EY UTW Advisory Limited
Junction City Tower Unit 20-06 to 10, Level 20 No. 3A, Bogyoke Aung San Road Pabedan Township, Yangon Myanmar
Indirect tax contacts
Naing Naing San +951 9253493 (ext.9) naing-naing.san@mm.ey.com
Moe Moe Aye +951 9253493 (ext.9) moe-moe.aye@mm.ey.com
Kaung Zin Tun +951 9253493 (ext.9) kaung.zin.tun@mm.ey.com
A. At a glance
Name of the tax
Commercial tax (CT)
Local name Commercial tax (CT)
Date introduced 31 March 1990
Trading bloc membership Association of Southeast Asian Nations (ASEAN)
Administered by Myanmar Internal Revenue Department (MIRD) (www.ird.gov.mm)
CT rates
Standard 5%
Other 3%, 8%, 15%, zero-rated (0%), and exempt
CT number format The CT number is same as the tax identification number and company registration number (i.e., 9-digit number).
CT return periods Quarterly and yearly
Thresholds Registration Annual sales proceeds or service income over Myanmar Kyats (MMK) 50million
Recovery of CT by non-established businesses No, unless the non-established business is registered for CT in Myanmar
B. Scope of the tax
CT applies to the following transactions in Myanmar:
• Sale of goods/specific goods produced domestically
• Examples of specific goods subject to CT are tobacco, liquor, wine, beer, logs and different types of timber petrol, diesel, kerosene and natural gas, among others
• Importation of goods/specific goods
• Sale of imported goods/specific goods
• Provision of services and trading activities
• Sale proceeds on building and repairing infrastructure
• Sale and/ or importation of pure gold and gold jewelry
• Export sale of electricity and crude oil
• Sale of SIM card and SIM card activation
• Internet services
• Hotel and tourism services
Effective use and enjoyment. There are no “use and enjoyment” provisions under CT Laws. Generally, CT should be applicable on any transactions occurring within Myanmar that falls under the scope of CT. A non-established service supplier may be required to register for CT if they conduct transactions subject to CT in Myanmar.
Transfer of a going concern. Transfer of going concern rules do not apply in Myanmar. There are no CT exemptions for the transfer of businesses and CT should be applicable on the transfer of assets (e.g., inventories) subject to CT that may be included as part of a business transfer.
Transactions between related parties. In Myanmar, related-party transactions subject to CT must reflect market prices and be treated as if carried out between independent parties.
C. Who is liable
The following persons must register for CT:
• Any business conducting taxable activities subject to CT
• Importers of goods
Businesses with expected total sales proceeds or service income, including zero-rate CT sales, exceeding MMK50 million for the Myanmar fiscal year must register for CT one month before the commencement of business.
The Myanmar Internal Revenue Department (MIRD) must be notified of the commencement of business within 10 days after commencement. The taxpayer is required to notify the MIRD of any changes to its name, including the company name, address, or the nature of the business on which the tax is being levied within 15 days after the change.
Exemption from registration. A business may be exempt from CT registration if its transactions are not subject to CT.
Voluntary registration and small businesses. A business may voluntarily register for CT in Myanmar so that its input tax can be used as credit against its output tax incurred.
Group registration. Group CT registration is not allowed in Myanmar.
Fixed establishment. In Myanmar, there is no legal definition of fixed establishment for CT purposes. Generally, businesses engaging in transactions that fall under the scope of CT are required to register for CT.
Non-established businesses. Non-established businesses must register and pay CT if they have transactions subject to CT in Myanmar. Typically, a non-established business appoints a local representative (e.g., third party service provider) to comply with its CT obligations.
Tax representatives. A non-established business must appoint a local tax representative (e.g., third party service provider) to comply with its CT obligations in Myanmar.
Reverse charge. The reverse-charge mechanism is not available in Myanmar. The obligation to collect CT solely lies with the service provider. Typically, overseas service providers providing services in Myanmar appoint a local representative (e.g., third party service provider) to comply with their CT obligations.
Domestic reverse charge. There are no domestic reverse charges in Myanmar.
Deposits and prepayments. No special time of supply rule applies in this case; therefore, the general time of supply rules apply (as outlined above).
Continuous supplies of services. No special time of supply rule applies in this case; therefore, the general time of supply rules apply (as outlined above).
Goods sent on approval for sale or return. No special time of supply rule applies in this case; therefore, the general time of supply rules apply (as outlined above).
Reverse-charge services. Myanmar currently does not have CT reverse-charge/self-assessment mechanism. The obligation to collect CT lies solely with the service provider. Typically, overseas service providers providing services in Myanmar appoint a local representative (e.g., third party service provider) to comply with their CT obligations.
Leased assets. No special time of supply rule applies in this case; therefore, the general time of supply rules apply (as outlined above).
Imported goods. The time of supply rules for imported goods is the time of customs clearance, and CT is borne by the importer. The importer of record must pay the CT with the prescribed Form PaTaKha(KaThaKha)-05-02 to the Myanmar customs authority, which collects the CT on behalf of the MIRD at the time of importation.
F. Recovery of CT by taxable persons
A taxable person may recover input tax (CT) paid on most goods supplied for business purposes, including goods produced and sold, trading goods and imported goods. Input tax is recovered by deducting it from the output tax, which is the CT charged on supplies made/services provided.
Input tax includes CT charged on goods supplied within Myanmar and CT paid on imported goods into Myanmar. In addition, the input tax can also be recovered on services.
Nondeductible input tax. The purchase of goods not used for business purposes but acquired for personal use by an entrepreneur does not qualify for the deduction of CT paid (input tax).
Examples of business expenditures for which input tax is nondeductible
• Damage and losses of raw material when producing finished goods
• Damage and losses of semi-finished goods
• Damage and losses of trading goods
Partial exemption. There are no rules that input tax incurred for both taxable and exempt supplies require apportionment. In practice, the input tax paid on general business overheads should be able to offset against the output tax when it obtains the prescribed “CT Form PaTaKha(KaThaKha)05-01 or PaTaKha(KaThaKha)-05-02”and copy of valid CT registration certificate for each relevant fiscal year from their suppliers or service providers.
Excess input tax will not be refunded but it may be carried forward to the next period in certain conditions (e.g., for the advance rental payment). Otherwise, excess input tax will be treated as a deductible expense for corporate income tax calculation purposes within the same fiscal year.
If a business makes purely CT exempt supplies, the input tax incurred on purchases can be treated as a deductible expense for corporate income tax calculations.
Capital goods. Input tax incurred on capital goods in Myanmar is allowed to be offset with the output CT payable.
J. Penalties
Penalties for late registration. Failure to register for CT or notify about changes regarding taxpayer information (including failure to apply for cancellation of tax registration) results in a penalty of 10% of the CT payable in the relevant assessment year.
Penalties for late payment and filings. Failure to pay monthly tax within the stipulated time results in a penalty of 10% of the additional CT payable in the relevant assessment year.
Failure to file tax returns in accordance with the prescribed timelines results in a penalty at higher of:
• 5% of the tax due and an additional 1% of the tax due for each month (or the proportionate amount if less than a month) from the due date of the return until the date of the MIRD assessment Or
• MMK100,000
The penalty for failure to provide correct disclosures such as using fraudulent or incorrect TINs, issuing incorrect invoices or receipts, issuing incorrect receivables or payable records, and providing invoices, receipts receivables and payables not according to tax laws or failure to provide, is MMK250,000.
Penalties for failure to provide the documents or records as requested by the tax officer or comply with a notice requesting personal attendance for an examination relating to the assessment results shall be as follows:
1) MMK250,000; and/or
2) One-year imprisonment.
Penalties for errors. The penalty for failure to maintain records depends on the amount of tax payable as follows:
1) MMK5,000 per day of failure for taxpayers with tax payable up to MMK500,000
2) MMK50,000 per day of failure for taxpayers with tax payable up to MMK5 million
3) MMK100,000 per day of failure for taxpayers with tax payable of more than MMK5 million
Note that the Director General of the MIRD may grant relief from the penalty up to 30 days.
Penalties for fraud. For fraudulent activity resulting in underpayment CT:
• If underpayment is not more than MMK100 million or underpayment of tax does not account for more than 50% of actual tax due, the penalty is 25% of the deficient tax.
• If the underpayment exceeds MMK100 million or the underpayment of tax accounts to more than 50% of the actual tax due, the penalty is 75% of the deficient tax.
The penalty for disclosure of inaccurate or misleading information to a tax officer is MMK150,000 and in addition higher penalty of the following:
1) The difference between the tax liability that should have been paid and the actual tax paid Or
2) The difference between the tax refund that should have been claimed and the actual tax refunded
The penalty for failing to provide the requested information by the Director General of the MIRD is MMK500,000.
Personal liability for company officers. Pursuant to the Tax Administrative Law 2019, there is no penalty provision stated that the company’s directors/officers can be held personally liable for errors or omissions in CT declarations and reporting. However, it is stated that if an offense is
committed by a company, every director or similar officer of that company is deemed to have committed the offense.
Statute of limitations. The statute of limitations in Myanmar is six years after the end of the relevant assessment year (including the assessment year) (i.e., within 72 months after the end relevant fiscal year). In cases of fraud or incomplete information, the assessment can be made within 12 years after the end of the relevant assessment year.