Further updates to withholding tax changes from 1 April 2017
The notice 2/2017 was issued on 10 January 2017 to make some changes to the withholding tax system that took effect from 1 April 2017. One of the changes was in relation to the de-minimis threshold for withholding tax. The change exempted payments from withholding tax if the total amount of payments (in aggregate) to a recipient within a fiscal year is less than MMK 500,000. In the notice 37/2017, the de-minimis rule has been further expanded such that withholding tax would also be exempted from payments to large tax payers and medium tax payers that are under self-assessment if the total payments do not exceed an aggregate of MMK 1,500,000. The changes will take effect from 1 April 2017.
However, the new notification did not provide details as to the documentation that would be required to prove that the recipient is a company under the self-assessment system.
Further to the announced changes to the withholding tax system, the Internal Revenue Department (“IRD”) has issued further guidance to tax payers to help them better understand the withholding tax regulations in Myanmar.
Some of the key points therein are discussed below.
It is explained in the document that generally, individuals will not be obliged to undertake withholding tax on payments made in relation to goods and services, subject to certain exceptions.
The IRD has also clarified that it expects tax payers to submit an application to the Director General of the IRD to obtain a decision on whether withholding tax would be applicable to services that have been procured overseas.
Whilst this seems to be a new insertion, this continues to follow the current practice of the IRD where their upfront agreement on many of these issues are expected prior to the transactions taking place.
This practice of obtaining an upfront approval is also mentioned in a later paragraph within the document in relation to tax payer’s reliance on any of the Avoidance of Double Taxation Agreement (“DTA”) that Myanmar has concluded. The tax payer is expected to obtain a response from the IRD prior to reliance. This is likely to cause the delay of some commercial transactions unless the IRD will be able to respond to all applications on a timely basis.
It is clarified in the document that contractors when making payments to sub-contractors are expected to withhold tax and the sub-contractors will be able to utilise the withholding tax suffered to offset against their final tax assessment.
Whilst this is clearly understood by many well established tax payers to be how the system was meant to work, we can see that the IRD continue to put in efforts in educating the general tax payers of their obligation under the current tax system.
KPMG can assist in managing your tax compliance needs whilst operating in Myanmar including corporate tax, personal income tax, commercial tax and withholding tax filings. KPMG has extensive experience in assisting clients submit applications to the IRD to obtain clarifications and decisions for businesses investing in Myanmar.
KPMG Client Alerts highlight the latest tax and regulatory developments, impending change to law or regulations, current practices and potential problem areas that may impact your company. As certain issues discussed herein are time sensitive, it is advisable to make your plans accordingly.
“Client Alert” is issued exclusively for the information of clients and staff of KPMG Advisory (Myanmar) Ltd and should not be used or relied upon as a substitute for detailed advice on the basis for formulating business decisions.
© 2018 KPMG Advisory (Myanmar) Ltd. a Myanmar limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.