Knowledge Highlights 21 October 2019

On 24 September 2019, the Myanmar government issued a new Union Tax Law (“UTL 2019”) for the new financial year commencing on 1 October 2019.

The UTL 2019 reduces the progressive rates for “tax on unassessed income”, also known as “black money tax”, in what is essentially a conditional tax amnesty. The tax on unassessed income effectively operates as a penalty on citizens who evade income tax on their earnings and, in practice, when these citizens transfer material property (such as automobiles, houses, apartments) or pay share capital contributions, the government imposes a tax on the transaction value if there is evidence that income tax payable has been not paid on the consideration received or paid.

The new tax rates under the UTL 2019 for unassessed income are as follows:

  • Income of 1 to 100,000,000 MMK attracts a tax rate of 3%
  • Income of 100,000,001 to 300,000,000 MMK attracts a tax rate of 5%
  • Income of 300,000,001 to 1,000,000,000 MMK attracts a tax rate of 10%
  • Income of 1,000,000,001 to 3,000,000,000 MMK attracts a tax rate of 15%
  • Income of 3,000,000,001 MMK and above attracts a tax rate of 30%

Under the previous Union Tax Law 2018, the tax rates for unassessed income was as follows:

  • Income of 1 to 30,000,000 MMK attracted a tax rate of 15%
  • Income of 30,000,001 to 100,000,000 MMK attracted a tax rate of 20%
  • Income of 100,000,001 MMK and above attracted a tax rate of 30%

Section 25(c) of the UTL 2019 emphasises that this reduction will only apply from 1 October 2019 to 30 September 2020. By applying this tax amnesty, the government aims to incentivise citizens to pay tax on hidden earnings at a lower “cost”, and to recover and collect more tax revenue within the foregoing period.

The new tax rates significantly reduce income tax liability for those with unassessed income of not more than three billion MMK. To illustrate, previously, tax of 888,500,000 MMK would be payable where a person intends to invest three billion MMK (on which income tax has never been paid). He would now only be required to pay tax of 383,000,000 MMK, a saving of 505,500,000 MMK.

The UTL 2019 also makes the following amendments to the Union Tax Law 2018:

  • Commercial tax: The main changes in the UTL 2019 regarding Myanmar’s commercial tax regime are that (1) commercial tax on services procured using donations made to the Union are exempted, and (2) commercial tax paid by the taxpayer when purchasing gold and jewellery cannot be set off against commercial tax levied when he sells the same. 
  • Gemstones tax: The UTL 2019 introduces a new tax for the jewellery industry. The new tax will be imposed on the importation and trading (domestically and export) of various types of gemstones and jewellery, in addition to commercial tax levied on those items at the relevant rates under the existing regime.

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