The taxable period of a company is the same as its financial year (income year). Income earned during the financial year is assessed to tax in the assessment year, which is the year following the financial year.
Prior to the financial year 2018/19, the fiscal year was from 1 April to 31 March. The financial period of 31 March year-end was changed to 30 September from the financial year 2018/19 (i.e. from 1 October 2018) for state-owned enterprises and financial institutions and from the financial year 2019/20 (i.e. from 1 October 2019) for all other taxpayers.
The financial year-end of 30 September has changed to 31 March again, starting from 1 October 2021.
In general, annual income tax returns must be filed within three months from the end of the financial year.
Tax returns for capital gains must be filed within 30 days from the date of disposal of the capital assets.
If a taxpayer discontinues one’s business, returns must be filed within one month from the date of discontinuance of business.
The failure of a taxpayer to file income tax returns, knowing that assessable income has been obtained, is deemed to have ‘fraudulent intention’.
Payment of tax
Advance corporate tax payments are made in quarterly instalments within ten days from the end of the relevant quarter throughout the income tax year based on the estimated total income for the year. The advance payments and any taxes withheld are creditable against the final tax liability. The date for settling the final tax liability is within 21 days from the date of notice issued by the IRD.
Capital gains tax needs to be paid within 30 days from the date of disposal of capital assets.
Tax audit process
Under the Myanmar Income Tax Law, if it is found that there is a fraudulent intention to evade tax, the assessment or reassessment of income tax can be made at any time on the income that has escaped assessment of tax.
Failure by a taxpayer to file a return of income knowing that assessable income has been obtained, failure to comply with the notice of the IRD to submit accounts and documents, including the tax return and profit and loss accounts within the time prescribed, or submitting forged instruments and other documents are included within the meaning of fraudulent intention. If the tax authority in the course of investigation finds that a taxpayer has concealed income or particulars relating to income, the taxpayer may be permitted to fully disclose the facts within the specified time. In addition, the taxpayer must pay a penalty equal to 100% of the tax increased on account of the concealment. If the taxpayer fails to disclose the particulars within the specified time or discloses less than the income concealed, the taxpayer will also be subject to prosecution, in addition to paying the tax and penalty. If the taxpayer is found guilty, the taxpayer may be punishable with imprisonment for between three to ten years.
Under the new TAL that shall be effective from 1 October 2019, the penalties for concealing or providing incorrect information and tax evasion will change as follows:
- Concealing or providing incorrect information:
- MMK 150,000 and the higher of:
- the difference between the correct tax due and the tax assessed, or
- the difference between the correct amount of refund and the refund made.
- If it is reasonable to assume that the person must not have known that it is incorrect or misleading, no penalty shall be imposed.
- MMK 150,000 and the higher of:
- Tax evasion cases:
- seven years of imprisonment
- the higher of MMK 250,000 and 100% of the tax amount evaded, or
- both of the above.
Statute of limitations
The statute of limitation to raise an assessment is three years after the financial year-end. It does not apply in cases of fraudulent default. Mere filing of the income tax return and payment of advance tax in time does not constitute a final tax assessment.
Under the TAL 2019, with effect from 1 October 2019, the statute of limitation of three years has increased to six years. The Director General of the Internal Revenue Department can conduct an assessment or re-assessment of the taxpayer within a period of six years after the end of the relevant assessment year. In relation to intentional negligence or fraudulent cases, the infinite statute of limitation was replaced with a 12-years period.
Topics of focus for tax authorities
The following issues are currently being focused on by the tax authorities:
- Timely filing of tax returns and payment of taxes (i.e. corporate tax, commercial tax, capital gains tax, employer tax, specific goods tax, etc.).
- Exchange rates used in translating foreign currencies to the local currency for claims of tax deduction, tax depreciation and for the tax payment purposes.
- Completeness of records maintained by taxpayers to verify income and claims for deductions.
- Tax deduction of donations for corporate tax purposes.
- WHT compliance on both domestic and cross-border transactions.
- Stamp duty compliance (i.e. the application of the duty rates and timeliness of payment).
- Related-party transactions (e.g. payment of management fee to head office, shareholder loans etc.).