Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

December 11, 2020
2020-6565

Myanmar Tax Authority issues guidance on withholding tax reporting obligations

The Myanmar Internal Revenue Department (MIRD) promulgated Practice Statement 2/2020 (the Practice Statement) on 3 September 2020 regarding withholding tax (WHT) reporting obligations. This Alert summarizes the required conditions under the Practice Statement for the WHT exemption to apply on payments made to nonresident foreigners, without the requirement to request upfront approval from the MIRD.

Prior to the issuance of the Practice Statement, the following payments made to nonresident foreigners were exempted from WHT, but required upfront approval from the MIRD:

  • Payments for services performed entirely outside Myanmar
  • Payments for services performed in Myanmar if there was no permanent establishment (PE) in Myanmar under a relevant tax treaty concluded with Myanmar

WHT reporting obligations under Practice Statement 2/2020

  1. With effect from 3 September 2020, taxpayers can adopt the 2.5% WHT exemption without seeking upfront approval from the MIRD, for service contracts with a value of less than US$100,000 (i.e., US$2,500 of WHT) or the equivalent amount in another currency, where the services are either:
    • Performed by nonresident foreigners entirely outside Myanmar
    • Performed by a business resident in a country with which Myanmar has signed a tax treaty agreement, and the provision of those services is not related to, and will not create, a PE in Myanmar
  2. Practice Statement 2/2020 is applicable to all taxpayers assessed under the Self-Assessment System (SAS).
  3. The MIRD has provided the following examples for a clear understanding of the Practice Statement (extracted from the English translation of Practice Statement 2/2020 issued by the MIRD):

Example

Case

Application of this Practice Statement

1.

A Myanmar company sends all of its basic accounting records electronically to an accounting firm in Singapore for preparation of the annual financial accounts. The charge to the Myanmar company is US$80,000.

All the services are performed outside Myanmar. No withholding tax would be payable. The Myanmar company would not need to seek prior confirmation from the IRD regarding their obligation to withhold payments to the Singapore firm. All services are performed outside the country of Myanmar. The value of the services is less than US$100,000.

2.

An Indian architect firm is commissioned to design a bridge to be constructed in Myanmar by a Myanmar company. The architect firm sends a representative to Myanmar who meets the client and spends two days taking measurement and soil samples, and then returns to India. Over the next three months the Indian architect firm does bridge design drawings and specifications, which it sends to Myanmar via e-mail for the three months work. The total cost of this work is US$50,000. The services are performed predominantly in India with only two days spent in Myanmar by the Indian company’s representative. As such no PE is created in Myanmar.

The services are predominately performed in India. The Myanmar company would not need to seek prior confirmation from the MIRD regarding their obligation to withhold payments to the Indian firm. Predominately all services are performed outside the country of Myanmar. The two days in country would not create a “PE.” The value of the services is less than US$100,000.

3.

A Myanmar company contracts with a Vietnam company to provide consulting services on development of its supply chain. The Vietnam company will be providing the services for a period of 10 months from a fixed base in Myanmar country. The value of the consulting services provided by the Vietnam company is US$95,000.

As the Vietnam company will be providing consultancy services in Myanmar for more than six months within a 12-month period it is deemed to have a PE in Myanmar and the Myanmar company will need to obtain prior confirmation from the MIRD regarding its obligation to withhold tax regardless of the fact that the value of the contract is less than US$100,000.

_____________________________________________________________________________________________________________

For additional information with respect to this Alert, please contact the following:

EY UTW Advisory Limited, Yangon

ATTACHMENT

 

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more