New tax legislation for the financial year...

New tax legislation for the financial year 2015/16Sebastian Pawlita8 April 20158 April 2015

Recently enacted legislationy g

• Ministry of Finance Notification 180/2015y• Law Amending the Sea Customs Act (Law 13/2015)• Law Amending the Road Customs Act (Law 14/2015)• Law Amending the Land and Revenue Act (Law

15/2015)2015 Tax of the Union Law (Law 17/2015)• 2015 Tax of the Union Law (Law 17/2015)

• Law Amending the Commercial Tax Law (Law18/2015))

Overview

• MoF Notification 180/2015 (commercial tax)( )– Service companies may set off commercial tax– Reverse-charge mechanism (sort of) for non-resident service

providersproviders– Obligation for all businesses to issue receipts that are (i) either

from a pre-approved receipts booklet or (ii) to which a pre-purchased revenue stamp is affixedpurchased revenue stamp is affixed

• 2015 Tax of the Union Law (commercial tax)– Change of the tax rate with regard to the sale and the import of

i d ( i li )certain goods (e.g. cigarettes, liquor)– Decrease of the tax rate with regard to the export of gem stones

and gem stone products

Overview

• 2015 Tax of the Union Law (commercial tax) -( )continued– Sale of buildings by developers subject to 3% commercial tax

Export of electricity subject to 8% commercial tax– Export of electricity subject to 8% commercial tax– Four lines of services no longer exempt from commercial

tax– Abolition of the preferential tax rate of 2% on the production and

sale of goods by local entrepreneurs

• Law Amending the Commercial Tax Lawg– New penalties

Overview

• 2015 Tax of the Union Law (income tax)( )– Harmonization of tax rates for residents and non-residents– In particular: Capital gains of non-residents now only taxed at

10%10%– Increase of caps/thresholds/allowances– Salary income of non-resident Myanmar nationals not subject to

income tax any moreincome tax any more– Rental income of individuals taxed at 10%

Changes to commercial tax: Service companies may t ff i l tset off commercial tax

• MoF Notification 180/2015: "A service provider mayp yset off, with the tax imposed on the service providedby him, the tax which he paid for the matters used toprovide the service"provide the service


• Example: A construction company invoices 100+5 top p ya tower company who invoices 300+15 to Ooredoo.The tower company only has to pay 15-5=10 to thetax officetax office.

Construction TowerServices Services

Construction company

Tower company Ooredoo

Money: 100+5

Money: 300+15Money:

15‐5=10

Tax office

15 5 10


• Requirements:q– Construction company: Must prepare 3 "evidence certificates"

on a prescribed form, and– send the original to the tower companysend the original to the tower company,– send a copy to the township revenue officer in charge of the

tower company,keep the remaining copy– keep the remaining copy

– Tower company: Must send copy of the evidence certificate anda form detailing the set-off to the township revenue officer


• Questions:Q– What happens if the construction company invoices the tower

company in March and the tower company invoices Ooredoo inApril?p

– The tower company purchases a diesel generator. Can the towercompany set off the commercial tax charged by the seller?

– The tower company uses the services of a lawyer Can the towerThe tower company uses the services of a lawyer. Can the towercompany set off the commercial tax charged by the lawyer?

– Can manufacturers and traders set off commercial tax invoicedby service companies?by service companies?

Changes to commercial tax: Reverse-charge h i ( t f)mechanism (sort of)

Service provider

Sends

Abroad

Myanmar

employees to Myanmar to provide services

Sends invoice 100+5

Pays invoice100

Service recipient

services

Pays comm. tax 5

Tax office

Changes to commercial tax: Reverse-charge h i ( t f)mechanism (sort of)

• New section 3(c) Commercial Tax Regulations: The( ) g"representative" (i.e. the recipient of the services inMyanmar) must register the foreign service provider

• Mechanism:– Foreign service provider sends invoice with 5% commercial taxForeign service provider sends invoice with 5% commercial tax– Myanmar service recipient uses this invoice to register the

foreign service provider– Myanmar service recipient pays foreign service provider without– Myanmar service recipient pays foreign service provider without

5% commercial tax– Foreign service provider sends invoice with 5%

commercial taxcommercial tax

Changes to commercial tax: Reversed-charge h i ( t f)mechanism (sort of)

• Mechanism (continued):( )– Myanmar service recipient pays 5% commercial tax in bank

account of tax authorities using payment challan in the name ofthe foreign service providerg p

– Foreign service provider sends letter (no specified form) toMyanmar service provider allowing set-off

– With the payment challan and the letter Myanmar serviceWith the payment challan and the letter, Myanmar servicerecipient can set off commercial tax (if he has output tax)

Changes to commercial tax: "Restaurant rules" d d t ll b iexpanded to all businesses

• Restaurants have to pay commercial tax as follows:p y

– Method 1:Sending in advance the receipts booklet (one original and– Sending, in advance, the receipts booklet (one original andtwo duplicate receipt forms on paper of the same size indifferent colours bound as a booklet) to the townshiprevenue office so that the township revenue office can stamprevenue office so that the township revenue office can stampit with its seal

– Obtaining, in advance, payment notice forms ("paymentchallans") and declaration forms from the township revenuechallans ) and declaration forms from the township revenueoffice

– Collecting the money (inclusive of commercialtax) from the customertax) from the customer


– Method 1 (continued):– Handing over the original of a receipt from the receipts

booklet to the customer– Depositing the commercial tax collected during the monthp g g

with a bank together with a payment challan within 10 daysafter the end of the month

– Filing quarterly declarations which contain the challang q ynumbers within 1 month after the end of the quarter


– Method 2:– Purchasing revenue stamps from the township revenue

office in advance– Collecting the money (inclusive of commercial tax) from theg y ( )

customer– Handing over a receipt to the customer to which revenue

stamps with a value equivalent to the commercial tax duep qare affixed


• MoF Notification 180/2015: "A manufacturer, trader,or service provider who earns assessable revenuefrom sales or from services" shall collectcommercial tax according to the "restaurant rules"commercial tax according to the restaurant rules

• MoF Notification was issued on 21 January 2015 andMoF Notification was issued on 21 January 2015 andcame "into force with effect from the 2014/15financial year"


• We do not issue receipts. We issue invoices; ourp ;customers transfer the money to our bank account.What do we do?

Theoretically there is an obligation to issue receipts (section 32– Theoretically, there is an obligation to issue receipts (section 32Commercial Tax Law as amended by the 2014 Tax of the UnionLaw)MoF Notification 180/2015 states that that taxpayers "who do not– MoF Notification 180/2015 states that that taxpayers who do notissue receipts" may, with the approval from certain senior taxofficers, instead "systematically keep accounts of the moneycollected daily using a specified form"collected daily using a specified form


• Penalties for non-compliancep– Law Amending the Commercial Tax Law: Penalties for not giving

receipts and for giving receipts without revenue stamps stuck on– Informers rewarded with part of the penaltiesInformers rewarded with part of the penalties

Changes to commercial tax: Sale of "special goods"g p g

• MoF Notification 180/2015: The producer or importerp pof cigarettes, tobacco, cured Virginia tobacco,cheroots, cigars, pipe tobacco, betel chewingpreparations liquor beer or wine must affix apreparations, liquor, beer or wine must affix arevenue stamp to them before selling these goods

Changes to commercial tax: Changes to the tax rate di t th 2015 T f th U i Laccording to the 2015 Tax of the Union Law

Goods Domestic Import Resale ExportGoods Domestic production and subsequent

Import Resale Export

sale

Cigarettes Old: 100%, new: 120%

Old: 100%, new: 120%

Old/new: 5% Old/new: 0%

Tobacco, betel, liquor, beer

Old: 50%, new: 60%

Old: 50%,new: 60%

Old/new: 5% Old/new: 0%

P i Old 30% Old 30% Old/ 5% Old 30%Precious stones

Old: 30%, new: 15%

Old: 30%,new: 15%

Old/new: 5% Old: 30%, new: 15%

Jewelry Old: 15%, new: 5%

Old: 15%, new: 5%

Old/new: 5% Old: 15%, new: 5%new: 5% new: 5% new: 5%


Goods Domestic Import Resale ExportGoods Domestic production and subsequent

Import Resale Export

sale

Electricity Old/new: 5% Old/new: 5% Old/new: 5% Old: 0%New: 8%

Buildings Old: 5%New: 3%

N.A. Old/new: 5% N.A.


Service Old tax rate New tax rate

Information technology services Exempt 5%

Technology and management consultancy Exempt 5%gy g yservices

p

Container transport services Exempt 5%

Licensed slaughtering of animals Exempt 5%Licensed slaughtering of animals Exempt 5%

Changes to commercial tax: Other changes according t th 2015 T f th U i Lto the 2015 Tax of the Union Law

• Abolition of the preferential tax rate of 2% on thepproduction and sale of goods by local entrepreneurs

• Few amendments to the list of goods (mainlyagricultural products) whose production andsubsequent sale is tax-exemptsubsequent sale is tax exempt

• Increase of the revenue cap for being considered acommercial tax-exempt small business from kyats15,000,000 to now kyats 20,000,000 per financial year

Changes to income tax law: Changes of the tax rate di t th 2015 T f th U i Laccording to the 2015 Tax of the Union Law

Type of income Tax rate resident Tax rate non‐ Tax rate ypresident branch of a

foreigncompany

Employment income Old/new: 0‐25% Old: 35%new: 0‐25%

N.A.

Capital gains Old/new: 10% Old: 40%10%

Old: 40%10%new: 10% new: 10%

Capital gains in the oil and gas sector

Old: 40‐50% payable in kyatsnew: 40‐50% payable in F.E. if received in F.E.

h d ld h l f f f hIncome having escaped assessment

Old: 30% with relief for first‐time purchasesnew: 30%, with relief for establishing/expanding businesses

Other income of companies Old/new: 25% Old: 35% Old: 35%Other income of companies Old/new: 25% Old: 35%new: 25%

Old: 35%new: 25%

Changes to income tax law: Changes of the tax rate di t th 2015 T f th U i Laccording to the 2015 Tax of the Union Law

Type of income Tax rate resident Tax rate non‐ Tax rate ypresident branch of a

foreigncompany

Rental income of individuals Old: 0‐25%new: 10%(only possible for Myanmar nationals)

N.A.

nationals)

Changes to income tax law: Other changes according t th 2015 T f th U i Lto the 2015 Tax of the Union Law

• Increased allowances:Allowance Old allowance p.a. New allowance p.a.

Basic allowance 20% of taxable income, max. Ks. 10,000,000

Allowance per parent living together with the taxpayer

Not available Ks. 1,000,000

Spouse allowance Ks. 500,000 Ks. 1,000,000

Allowance per child Ks. 300,000 Ks. 500,000


• Salary income of Myanmar nationals residing andy y gworking abroad no longer subject to Myanmarincome tax


• Increased thresholds/capsp

– No capital gains tax to be assessed if the capital gain in allrelevant transactions in a financial year does not exceed kyatsrelevant transactions in a financial year does not exceed kyats10,000,000 (previously, the amount was kyats 5,000,000)

f f– Income of small or mid-sized businesses of up to kyats10,000,000 during the first three years, including the year ofcommencement of the business, is exempt from income tax.Previously the amount was kyats 5 000 000 The mechanismPreviously, the amount was kyats 5,000,000. The mechanismbehind this provision is not entirely clear.

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New tax legislation for the financial year...

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