The Draft Union Tax Law 2020 and Key Takeaways From Recent Changes in Tax Regulations

The past few months have been an interesting phase for taxpayers in Myanmar due to the tax reliefs granted under the COVID-19 Economic Relief Plan, changes in current tax regulations, the announcement of the draft Union Tax Law 2020 (“draft UTL”), and the draft new Income Tax Law.  

What major changes are included under the draft UTL?     

The draft UTL was announced by the Union Parliament (“Pyidaungsu Hluttaw”) on 13 July 2020 and will be applicable for the financial year (“FY”) 2020-2021 (1 October 2020 to 30 September 2021) upon enactment.

Alcoholic beverages and cigarettes

Specific Goods Tax (“SGT”) rates for cigarettes, cheroot, alcohol, and wine have been increased. With the ease in import regulations, which now allow importation of alcohol, we understand that the increased SGT rate will serve as a form of control for alcohol consumption in the market. However, it is noteworthy that the minimum price of alcohol subject to SGT has been increased from MMK200 to MMK300. In other words, alcohol prices lower than MMK300 per liter will be exempted from SGT. 

Goods and services purchased by United Nations organizations

There are no major changes under Commercial Tax (“CT”) and, therefore, CT-exempted goods and services are more or less the same as the UTL 2019. However, milk substitute products and creamers that are not produced from cow, buffalo, and goat milk will no longer be exempted from CT. In addition, the following new category of goods and services has been included under the CT-exempted list: imported goods as well as services and goods purchased locally by United Nations organizations.

Undisclosed income

The major change under Income Tax would be the tax amnesty allowed under the UTL 2019 on undisclosed income, which is now abolished under the UTL 2020. Unlike the previous UTL, there will be no income tiers and progressive income tax rates for undisclosed income. A flat income tax rate of 30% will be applied on the undisclosed income. Therefore, if an entity buying a capital asset (e.g., land or car) cannot prove the source of income for the funds used in the purchase of such asset, such funds will be subject to a flat income tax rate of 30%.

Recent changes in tax regulations 

The Ministry of Planning, Finance, and Industry has enacted two notifications (“Notifications”) during May and June 2020; Notification 56/2020 which amends the Commercial Tax Regulations and Notification 62/2020 which amend the Income Tax Regulations. The amendments in the Notifications will be applicable for the current FY2019-2020 (1 October 2019 to 30 September 2020).

Offset of input CT paid on capital assets

Notification 56/2020 allows the offset of input CT paid on the purchase and construction of capital assets against the output CT on sales. Therefore, if the taxpayer has any unutilized input CT paid on the capital assets during the previous months, such input CT can be offset against output CT in the remaining months of FY2019-2020.

Tax depreciation

It is noteworthy that a straight-line depreciation method is required to be used when calculating tax depreciation allowance. However, under Notification 62/2020, the taxpayer will be able to request the use of a different tax depreciation method. In addition, the Internal Revenue Department will also prescribe tax depreciation rates for intangible assets and low-cost capital assets. 

Changes in tax payment deadlines

Furthermore, Withholding Tax and Personal Income Tax payments deadlines have been increased from 7 days to 15 days after deduction from payments.

Conclusion

Therefore, the taxpayer should pay attention to the changes before the end of this financial year (i.e., 30 September 2020) to make necessary adjustments to the tax position. Additionally, if anyone has an undisclosed income, income tax should be paid within this year under the tax amnesty rate, which is as low as 3%.