Myanmar, officially known as the Republic of the Union of Myanmar, is a Southeast Asian country bordered by India, Bangladesh, China, Laos, and Thailand. In recent years, Myanmar has embarked on a journey of economic reform and liberalization, opening up new opportunities for international businesses. However, understanding the nuances of the country’s tax regime is crucial for companies planning to set up operations. This article delves into the key aspects of corporate taxation in Myanmar.
The Basics of Corporate Taxation
Myanmar employs a residency-based tax system. Both resident and non-resident companies are taxed on their Myanmar-sourced income. A company is considered a resident if it is incorporated in Myanmar or if the control and management of its business are in Myanmar during the income year.
Corporate Income Tax
The corporate income tax (CIT) rate in Myanmar is 25%, applicable to resident companies. Non-resident companies, however, are subject to a flat rate of 2.5% on their Myanmar-sourced income. It’s important to note that foreign businesses not incorporated in Myanmar but operating in the country need to understand this differential taxation policy to ensure compliance.
Types of Taxable Income
Corporate taxable income includes but is not limited to, income derived from business operations, rental income, interest, royalties, and capital gains. Myanmar also taxes management and technical services fees paid to non-residents at a withholding tax rate that varies depending on whether the company has a Double Taxation Agreement (DTA) with Myanmar.
Tax Incentives and Exemptions
To attract foreign investment, Myanmar offers various tax incentives. The Myanmar Investment Law (MIL) provides tax exemptions and other benefits to eligible businesses. For instance, companies registered under the MIL may benefit from an income tax exemption for a period of up to five consecutive years, depending on the zone in which they operate. Additionally, businesses engaged in manufacturing, infrastructure, and other priority sectors are eligible for specific fiscal incentives.
Withholding Tax
Myanmar imposes withholding tax (WHT) on certain types of payments made to both residents and non-residents. Payments to residents for services rendered are subject to a 2% withholding tax, whereas payments to non-residents for services rendered outside Myanmar attract a 3.5% withholding tax. Dividends and interest payments made to non-residents are generally subject to a 20% withholding tax, although this rate can be reduced under applicable double taxation treaties.
Value Added Tax (VAT)
Myanmar does not impose a VAT. Instead, it levies a Commercial Tax (CT) on goods and services supplied in Myanmar, with rates varying depending on the nature of the product or service. The standard rate for most goods and services is 5%.
Filing and Payment
Corporate tax returns must be filed annually within three months following the end of the fiscal year, which runs from October 1 to September 30. Companies are expected to make quarterly advance payments of tax based on estimated income, with the balance payable when filing the annual return.
Penalties for Non-Compliance
Myanmar’s tax authorities are stringent regarding compliance. Companies that fail to file their returns or pay taxes on time are subject to penalties, including fines and interest on overdue taxes. Businesses must maintain accurate records and documentation to support their tax filings and mitigate the risk of penalties.
Conclusion
Navigating Myanmar’s corporate tax landscape requires a thorough understanding of the applicable laws and regulations. While the country offers attractive incentives to encourage investment, businesses must ensure they are fully compliant with local tax requirements. Consulting with a local tax advisor can provide additional clarity and support, helping businesses successfully establish and grow their presence in Myanmar.
Certainly! Below are some suggested related links about Corporate Taxation in Myanmar:
Official resources
Ministry of Finance Myanmar
Legal and professional services
Deloitte
PwC
EY
KPMG
Business information and insights
EuroCham Myanmar
Myanmar Centre for Responsible Business
Asean Briefing