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Myanmar: Tax procedures concerning change to financial year-end

Myanmar: Change to financial year-end

The Ministry of Planning and Finance previously announced a change to the financial year-end to 30 September of each year. As such, the period 1 April 2019 through 30 September 2019 is a short six-month financial year.

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The Ministry of Planning and Finance in August 2019 issued guidance (notification 64/2019) that sets forth procedures for taxpayers to follow in determining how certain taxes—the specific goods taxes, commercial tax, and income tax—are to be calculated for the short financial year ending 30 September 2019.

Specific goods taxes and commercial tax

Taxpayers are expected to double their revenue to assess if they will exceed the threshold of MMK 20 million. If so, then taxpayers will need to comply with specific goods tax requirements and remit the tax amount accordingly. 

A similar test will be applied for commercial tax purposes, except the threshold for this tax is MMK 50 million.

KPMG observation

This determination does not take into account seasonality and will be a simple doubling of revenue for the six-month period. As such, some taxpayers previously not exceeding the respective threshold(s) for a full year may be required to comply with these taxes during this six-month period and remit the tax accordingly. The tax authorities are reportedly aware of and looking into this issue.

Update for income tax

There are multiple changes pertaining to income tax, giving rise to the following issues:

  • Doubling of employment income: Taxpayers are expected to double all income received during the period in order to arrive at the taxable income before applying the tax rates; the amount of tax payable so determined will then be halved. However, the doubling of income would also be applied to one-off allowances and bonuses and this could result in an over-estimation of the taxable income. There are no adjustments for taxpayers with income that is subject to “seasonality.”
  • Business income: Based on the August 2019 guidance, companies and other relevant entities will have their income (less expenses excluding interest, depreciation, and donations deducted as per normal rules) doubled. Thereafter, depreciation and actual interest paid will be deducted from the income. Donations will be deducted subject to the standard amount of caps and then the resulting amount of income will be subject to the applicable tax rates. Half of the calculated tax then will be the income tax due for the period. 

KPMG observation

There are several issues in relation to the above methodology. First, because the interest deducted is the actual amount paid and not the annualised amount, the taxpayer is only getting half of its value when calculating the tax, given the income was doubled. Similarly, donations are only allowed for the actual amounts paid and thus the taxpayer that contributes consistently would only be deriving half of the usual deduction value. Lastly, the rules do not mention how companies with net operating losses would be able to carry forward the losses or whether any adjustments would be made in calculating the tax losses that may be carried forward. 

  • Residency of individuals: The August 2019 guidance provides that individuals whose number of days spent in Myanmar during the period, when doubled, is more than 183 days, would be regarded as residents for the period. 

KPMG observation

This treatment could be problematic for individuals who may have departed Myanmar during the period but whose number of days spent in Myanmar is more than 92 days during the period because they now would be regarded as resident.


Read an August 2019 report prepared by the KPMG member firm in Myanmar

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