The Myanmar Ministry of Planning and Finance (“MOPF”) recently issued Notification 38/2019 dated 8 April 2019 removing the 2% advance income tax exemption on exports previously granted to taxpayers under the Large Taxpayers Office (“LTO”) and Medium Taxpayers Office No. 1 (“MTO 1”) effective from 1 May 2019.
The 2% advance income tax was introduced in 2013 and was collected from the importer and exporter based on the assessed value of the goods being imported to and exported from Myanmar. In January 2018, the MOPF, through the issuance of Notification 7/2018, provided an exemption for “goods exported by taxpayers at the large or medium tax payers’ office who use the self-assessment system.” This was an acknowledgment by the Myanmar Government of the level of compliance and significant tax payments made by taxpayers under the LTO and MTO 1.
However, the MOPF noted that some traders engaging in border trade transactions are now exporting goods under the name of companies under the LTO and MTO 1, which it considers unfair to other traders not covered by the self-assessment system. Therefore, in order to maintain a level playing field, the MOPF issued Notification 38/2019 revoking the 2% advance income tax exemption on exports previously granted to taxpayers under the LTO and MTO 1.
Under Notification 38/2019, only the following importation and export of goods are exempt from payment of 2% advance income tax:
- goods imported or exported using the budget allowance by the ministry, departments, and state-owned enterprises;
- motor vehicles imported by individuals after returning the permit for old vehicle;
- for MIC-registered enterprises, machines, equipment, and spare parts imported to be used during the construction period and raw materials imported within the first three years after the construction period;
- goods imported with donation of local or foreign organizations.
- fire engines, funeral engines, ambulance (except hospital vehicles imported by private businesses);
- raw materials imported for contract-manufacturing services; and
- goods imported under draw-back system or under temporary importation.
This Notification 38/2019 supersedes Notification 7/2018. Starting from 1 May 2019, all taxpayers (unless otherwise covered by the exemptions) will be subject to 2% advance income tax on importation and exportation of goods. Such advance income tax paid by the taxpayer upon importation and exportation is creditable against the taxpayer’s corporate income tax liability at the end of the tax year.