/2016 dated 4 February 2016 shall be claimable and the tax losses incurred during the transition six-month period shall be considered as one financial year.

Special provisions relating to fiscal year end for FY2019/2020

The UTL 2018-19 includes a special provision relating to the fiscal year end for FY 2019/2020. All taxpayers (both state-owned enterprises and private taxpayers) will have the same fiscal year end for Income Tax Law, Commercial Tax Law and Specific Goods Tax Law starting from 1 October 2019. < /p>

In other words, from 1 October 2019, all private taxpayers are required to adhere to the tax year period of 1 October to 30 September of the subsequent year. We expect the IRD to issue further guidelines to address the transitional issues pursuant to the change of financial year-end for FY2019/2020 for private taxpayers.

2. Specific Goods Tax (SGT)

The SGT rates applicable to the list of specific goods remain unchanged (compared to UTL 2018) save for the following:

  1. Raw and polished diamond and emerald, as well as jewellery studded with diamond and emerald are no longer subject to SGT on the importation, exportation, production and sale within the country. The SGT rates applicable to (i) raw rubies, sapphires and other precious gems; and (ii) polished jade, rubies, sapphires, and other precious gems and jewellery studded with the same polished gems, remain unchanged at the rates of 10% and 5% respectively.
  2. The SGT rates and value tier applicable to various kinds of cigarettes, alcoholic beverages and the SGT rate applicable to cheroots have increased.

The new SGT rates will take effect from 1 April 2019.

3. Commercial Tax

The UTL 2018-19 sets out 10 categories each for goods and services exempted from Commercial Tax (CT).

Goods exempted from CT Services exempted from CT

1. Food

1. Foreign affairs sector

2. Agriculture and livestock

2. Defence sector

3. School and office supplies 

3. Religious and cultural sector

4. Health related goods

4. Transportation sector

5. Goods used for religious and social purposes

5. Education and information sector

6. Transportation related goods

6. Health sector

7. Industrial goods

7. Planning and finance sector

8. Defence related goods

8. Social welfare, relief and settlement

9. Gems and extractive goods

9. Industry and electricity sector

10. General goods

10. General

Several goods and services have been added to the list of goods/services exempted from CT under the UTL 2018-19. They include:

  1. Goods:
    • Textbooks related to basic education, university and college under school and office supplies;
    • Search and rescue vehicles under goods used for religious or social purposes;
    • Raw materials for detergent and raw materials for soap and raw soap under industrial goods;
    • Gum karaya under industrial goods;
    • Medicines certified by livestock breeding and veterinary department under industrial goods; and
  2. Services:
    • Small-scale private electricity supply services provided through electric power generation and transmission in the areas where there is no access to national grid.

Under the UTL 2018-19, duty free goods sold in local currency at designated departure areas for overseas use are exempted from CT from 1 April 2019 onwards (if the businesses selling such goods are private taxpayers). Under UTL 2018, duty free goods sold in foreign currencies are already exempted from CT.

The UTL 2018 stipulates that sale of gold jewelleries are subject to CT of 1% without specifying the CT rate applicable to importation. The UTL 2018-2019 clarifies that the 1% CT shall apply to the importation of gold jewelleries based on the landed cost.

4. Income Tax

There are minimal changes to the Income Tax Law under the UTL 2018-19. The key changes include:

  1. Clarification that cash received from conversion of pension and gratuity (upon retirement) are exempted from income tax. This exemption does not just apply to civil servants.
  2. The entire reward amount received from (i) exercising Narcotic Drug and Psychotropic Substance Act; and (ii) taking action on illicitly traded items are not subjected to income tax. The previous tax exemption threshold of MMK 10 million per annum has been removed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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