Amendment to the Union Tax Law 2023: Income Tax on Salary Income Received by Non-resident Myanmar Citizens in Foreign Countries

On 12 September 2023, the State Administration Council (“SAC”) made an amendment to the Union Tax Law 2023 (Law No. 55/2023) under Section 419 of the Constitution of the Republic of the Union of Myanmar (the “Amended UTL 2023”), by which the income tax will be imposed on the income, including the salaries, received by the non-resident Myanmar citizens in foreign countries. The provision of Section 31 (a) (iv) granting the income tax exemption on the salaries of non-resident Myanmar citizens is also revoked.

The Amended UTL 2023 is effective from 1 October 2023 until 31 March 2024, the end of Fiscal Year 2023-2024.

Income Tax on Salaries

Starting from 2015 until now, the salary income received by non-resident Myanmar citizens in foreign countries has been exempt from the income tax after the enactment of the Union Tax Law (2015).

By the Amended UTL 2023, the SAC now revives the imposition of income tax on salaries received by non-resident Myanmar citizens in foreign countries.

As for the income tax rate applicable to the salary income received by non-resident Myanmar citizens, the Amended UTL 2023 provides that the income tax payable by a non-resident Myanmar citizen on his or her salary must be the lesser tax amount subject to two calculation methods. The tax payment must be made to Myanmar Internal Revenue Department (the “IRD”) in the same foreign currency in which the non-resident Myanmar citizen receives the income.

Calculatation of the Income Tax on Salaries of Non-resiendt Myanmar Citizens

Instead of fixing the specific tax rate, the Amended UTL 2023 states the imposition of income tax on the basis of two different calculation methods as follows:

Method 1	Subtract the tax relief (i.e., 20% basic allowance, parents’ allowance, dependent spouse and dependent child allowance, etc.,) from the total salary amount in accordance with Section 6 of the Income Tax Law (1974). Calculate the income tax payable at the progressive personal income tax rate under Section 19 (c) of the 2023 UTL and as per Clause 8 of the Income Tax Regulation (2018).
Method 2	Calculate the income tax on the total salary income at 2% without subtracting the tax relief under Section 6 and 6-A of the Income Tax Law (1974).

Out of two tax amounts computed by Method 1 and Method 2 above, the lesser amount will be the PIT payable by a non-resident Myanmar citizen.

Example 1:

The tax amount payable computed by Method 1 is US$100. The tax amount payable computed by Method 2 is US$90. Then the PIT payable by the non-resident Myanmar citizen is US$90.

Income Tax on Other Income Apart From Salaries

Other income, apart from salaries, means income derived from profession, business, property rental, capital gain, income escaping assessment, and other sources of income.

10% income tax must be imposed on the total income, apart from salaries, received by non-resident Myanmar citizens in foreign countries without granting the tax relief under Section 6 and 6-A of the Income Tax Law (1974). The tax payment must be in the same foreign currency in which a non-resident receives the income.

Right to Offset

According to Section 22 (c) of the Amended UTL 2023, we understand that the non-resident Myanmar citizens have the right to offset the tax paid in foreign countries against the calculated amount of payable tax under Section 22 of the Amended UTL 2023.

Therefore, if the non-resident Myanmar citizens have already paid the applicable taxes on their income in the residing foreign country, then such taxes paid can be offset against the tax payable in Myanmar.

Example 2:

A non-resident Myanmar citizen has paid the income tax of US$450 to the tax authority   in a foreign country. The tax payable to Myanmar IRD as per Section 22 of the Amended UTL 2023 is US$500. In this scenario, the non-resident Myanmar citizen can exercise his or her right to offset the tax paid in the foreign country against the tax payable in Myanmar. Therefore, the tax balance that must be paid by the non-resident Myanmar citizen to Myanmar IRD will be US$50.

Conclusion

With effect from 1 October 2023, the income tax is to be imposed on the salary income of the non-resident Myanmar citizen under the Amended UTL 2023. Despite the imposition of the income tax on the income of the non-resident Myanmar citizens as stated above, non-resident Myanmar citizens will be granted the right to offset the taxes already paid in their residing countries to ensure protection against the risk of double taxation on the same income. 

For further detailed information, we expect that the relevant authorities will issue subsequent guidelines and instructions relating to this amendment, which specifies required documents (such as tax payment certificate issued by the foreign tax authority in the case of a request for right to offset) and detailed procedure how to make tax filing and payment to the Myanmar IRD.