Amended Union Tax Law 2021 increases the commercial tax rate on internet services and expands the income range of undisclosed source of income

The State Administration Council enacted Law No. 1/2022 on Amending the Union Tax Law 2021 (“Amended UTL 2021”) on 6 January 2022 to increase the commercial tax rate over internet services and expand the income layers of undisclosed sources of income for the financial year 2021-2022. The Amended UTL 2021 took effect on 8 January 2022 and it will be valid until the end of March 2022.     

Commercial tax on the sale of SIM cards and on the income of internet service providers

According to the amended UTL 2021, 15% Commercial Tax (“CT”) will be levied on income earned from internet services. Moreover, a one-time CT of MMK20,000 will be levied on each sale of a SIM card and SIM card activation. Previously the CT rate on both internet services and the sale of SIM cards was only taxed at 5%. As per a press release of the State Administration Council, the reason for raising the CT rate on internet services is to increase the State’s income.

Undisclosed sources of income

The undisclosed sources of income are still subject to income tax at progressive tax amnesty rates ranging from 3% to 30% under the amended UTL 2021 but the income ranges have been expanded.

A comparison of the income ranges for undisclosed income between UTL 2021 and amended UTL 2021 is shown in the table below.

Tax Rate	Old Income Range (MMK) under UTL 2021	New Income Range (MMK) under amended UTL 2021
3%	1 – 100,000,000	1 – 300,000,000
5%	100,000,001 – 300,000,000	300,000,001 – 600,000,000
10%	300,000,001 – 1,000,000,000	600,000,001 – 1,000,000,000
15%	1,000,000,001 – 3,000,000,000	1,000,000,001 – 3,000,000,000
30%	3,000,000,001 and above	3,000,000,001 and above

When will the new income ranges apply?

If a taxpayer has undisclosed income from a previous income year or even in this October 2021 and he did not file and pay taxes yet, the undisclosed source of income will be assessed using the new income ranges and the tax amnesty rates currently prevailing at the time of filing. The new income range as per the amended UTL 2021 will apply from 8 January 2022 and it will be valid until 31 March 2022.   

Is there any substantial tax savings due to income range changes?

As an example, Mr. A will declare income tax on the undisclosed source of income of MMK 300,000,000.

Under the old income range, Mr. A is required to pay a total of MMK 13,000,000 as income tax on his undisclosed source of income (MMK 100,000,000 at 3% and the remaining MMK 200,000,000 at 5%). Due to the expansion of income ranges under the amended UTL 2021, Mr. A will only require pay MMK 9,000,000 as income tax on his undisclosed source of income (MMK 300,000,000 at 3%).

Mr A will be saving approximately 30% on payable income tax (MMK 13,000,000 – MMK 9,000,000) under the new income ranges of the amended UTL 2021.