Tax Cuts and Soft Loans In Myanmar During Covid-19

Tax Cuts and Soft Loans In Myanmar During Covid-19

Businesses around the world are suffering from the impact of Coronavirus 2019 (“COVID-19”), and there is no denying that Myanmar’s economy has also subsequently taken a hit. Due to the lockdown of border countries and travel bans around the world, the import/export industry as well as the tourism industry in Myanmar has significantly suffered from the economic repercussions.

The Ministry of Planning, Finance, and Industry (“MOPFI”) issued Notification 1/2020 on 18 March 2020 in order to minimize the negative economic situation by providing tax cuts and establishing a COVID-19 Fund for prioritized industries immediately impacted by COVID-19. The COVID-19 Fund will be established with the initial capital of MMK100 billion at the Myanma Economic Bank (“MEB”); MMK50 billion is from the State Revolving Fund and MMK50 billion is from the Social Security Fund.

The prioritized industries are as follows: Cut, Make, and Pack (“CMP”) businesses which use imported raw materials for production and export finished goods; hotels; tour companies; and Small and Medium Enterprises (“SMEs”).

Referring to the Small and Medium Enterprises Law 2015, the criteria for what constitutes an SME in Myanmar are summarized in the table below.

Small Enterprise
Types of business	No. of permanent employees	Capital investment excluding land value	Annual income of previous year
Manufacturing	≤ 50 employees	≤ MMK500 million
Labor intensive production or piecework business	≤ 300 employees	≤ MMK500 million
Wholesale business	≤ 30 employees		≤ MMK100 million
Retail business	≤ 30 employees		≤ MMK50 million
Service business	≤ 30 employees		≤ MMK100 million
Other types of business	≤ 30 employees		≤ MMK50 million

Medium Enterprise
Types of business	No. of permanent employees	Capital investment excluding land value	Annual income of previous year
Manufacturing	≤300 employees	Above MMK500 million to MMK1,000 million
Labor intensive production or piecework business	≤600 employees	Above MMK500 million to MMK1,000 million
Wholesale business	≤ 60 employees		Above MMK100 million to MMK300 million
Retail business	≤60 employees		Above MMK50 million to MMK100 million
Service business	≤ 100 employees		Above MMK100 million to MMK200 million
Other types of business	≤ 60 employees		Above MMK50 million to MMK100 million

Who is entitled to soft loans?

Myanmar citizens owning CMP businesses, hotels, tour companies, and SMEs can apply for a one-year loan with 1% interest from the COVID-19 Fund. However, the period of the loan and the interest rate are subject to change depending on the economic situation.

As an example, if the tour companies have difficulties in making salary payments to their employees, these companies can start preparing the necessary documents to apply for loans, which include the tour license, final tax assessment notes (i.e., Demand Note or Confirmation of Self-Assessment), financial statements, and salary statements.

What is included in tax cuts?

The good news for exporters is that the MOPFI has exempted 2% Advance Income Tax (“AIT”) levied upon exported goods until the end of FY2019-2020. Although 2% AIT can be offset against the annual Corporate Income Tax (“CIT”) liability, this 2% AIT cut will significantly help exporters who earn low-profit margins, as they will benefit from a better cash-flow situation.

Any other reliefs?

The prioritized industries are also allowed to delay their monthly Commercial Tax (“CT”) payments and quarterly CIT payments until 30 September 2020.

In other words, monthly CT payments which are due 10 days after the relevant month end as well as Second Quarter and Third Quarter CIT payments which are due 10 days after the relevant quarter’s end can be settled until the end of September 2020 without any penalties, which would usually be 10% of the payable tax due.

In addition, the Ministry of Labor, Immigration, and Population (“MOLIP”) issued Notification 63/2020 on 20 March 2020, changing the payment deadline for Social Security Contributions of employees from 15 days to 3 months after the relevant month end. This relief is applicable to all businesses registered with the Social Security Board.

Conclusion

The tax cuts and reliefs are set to significantly help prioritized industries in this difficult time. As for the other industries, measures to reduce physical contacts can be taken by processing tax payments online and filing tax returns by post. Please do not miss our next article, which will discuss detailed procedures for online tax payments and things to watch out for when filing tax returns by post. Also, if Myanmar citizens owning the prioritized industries wish to apply for the soft loans, please do not hesitate to contact us for more information.