In respect of business income, deductions are allowed for expenditure incurred for the purpose of earning income.
Non-deductible items include capital expenditure, personal expenditure, expenditure that is not commensurate with the volume of business, irrelevant expenses and expenses incurred not for production of income, payments made to any member of an association of persons other than a company or a cooperative society, and inappropriate expenditure.
Depreciation and amortisation
Income from movable property is considered as business income, and depreciation allowance for the cost of such movable property can be deducted. Income from immovable property is generally computed in the same way as business income, except that no depreciation allowance can be deducted.
Technically, a taxpayer entity is required to claim tax depreciation on the qualifying assets used for its business purposes based on rates prescribed under the Myanmar Income Tax Law, using a prescribed tax depreciation claim form. A taxpayer is entitled to full-year tax depreciation in the year the asset is acquired. On the other hand, no tax depreciation is allowed in the year the asset is disposed of.
The tax depreciation rates of fixed assets, as prescribed under the Income Tax Regulations, are as follows:
- Buildings: 1.25% to 10%.
- Furniture and fittings installed in buildings: 5% to 10%.
- Machinery and plant: 2.5% to 20%.
- Various kinds of vehicles: 12.5% to 20%.
- Any fixed assets that are not prescribed: 5%.
There is no specific provision under the current Myanmar Income Tax Law governing the tax deductibility of goodwill.
There is no specific provision under the current Myanmar Income Tax Law governing the tax deductibility of start-up expenses. Generally, any operating expenses incurred before the commencement of business are not tax deductible. Myanmar tax authorities view pre-commencement expenses as capital in nature and not deductible for tax purposes. In current practice, capital expenditures incurred prior to the commencement of business should be allowed for tax depreciation where they relate to qualifying fixed assets.
There is currently no specific provision in the Myanmar Income Tax Law indicating the tax treatment of interest expenses. In current practice, interest expenses and the related financing costs are likely deductible only in the year these expenses are incurred, provided that the interest expenses incurred are commensurate with the volume of business or benefits that the taxpayer received. Interest expenses incurred before the commencement of business generally are not tax deductible or tax depreciable.
There is no specific provision under the current Myanmar Income Tax Law governing the tax deductibility of bad debt.
Deductible charitable donations are limited to those made to the approved charitable organisations/activities and are subject to an overall limitation of 25% of total income.
Fines and penalties
Fines and penalties are generally not deductible as they are not incurred in the production of business income.
There is no specific provision under the current Myanmar Income Tax Law governing the tax deductibility of taxes paid.
Net operating losses
Losses from any source may be set off against income accruing from any other sources in that year, except where the loss is from capital assets or a share of loss from an association of persons. Losses that are not fully deducted in a year can be carried forward and set off against profits in the next three consecutive years.
There is no provision for the carrying back of losses.
Capital losses and a share of loss from an association of persons cannot be set off against income from other sources or carried forward.
Payments to foreign affiliates
A Myanmar corporation can claim a deduction for royalties, management service fees, and interest charges paid to affiliates, provided that these payments are commensurate with the volume of business.