New tax legislation for the financial year 2015/16

New tax legislation for the financial year 2015/16
Sebastian Pawlita
8 April 2015
Recently
y enacted legislation
g
•
•
•
•
Ministry
y of Finance Notification 180/2015
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)
• Law Amending the Commercial Tax Law (Law
18/2015))
Overview
• MoF Notification 180/2015 ((commercial tax))
– Service companies may set off commercial tax
– Reverse-charge mechanism (sort of) for non-resident service
providers
– Obligation for all businesses to issue receipts that are (i) either
from a pre-approved receipts booklet or (ii) to which a prepurchased 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
certain
i goods
d (e.g.
(
cigarettes,
i
li
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
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
g the Commercial Tax Law
–
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%
Increase of caps/thresholds/allowances
Salary income of non-resident Myanmar nationals not subject to
income tax any more
Rental income of individuals taxed at 10%
Changes to commercial tax: Service companies may
sett off
ff commercial
i l tax
t
• MoF Notification 180/2015: "A service p
provider may
y
set off, with the tax imposed on the service provided
by him, the tax which he paid for the matters used to
provide the service
service"
Changes to commercial tax: Service companies may
sett off
ff commercial
i l tax
t
• Example:
p A construction company
p y invoices 100+5 to
a tower company who invoices 300+15 to Ooredoo.
The tower company only has to pay 15-5=10 to the
tax office.
office
Services
Construction Construction
company
Services
Tower Tower
company
Money: 100+5
Money: 15‐5=10
15
5 10
Tax office
Ooredoo
Money: 300+15
Changes to commercial tax: Service companies may
sett off
ff commercial
i l tax
t
• Requirements:
q
–
–
Construction company: Must prepare 3 "evidence certificates"
on a prescribed form, and
– send the original to the tower company,
company
– send a copy to the township revenue officer in charge of the
tower company,
– keep the remaining copy
Tower company: Must send copy of the evidence certificate and
a form detailing the set-off to the township revenue officer
Changes to commercial tax: Service companies may
sett off
ff commercial
i l tax
t
• Questions:
Q
–
–
–
–
What happens if the construction company invoices the tower
company in March and the tower company invoices Ooredoo in
April?
p
The tower company purchases a diesel generator. Can the tower
company set off the commercial tax charged by the seller?
The tower company uses the services of a lawyer.
lawyer Can the tower
company set off the commercial tax charged by the lawyer?
Can manufacturers and traders set off commercial tax invoiced
by service companies?
Changes to commercial tax: Reverse-charge
mechanism
h i
(sort
(
t of)
f)
Service provider
Sends employees to Myanmar to provide services
Pays invoice
100
Sends invoice 100+5
Service recipient
Pays comm. tax 5
Tax office
Abroad
Myanmar
Changes to commercial tax: Reverse-charge
mechanism
h i
(sort
(
t of)
f)
• New section 3(c)
( ) Commercial Tax Regulations:
g
The
"representative" (i.e. the recipient of the services in
Myanmar) must register the foreign service provider
• Mechanism:
–
–
–
–
Foreign 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
5% commercial tax
Foreign service provider sends invoice with 5%
commercial tax
Changes to commercial tax: Reversed-charge
mechanism
h i
(sort
(
t of)
f)
• Mechanism (continued):
(
)
–
–
–
Myanmar service recipient pays 5% commercial tax in bank
account of tax authorities using payment challan in the name of
the foreign
g service p
provider
Foreign service provider sends letter (no specified form) to
Myanmar service provider allowing set-off
With the payment challan and the letter,
letter Myanmar service
recipient can set off commercial tax (if he has output tax)
Changes to commercial tax: "Restaurant rules"
expanded
d d to
t all
ll businesses
b i
• Restaurants have to p
pay
y commercial tax as follows:
–
Method 1:
– Sending,
Sending in advance,
advance the receipts booklet (one original and
two duplicate receipt forms on paper of the same size in
different colours bound as a booklet) to the township
revenue office so that the township revenue office can stamp
it with its seal
– Obtaining, in advance, payment notice forms ("payment
challans")) and declaration forms from the township revenue
challans
office
– Collecting the money (inclusive of commercial
tax) from the customer
Changes to commercial tax: "Restaurant rules"
expanded
d d to
t all
ll businesses
b i
–
Method 1 (continued):
– Handing over the original of a receipt from the receipts
booklet to the customer
– Depositing
p
g the commercial tax collected during
g the month
with a bank together with a payment challan within 10 days
after the end of the month
– Filing
g q
quarterly
y declarations which contain the challan
numbers within 1 month after the end of the quarter
Changes to commercial tax: "Restaurant rules"
expanded
d d to
t all
ll businesses
b i
–
Method 2:
– Purchasing revenue stamps from the township revenue
office in advance
– Collecting
g the money
y ((inclusive of commercial tax)) from the
customer
– Handing over a receipt to the customer to which revenue
stamps
p with a value equivalent
q
to the commercial tax due
are affixed
Changes to commercial tax: "Restaurant rules"
expanded
d d to
t all
ll businesses
b i
• MoF Notification 180/2015: "A manufacturer,, trader
or service provider who earns assessable revenue
from sales or from services" shall collect
commercial tax according to the "restaurant
restaurant rules
rules"
• MoF Notification was issued on 21 January 2015 and
came "into force with effect from the 2014/15
financial year"
Changes to commercial tax: "Restaurant rules"
expanded
d d to
t all
ll businesses
b i
• We do not issue receipts.
p
We issue invoices;; our
customers transfer the money to our bank account.
What do we do?
–
–
Theoretically, there is an obligation to issue receipts (section 32
Theoretically
Commercial Tax Law as amended by the 2014 Tax of the Union
Law)
MoF Notification 180/2015 states that that taxpayers "who
who do not
issue receipts" may, with the approval from certain senior tax
officers, instead "systematically keep accounts of the money
collected daily using a specified form
form"
Changes to commercial tax: "Restaurant rules"
expanded
d d to
t all
ll businesses
b i
• Penalties for non-compliance
p
–
–
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 penalties
Changes
g to commercial tax: Sale of "special
p
goods"
g
• MoF Notification 180/2015: The p
producer or importer
p
of cigarettes, tobacco, cured Virginia tobacco,
cheroots, cigars, pipe tobacco, betel chewing
preparations liquor,
preparations,
liquor beer or wine must affix a
revenue stamp to them before selling these goods
Changes to commercial tax: Changes to the tax rate
according
di to
t the
th 2015 Tax
T off the
th Union
U i Law
L
Goods
Domestic Domestic
production and subsequent sale
Import
Resale
Export
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%
Precious P
i
stones
Old: 30%, Old
30%
new: 15%
Old: 30%,
Old
30%
new: 15%
Old/
Old/new: 5%
5%
Old: 30%, Old
30%
new: 15%
Jewelry
Old: 15%, new: 5%
new: 5%
Old: 15%, new: 5%
new: 5%
Old/new: 5%
Old: 15%, new: 5%
new: 5%
Changes to commercial tax: Changes to the tax rate
according
di to
t the
th 2015 Tax
T off the
th Union
U i Law
L
Goods
Domestic Domestic
production and subsequent sale
Import
Resale
Export
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.
Changes to commercial tax: Changes to the tax rate
according
di to
t the
th 2015 Tax
T off the
th Union
U i Law
L
Service
Old tax rate
New tax rate
Information technology services
Exempt
5%
Technology and management consultancy gy
g
y
services
Exempt
p
5%
Container transport services
Exempt
5%
Licensed slaughtering of animals
slaughtering of animals
Exempt
5%
Changes to commercial tax: Other changes according
t the
to
th 2015 T
Tax off the
th U
Union
i L
Law
• Abolition of the p
preferential tax rate of 2% on the
production and sale of goods by local entrepreneurs
• Few amendments to the list of goods (mainly
agricultural products) whose production and
subsequent sale is tax
tax-exempt
exempt
• Increase of the revenue cap for being considered a
commercial tax-exempt small business from kyats
15,000,000 to now kyats 20,000,000 per financial year
Changes to income tax law: Changes of the tax rate
according
di to
t the
th 2015 Tax
T off the
th Union
U i Law
L
Type
yp of income
Tax rate resident Tax rate non‐
resident
Tax rate branch of a foreign
company
Employment income
Old/new: 0‐25%
Old: 35%
new: 0‐25%
N.A.
Capital gains
Old/new: 10%
Old: 40%
new: 10%
10%
Old: 40%
new: 10%
10%
Capital gains in the oil and gas sector
Old: 40‐50% payable in kyats
new: 40‐50% payable in F.E. if received in F.E.
Income having escaped h
d
assessment
Old: 30% with relief
ld
h l f for first‐time purchases
f f
h
new: 30%, with relief for establishing/expanding businesses
Other income of companies
Other income of companies
Old/new: 25%
Old/new: 25%
Old: 35%
Old:
35%
new: 25%
Old: 35%
new: 25%
Changes to income tax law: Changes of the tax rate
according
di to
t the
th 2015 Tax
T off the
th Union
U i Law
L
Type
yp of income
Tax rate resident Tax rate non‐
resident
Tax rate branch of a foreign
company
Rental income of individuals
Old: 0‐25%
new: 10%
(only possible for Myanmar nationals)
N.A.
Changes to income tax law: Other changes according
t the
to
th 2015 T
Tax off the
th U
Union
i L
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
Changes to income tax law: Other changes according
t the
to
th 2015 T
Tax off the
th U
Union
i L
Law
• Salary
y income of Myanmar
y
nationals residing
g and
working abroad no longer subject to Myanmar
income tax
Changes to income tax law: Other changes according
t the
to
th 2015 T
Tax off the
th U
Union
i L
Law
• Increased thresholds/caps
p
–
No capital gains tax to be assessed if the capital gain in all
relevant transactions in a financial year does not exceed kyats
10,000,000 (previously, the amount was kyats 5,000,000)
–
Income off small or mid-sized businesses off up to kyats
10,000,000 during the first three years, including the year of
commencement of the business, is exempt from income tax.
Previously the amount was kyats 5,000,000.
Previously,
5 000 000 The mechanism
behind this provision is not entirely clear.
Myanmar
sebastian@pwplegal.com
+95 (9) 401529445
www.pwplegal.com