Myanmar tax law for 2020-21 to include provisions supportive of SMEs

The Union Tax Law for fiscal 2020-21 will include provisions supportive of small and medium-size enterprises (SMEs) in Myanmar, including incentives
aimed at reducing tax burdens as well as simplifying compliance procedures, Deputy Minister for Planning, Finance and Industry U Maung Maung Win
said upon submission of the bill at the Pyidaungsu Hluttaw (Assembly of the Union) for discussion on July 17.

Some of the provisions under the new tax bill include allowing SMEs to deduct certain expenses, such as depreciation, in full, granting income tax exemptions to
businesses with earnings of up to K100 million for up to three years and stipulating a compulsory three-year period for book keeping.
Terms and conditions for production sharing contracts in the oil and gas sector will also be amended to be more equitable and attractive for investors. The benefits reaped from the sector will be balanced between investors and the State, while preventive measures against tax losses will be included.

Other sectors will considered as well. Financial institutions, for example, will be allowed to deduct certain costs for tax purposes at rates prescribed by the Central Bank of Myanmar.The tax carryover period will be extended to five years from the current three. This is a provision that allows taxpayers to carry forward a tax loss to offset against future profits to reduce tax payments for that year. The new bill will include stipulations to prevent tax evasions. “We are paying close attention to preventing tax evasion methods deployed by multi-national firms,” U Maung Maung Win said.

In addition, the various tax rates, reliefs and exemptions will be listed clearly in the law to avoid uncertainties and situations where taxpayers seek loopholes to exploit or avoid paying the full amount of taxes.”In this bill, all tax rates, reliefs and exemptions will be stipulated in appropriate schedules as integral parts of the law,” he said. Other reforms include allowing businesses to state their financial year and choose between three methods of depreciation, depending on the type of asset, as this will provide businesses with more flexibility to adjust for tax payable, he explained.

Meanwhile, a tax amnesty for Myanmar citizens with unassessed sources of income introduced under the 2019 Union Tax Law will be repealed in fiscal 2020-21.
Starting October 1, a 30 percent tax rate on all unassessed sources of income will be reinstated to avoid the risk of money laundering and further boost government coffers.

For the first six months of the fiscal year of 2019-20, Myanmar collected more than K 4 trillion in tax revenues, exceeding the government’s own estimates. “We
originally expected K3.2 trillion, but actual receipts totalled K4.1 trillion,” said U Maung Maung Win.
Taxes on local products and domestic consumption rose to K2 trillion, exceeding initial estimates of K1.6 trillion. Meanwhile, commercial taxes had been expected
to hit K779 billion but came to K1.05 trillion. A total of K129 billion was received from fees and taxes on vehicles, driving licences and businesses licences, also exceeding iniatial estimates of K76 billion.

However, payment of royalties owed to the state did not meet expectations because gems emporiums had to be postponed due to the COVID-19 pandemic, U Maung
Maung Win said. Receipts from royalties had initially been projected to be K35 billion but reached only K9 billion.
Royalties from oil and natural gas extraction had been expected to be K234 billion but contributed only K197 billion due to a decline in production from the Zawtika field and exchange rate losses, he said.U Maung Maung Win added that the new tax law for the coming fiscal year took three years to draft with the assistance of the International Monetary Fund.

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Source : Myanmar Times

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