Myanmar Withholding Tax (“WHT”) rates will be reduced by up to 5% from 1 April 2017.
The Ministry of Planning and Finance issued Notification 2/2017 dated 10 January 2017 (“Notification 2”) which will lower the rate of WHT on payments to non-residents and royalties paid to residents. Notification 2 will also clarify some issues on the application of WHT to offshore services and leases. It will replace the current Notification 41-2010 as amended by Notification 167-2011 (“Notification 41”).
The key changes are as follows:
- Notification 2 provides that any person responsible for disbursing money must deduct WHT at the rates below:
| Kind of payment | Percentage to be deducted from payments to: | |
| Residents | Non-residents | |
| Interest payment for a loan or indebtedness or a transaction of a similar nature. | None (no change) | 15% (no change) |
| Royalties for the use of licenses, trademarks, patent rights, etc. | 10% (currently 15%) | 15% (currently, 20%) |
| Payment for the purchase of goods, work performed or supply of services, and hiring arrangements within the country under a tender, contract, quotation or other modes. | 2% (no change) | 2.5% (currently 3.5%) |
- Notification 2 includes “hiring” or “hiring arrangements” in the scope of taxable transactions. Notification 41 is vague on this point, and consequently, many landlords and lessors of machinery have argued that rent should not be subject to WHT. With this inclusion in Notification 2, WHT now firmly applies to rental or lease payments.
- Under Notification 2, the phrase “within the country” qualifies the sale of goods, provision of services and hiring agreements. This means that from 1 April 2017, goods sold abroad, services performed abroad and leases outside the country will no longer be subject to WHT. This differs from the implication of Notification 41 which exempts goods sold outside the country, but makes services rendered abroad liable to WHT.
- Notification 2 provides that no WHT applies to payments in local currency of less than MMK 500,000 within a financial year.
- WHT will not apply to; payments among government organizations, state-owned enterprises or interest payments made to branches of foreign banks.
Notification 2 reiterates that a person or entity disbursing money will not be excused from its obligation to deduct WHT for the simple reason that the payee refuses to accept payment with WHT deductions. WHT tax must be reported within 7 days from payment. In practice, the tax authority allows payment on a monthly basis.
Please contact Bernard Cobarrubias, K Khine Phyo, or Diberjohn Balinas if you would like further information.
