Withholding Tax and Personal Income Tax Payment Be Made in Foreign Currency for Non-resident TaxpayersMay 11, 2023
The Central Bank of Myanmar (“CBM”) issued Directive No. 2/2023 on 25 January 2023 requiring that withholding tax (“WHT”) and personal income tax (“PIT”) payment for non-resident taxpayers be made in foreign currency. However, due to lack of clear instructions and further guidance from the Internal Revenue Department (“IRD”),we noted that taxpayers still made WHT and PIT payment for non-resident taxpayers in Myanmar Kyat (“MMK”) through authorized dealer licensed banks (“AD Banks”) after conversion of the tax amount payable into MMK at the CBM’s reference exchange rate.
On 4 May 2023, the IRD issued an official announcement requiring that the WHT and PIT payment for non-resident taxpayers be made in foreign currency (the “IRD’s Announcement”). The IRD’s Announcement states that taxpayers must make the WHT payment in foreign currency on interest, royalty or service fees payment to non-resident vendors, and the PIT payment for non-resident taxpayers in foreign currency as stated in the CBM’s Directive No.2/2023. This IRD’s Announcement applies to the WHT payment on interest, royalty or service fees payment to non-resident vendors and the PIT payment for non-resident employees. In other words, taxpayers can still remit applicable WHT payment for resident vendors and PIT payment for resident employees (both locals and expatriates) in MMK to the IRD.
With respect to WHT and PIT payment for non-residents in foreign currency, the IRD provides two options as follows:
Option 1: Tax payment through Myanmar Foreign Trade Bank (“MFTB”) and Myanma Investment and Commercial Bank (“MICB”)
If taxpayers have foreign currency accounts in MFTB and MICB, WHT and PIT payment for non-residents can be made with payment order cheque (“PO cheque”). In this option, taxpayers need to obtain a PO cheque for tax payment in foreign currency. Upon the receipt of the PO cheque, it is required to seek endorsement from the relevant tax office and remit the tax payment to respective Myanma Economic Bank (“MEB”) branch.
Option 2: Tax payment through AD banks
If taxpayers have foreign currency accounts in local AD banks or tax payments are remitted via branches of foreign banks in Myanmar, tax payment can be made via telegraphic transfer to MEB by using SWIFT Code – MYEBMMMY.
When tax payment is remitted to the respective branch of MEB either by option 1 or 2, the MEB branch will issue a credit advice to the relevant tax office of the IRD in order to provide electronic payment notifications to the taxpayers.
It is important to note that taxpayers need to remit the tax payment amount including the bank charges. Thus, it is advisable for the taxpayers to check the bank charges for such tax payment transactions with the relevant bank officer, and to ensure the remittance of sufficient amount. In the case of tax underpayment to the IRD, there is a risk that IRD may impose a 10% penalty on the underpaid tax amount.
To sum up, it is crucial for taxpayers to carefully review the tax payment process and timelines as outlined by the IRD especially if multiple intermediate banks are involved in the foreign currency tax payment process. Taxpayers should also ensure the remittance of sufficient amount for tax payment and bank charges. Taxpayers may also remit a buffer for bank charges for uncertain nature of intermediate bank charges when remitting tax payment through branches of foreign banks in Myanmar. In the case of tax overpayment due to the buffer for bank charges, the overpaid tax amount can be offset against the payable tax amount in the following month.