On 1^st October 2021, the Ministry of Planning and Finance issued the Notification No. 510/2021 Re: “Procedures for Tax Collection during the Transition Period due to the Change of Fiscal Year” (“MPF Notification”) setting out procedures for the transition towards the effective date of 1^st April 2022 for the change of fiscal year period to 1^st April to 31^st March. The transition period is 1^st October 2021 to 31^st March 2022.

The MPF Notification provides that the annual income tax return, the annual salary statement and the annual commercial tax return for this six-month transition period must be filed within three months after the end of the six months period i.e. within 30^th June 2022.

This Article summarizes some salient features of the MPF Notification as follows:

1. Special Goods Tax (“SGT”)

The SGT shall be levied if the total revenue to be received or received during the transition period on the domestic production and sales of tobacco, cheroots and cigar to be multiplied by two, which exceeds MMK 20 million.

2. Commercial Tax (“CT”)

The CT shall be levied if the total revenue of the sales proceeds or service fees to be received or received during the transition period on the domestic production, trading and sales of goods that are subject to commercial tax to be multiplied by two, which exceeds MMK 50 million.

3. Personal Income Tax (“PIT”)

The PIT from salary shall be levied if the total income received by the individual during the transaction period to be multiplied by two, which exceeds MMK 4.8 million. The PIT shall be calculated on the remaining income after deducting the personal relief and allowance under section 6 of the Income Tax Law and half of the calculated income tax shall be the payable income tax.

Under the 2021 Union Tax Law, there are changes to the income brackets for assessing of personal income tax rates.

Any person whose annual income from salary within a year exceeds MMK 4,800,000, shall be paid income tax subject to the progressive tax rate between 0% to 25% as mentioned in the 2021 Union Tax Law.

The income under the heading of the profession, business and other sources, the remaining income after deducting the cost/expense incurred to earn from the total income, during the transition period to be multiplied by two. Thereafter, the income tax shall be calculated on the remaining income after deducting the relief and allowance under section 6 of the Income Tax Law and half of the calculated income tax shall be the payable income tax.

A foreign national will be considered to be a Myanmar resident and shall be levied income tax if the total number of days of his/her in Myanmar during the transaction period to be multiplied by two exceed 183 days.

Regarding non-resident foreign nationals, the income tax shall be calculated as per sub-paragraph (e) of the notification if the income is other types of income except salary and without deducting the tax relief and allowance under section 6 and 6-A of the Income Tax Law. If the income is from the salary, the income tax shall be calculated as per section 19 sub-section (c) of 2021, Union Tax Law and without deducting the tax relief and allowance under section 6 and 6-A of the Income Tax Law and half of the calculated income tax shall be the payable income tax.

The income tax shall be levied under section 22 of the 2021 Union Tax Law on the total foreign currency income of a citizen residing abroad during this period, except the title of salary.

4. Corporate Income Tax (“CIT”)

The CIT shall be calculated for MIC permitted entities, companies, state-owned enterprises and primary cooperative societies during the transition period by deducting the cost/expense incurred to earn and the depreciation prescribed by the regulations from the total income.

In calculation as per above sub-paragraph, for the primary cooperative societies, the income tax shall be calculated on the remaining income after deduction the half of the relief amount allowed under section 6 of the Income Tax Law from the net profit.

In the case of Small and Medium Enterprises (SME), the total net profit received during the six-month period (if the six-month period falls within the period of three consecutive year including the starting year) is multiplied by two and shall be levied corporate income tax if it exceeds of MMK 10 million. Half of the calculated income tax according to sub-clause 2 shall be the payable income tax of such enterprises.

To be improved the business enterprises which are affected due to COVID-19 and increased the investments, the 2021 Union Tax Law has reduced the rate of corporate income tax from 25% to 22%.

5. Capital Gains Tax (CGT);

No income tax shall be levied if the total value of the sale, exchange or transfer by other means of the capital assets does not exceed MMK 10 million during the transaction period, regardless of whether there is profit or not.

In conclusion, the MPF Notification is a tax assessment procedure on how the tax will be calculated for the six-month transition period from 1^st October 2021 to 31^st March 2022. This notification does not specify whether all taxpayers shall comply with these procedures or not. However, in September 2021, the Medium Taxpayers Offices issued an announcement to taxpayers that the current fiscal year, which runs from 1^st October to 30^th September, will be changed to 1^st April to 31^st March. Similarly, the State Administration Council published announcements in October 2021 on the six-month transition period from 1^st October 2021 to 31^st March 2022 to inform the public and set such period as the budget period. Therefore, the taxpayers will be required to comply with the tax administration matters in accordance with the government’s six-month budget period and the fiscal year changes.

South Asia Consulting

9^th November2021