On 30 March 2023, the State Administration Council enacted the 2023 Union Tax Law (“2023 UTL”), which clarifies the tax rates and related procedures concerning income tax, commercial tax, and specific goods tax. This new law is effective on 1 April 2023 or the start of the new financial year 2023-2024 in Myanmar.

Among the key highlights of the 2023 UTL are the increase in specific goods tax rates for liquor, the commercial tax exemption on Battery Electric Vehicles (“BEVs”) and photovoltaic/solar-related equipment, and the increase in income tax threshold for small and medium-sized companies.  

We provide the salient features of the 2023 UTL below:

1.  Matters relating to Specific Goods Tax (“SGT”)

• The 2023 UTL increased the SGT tiers and rates for liquor. Effective 1 April 2023, the lowest tier is at MMK 200 to MMK 1,400 with SGT of MMK 209 per liter. Meanwhile, the highest tier is now at MMK 19,851 with SGT of 60% per liter value.
• There are no changes on other types of specific goods listed in the Union Tax Law. Cigarettes are still taxed up to MMK 27 per cigarette, wines are taxed up to 50% of liter price, and beers are taxed at 60%.
• Vehicles (excluding BEVs) remain to be subject to SGT up to 50% where rates vary depending on engine power.

2.  Matters relating to Commercial Tax (“CT”)

• There are no major changes for CT under the 2023 UTL. The general CT rate remains at 5%, except for the following:

  –  internet services (15%);

  –  sale of SIM card and related services (MMK 20,000 per SIM card);

  –  hotel and tourism services (3%);

  –  sale of buildings constructed in Myanmar, whether through a long-term lease with the State,
      or through a partnership with a lessor (3%);

  –  sale of gold jewelry (1%); and

  –  export sale of electric power (at 8%).

• The 2023 UTL enumerated 46 exempt goods and 34 exempt services. The changes in the CT exempt list are mainly on the exemption of BEVs (including batteries, accessories, and related services), and photovoltaic/solar-related equipment. The 2023 UTL specifically introduced the following industrial-related goods and services as exempt from CT:

  – Photovoltaic (“PV”) Module/ Solar Module/ PV Panel/ Solar Panel/ Solar Panel 92 Watt CIGS 
     (Copper Indium Gallium Selenide)], PV/ Solar (Hybrid/ Smart Array) Controller, Charge
     Controller or PV/ Solar, PV/ Solar Inverter (String/ Hybrid/ Battery/ Bidirectional/ Central),
     PV/ Solar Mounted Structure, Solar/ PV Mounted Frames, Solar/ PV Mounted Kits (Roof
     and Ground Mounted), PV/ Solar Mounted System (Floating), PV/ Solar Controller and
     Battery Box (onlyif the PV/ Solar Controller and Battery are imported altogether); and

  – Battery Electric Vehicles (BEVs) including three-wheeler and two-wheeler BEVs, associated
     batteries and accessories to be used particularly for BEVs (previously, only BEVs and their
     batteries are exempted as per the law amending the 2022 UTL).

  – Service providers for charging batteries for BEVs.

3. Matters relating to Income Tax

• The general corporate income tax (“CIT”) rate remains at 22% (and 17% for companies listed in the Yangon Stock Exchange). Meanwhile, the CIT rate for companies engaged in the oil and gas exploration and production sector is at 25%.

Note:
In a similar notification, the Ministry of Planning and Finance issued Notification 11/2023 dated 2 February 2023 clarifying the phrase “Oil and Gas Exploration and Production Sector” under the Union Tax Law. The Notification states that the phrase “Oil and Gas Exploration and Production Sector” refers to businesses operating under any of the oil and gas exploration and production rights (i.e., the production-sharing contract for oil and gas exploration and production – either executed under the law associated with the oil and gas exploration and production businesses, or under any other law). In addition, this includes: (a) the exploration, extraction and production of oil and gas themselves; or (b) the exploration, extraction and production of oil and gas by receiving services from others; or (c) transporting oil and gas via pipelines or to overseas locations; or (d) the service businesses that provide the exploration, extraction, and production of oil and gas.

• The 2023 UTL increased the income tax exemption threshold for new small or medium-sized enterprise (based on industry) from MMK 10 million to MMK 15 million (approx. USD 7,100) per year for three consecutive years, including the year of business commencement.
• Capital gains tax (“CGT”) rate remains at 10%, except for companies engaged in oil and gas exploration and production sector where they are subject to a higher CGT rate of 40-50%.  
• Individual personal income tax (“PIT”) rates remain at graduated rates of 0-25%. PIT exemption still applies if the individual’s annual income does not exceed MMK 4.8 million (approx. USD 2,300).
• There are no changes in the income tax rates for undisclosed sources of income. This tax is payable by Myanmar citizens who are unable to show the source of income used for buying, constructing, or obtaining any assets, and establishing new businesses. Income tax remains at progressive rates from 3-30%.

4.  Matters relating to Gemstone Tax

• The 2023 UTL removed the gemstone tax exemption of diamonds and emeralds. The sale of gemstones in Myanmar remains to be subject to royalty/gemstones tax of 5-11%. The tax rate will depend on the type of gems and whether they are sold as raw stone or finished jewelry.

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