The Ministry of Planning and Finance issued Notification 47/2018 on 18 June 2018 outlining the new withholding tax (“WHT”) rules that now apply on payments to resident and non-resident taxpayers in Myanmar. This Notification is effective from 1 July 2018 and will supersede the current WHT Notification 51/2017 that was issued last 22 May 2017.
The major changes under Notification 47/2018 are as follows:
- No WHT will apply to payments to resident citizens, resident foreigners, and resident companies for the purchase of goods, work performed, or supply of services within Myanmar. This means that business-to-business payments to resident taxpayers will not be subject to WHT effective 1 July 2018. However, there is a qualification in Notification 47/2018 that if payment is made “by Union level organizations, Department of Union Ministries, the Naypyitaw Council, Regional or State Governments, State-owned enterprises, or Municipal organizations for the purchase of goods, work performed, or supply of services within the country under a tender, bid, quotation, contract, agreement, or other modes”, then the 2% WHT on payments to resident taxpayers will still apply.
There is no change in WHT on payments to non-resident foreigners. The WHT on payments for goods and work performed or supply of services within the country is still at 2.5%.
- The WHT threshold for payments to resident taxpayers is now MMK 1 million per payment to supplier per year. This applies if payment is made “by Union level organizations, Department of Union Ministries, the Naypyitaw Council, Regional or State Governments, State-owned enterprises, or Municipal organizations for the purchase of goods, work performed, or supply of services within the country under a tender, bid, quotation, contract, agreement, or other modes.”
Previously, Notification 51/2017 qualified the threshold: (1) based on the type of the payer’s registration with the Internal Revenue Department (i.e., if under Self-Assessment of Office Assessment Systems); and (2) the amount per payment to supplier. However, Notification 47/2018 now applies the threshold uniformly to all resident taxpayers and based on total payments to suppliers per annum.
- The term “hiring” was excluded as part of the coverage of WHT. Previously under Notification 51/2017, WHT applied “for purchase of goods, work performed or supply of services and hiring within the country.” With the removal of this, it can be interpreted that rental payments for lease or hiring arrangements (residents and non-residents) are not subject to WHT. (Update as of August 2018: Based on the recent confirmation from IRD, they opined that leasing transactions are under the scope of services subject to WHT if paid to non-residents)
From the above, the following WHT rates will apply effective 1 July 2018:
| Type of Payment | WHT rates on payments to | ||
| Residents | Non-residents | ||
| (a) | Interest payments. | Exempt | 15% |
| (b) | Royalties for the use of Licenses, Trademarks, Patent Rights, etc. | 10% | 15% |
| (c) | Payments by Union level organizations, Departments of Union Ministries, Naypyitaw Council, Regional or State Governments, State-owned enterprise, Municipal organizations for the purchase of goods, work performed or supply of services within the country under a tender, bid, quotation, contract, agreement, or other modes. | 2% | 2.5% |
| (d) | Payments by business firms that beneficially consolidate with the government, joint ventures, partnerships, companies, associations of individuals, organizations, or associations registered and organized under the existing law, cooperatives, foreign companies, foreign enterprises for the purchase of goods, work performed, or supply of services within the country under a contract, agreement, or other modes. | Exempt | 2.5% |
Note: For item (a), WHT Notification 51/2017 stated that interest payments should be for a loan or indebtedness or a transaction of a similar nature or saving. However, Notification 47/2018 did not qualify the nature of interest payments. Similarly, interest payments made to branches of foreign banks are still exempt from WHT.
DFDL Contact
Jack Sheehan
Partner,
Head of Regional Tax Practice
jack.sheehan@dfdl.com
Diberjohn Balinas
Tax Manager,
Myanmar
diberjohn.balinas@dfdl.com
The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
