Over the past few months, the Myanmar Internal Revenue Department (“IRD”) has issued several Interpretation Statements and a Notice Statement clarifying certain provisions of the Commercial Tax (“CT”) Laws. These Interpretation Statements address a number of common issues encountered by taxpayers and to provide clearer guidance with respect to the CT treatment of service charges, advance rental payments, capital asset purchases, and other similar payments. The guidance provides additional clarity on the timing of the CT recognition from both a buyer and seller perspective.
Here is a summary of these IRD Interpretations:
| Issuances from the IRD | Details |
|
Interpretation Statement No. 1 dated 10 October 2018 |
Service charges that are levied by a service-oriented entity (e.g. restaurants, hotels) are also subject to 5% CT. |
|
Interpretation Statement No. 2 dated 11 October 2018 |
The seller must pay output CT to the IRD within 10 days after the end of the relevant month. The “relevant month” refers to the month of settlement (payment date) or the month for which settlement is determined (invoice date), whichever comes first. The Interpretation, however, did not clarify the CT treatment for credit notes or transactions that result in sales adjustments after the invoice is issued. |
|
Interpretation Statement No. 3 dated 29 October 2018 |
The buyer is required to recognize input CT only at the time that the CT is paid. The Interpretation, however, did not clarify the CT treatment in cases where the invoice was already issued in a prior year but the payment (as supported by voucher or bank confirmation) was only settled in the subsequent year. An argument can be raised that the related input CT should be reported following the actual payment date, irrespective of whether the related invoice was issued in the prior year. Nevertheless, this may still be a point of contention during an assessment given the absence of clear guidelines on the matter. |
|
Interpretation Statement No. 4 dated 2 November 2018 |
CT paid on advance rental payment can be offset against output CT in the month that the payment is made. Any excess CT at the end of the tax year can either be carried-forward to the succeeding year as CT credit, or it can be claimed as a tax deductible expense for income tax purposes. |
|
Interpretation Statement No. 5 dated 26 December 2018 |
The input CT paid for the purchase of capital assets, and the purchase of goods or services in relation to construction of such capital assets cannot be offset against output CT. Such input CT must be included as part of the cost of capital assets and will be subject to depreciation under existing tax rules (under Notification 19/2016 as applicable). |
|
Interpretation Statement No. 6 dated 26 December 2018 |
Payments for purchases of goods and services that are settled in forms other than cash (e.g., non-cash or payment in kind) are also subject to 5% CT. |
|
Notice Statement No. 3 dated 26 December 2018 |
If the amount of CT is not included or not separately presented in an invoice, the amount per invoice will be deemed inclusive of 5% CT. |
DFDL Contacts
Jack Sheehan
Partner,
Head of Regional Tax Practice
jack.sheehan@dfdl.com
Diberjohn Balinas
Senior 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.
