Attracting investments into its recently opened-up economy is a clear priority of Myanmar's tax regime, with a slew of tax incentives for foreign investors. But that is tempered by a need to collect more tax revenues - less for the government to spend on developing public infrastructure creates roadblocks to Myanmar’s economic development too.
Despite being one of the fastest growing economies in Asia, Myanmar’s tax revenue collection has been one of the lowest. Its revenues amount to 7.5 per cent of GDP, compared to Thailand’s 16 per cent and Cambodia’s 14 per cent.
Here are the key tax rates:
Corporate Tax: 25% standard rate
Companies incorporated in Myanmar are subject to the standard corporate tax rate of 25 per cent, on their worldwide income. Branches of foreign companies and foreign companies without a permanent establishment in Myanmar are taxed only on Myanmar-source income.
Companies listed on Yangon’s stock exchange benefit from a reduced rate of 20 per cent on their corporate income.
For those importing goods into Myanmar, there is a 2 per cent advance corporate income tax levied on imports. This can be credited against the corporate income tax the importer needs to pay at the end of the year.
Indirect Tax: 5% commercial tax on most goods and services
Myanmar levies a commercial tax, instead of a value-added tax.
It is levied as a turnover tax on a wide range of goods and services traded, produced or rendered in Myanmar, as well as on imported goods. For most goods and services, the rate of commercial tax imposed is 5 per cent, but rates range from 0 to 8 per cent.
There are exceptions. 30 types of services are exempt from commercial tax, including life insurance, banking and financial services, microfinance, public transportation and publishing services. And no commercial tax is imposed if a company’s proceeds are not more than 50 million Myanmar kyats.
Commercial tax is also zero-rated on all exports, except for electricity (8 per cent) and crude oil (5 per cent).
Dividends: Not taxed
Interest: Interest paid to residents is not taxed. Interest paid to non-residents is subject to withholding tax of 15 per cent.
Royalties: Royalties paid to residents are subject to withholding tax of 10 per cent, while royalties paid to non-residents are taxed 15 per cent.
Personal Tax: 25% top marginal rate
Myanmar has a progressive schedule of personal income tax rates which range from 0 per cent to 25 per cent. The top marginal rate of 25 per cent applies to chargeable income above 30 million Myanmar kyat.
This schedule applies to all tax residents: this includes all Myanmar citizens and foreigners who live in Myanmar for at least 183 days during the year of assessment. The salaried income of Myanmese working abroad is tax-exempt, but other sources of income are taxable.
Non-resident foreigners are subject to tax on their Myanmar-source income at rates ranging from 0 per cent to 25 per cent too.
Myanmar provides incentives to foreign investors under two main laws: the Myanmar Investment Law and the Special Economic Zone law.
Incentives for companies registered under the Myanmar Investment Law include:
- A tax exemption for five consecutive years
- A tax exemption for the production of goods and services, and for reinvested profits
- 50 per cent tax relief for export profits
- Various deductions and exemptions from customs duty and domestic taxes on imported materials, machinery and equipment
- Companies are allowed to repatriate investments and profits in the foreign currency in which investments were made, subject to authorities’ approval. (Individuals and companies in Myanmar are otherwise subject to stricter foreign exchange controls.)
Incentives for companies and investors operating in special economic zones include:
- For investors in a free zone: a tax exemption for the first seven years, 50 per cent relief for the five years after, and 50 per cent relief for an additional five years if profits are reinvested within a year.
- For investors in a promotion zone: a tax exemption for the first five years, 50 per cent relief for the second five years, and 50 per cent relief for the third five years if profits are reinvested within a year.
- For developers: a tax exemption for the first eight years, 50 per cent relief for the five years after, and 50 per cent relief for an additional five years if profits are reinvested within a year.
- An import duty exemption on certain goods.
Here are our other TAX GUIDES: