Myanmar Introduces Tax Credit for Importation and Distribution of Gasoline and Diesel

YANGON, Myanmar, 27 August 2012 – A new Notification by the Ministry of Finance and Revenue has made it possible for importers and distributors of gasoline and diesel to credit the Commercial Tax that is due on import and resale.

The new Notification, which enters into force retrospectively on 1 April 2012, aims to reduce transportation and manufacturing costs, as well as stabilize fuel prices.

“The new measure came in response to requests from gasoline distribution companies,” said Edwin Vanderbruggen, Partner, VDB Loi. “Gasoline and diesel are on a list of selected goods for which distributors are not able to use the Commercial Tax they pay to suppliers as a credit for the Commercial Tax they charge their customers. This meant that each time gasoline or diesel was sold, the tax added to the cost and prices kept increasing.”

Importation of most petroleum products is subject to, among other taxes, a 10% Commercial Tax. Domestic trading of petroleum products is taxed at 5%.

The Commercial Tax system, which was significantly revamped in March 2012, allows the offset of tax paid and tax received by registrants only for certain activities and with the exception of goods included in a special schedule.

“Myanmar overhauled its Commercial Tax and Income Tax systems this year in an effort to simplify its tax system for foreign investors,” said Vanderbruggen. “The various rates of Commercial Tax, which is somewhat comparable to GST or VAT, were reduced to a common rate of only 5%, with a few higher rates for certain products, including alcohol, tobacco products and vehicles. The Income Tax rates were simplified as well, with the common rate for companies fixed at 25%.”

Thida Cho Win, Director, VDB Loi, with over 25 years of experience in Myanmar taxation, notes that the changes reflect ongoing efforts to ease the investment process for foreign companies.

“As Myanmar is negotiating and concluding more and more tax treaties, the government is very much aware that a transparent tax system is important to attract new FDI,” concluded Win.

VDB Loi is Southeast Asia’s first regional legal and tax services firm with offices in Yangon and Naw Pyi Taw. The firm’s on-the-ground team has extensive experience advising on all aspects of Myanmar taxation.

To read further analysis on legal and tax issues in Myanmar, please visit www.vdb-loi.com/analysis/

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VDB Loi is a regional legal and tax services firm with more than 50 outstanding local and international lawyers and tax advisers. We provide the highest quality integrated solutions for structuring investment and business transactions in Cambodia, Indonesia, Laos, Myanmar, Singapore and Vietnam. For further information, please visit www.vdb-loi.com

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