Nay Pyi Taw, 15 September 2015 1 - VDB Loi · 17 September 2015 | Page 3 Quick overview of our...

1 Nay Pyi Taw, 15 September 2015

2 17 September 2015 | Page

VDB Loi offices


Quick overview of our Myanmar practice

Senior Myanmar legal and tax team VDB Loi is a network of leading law and advisory member firms and affiliates delivering local law, tax and regulatory advice in Myanmar as well as in Cambodia, Indonesia, Laos and Vietnam. Our team passionately pursues a hands-on approach. We deliver practical solutions that commercially fit in the dynamic context of the emerging markets we cover.

Legal team in Myanmar

2 Partners (full-time Myanmar residents)

40 Fee earners (full-time Myanmar residents only)

18 Expats (20 languages)

60 Staff in total in Myanmar

Core expertise

• Property law • Corporate M&A • Commercial law • Foreign investment • Taxation and customs • Regulatory and licensing • Litigation and arbitration

Outstanding experience

• TMT • Resources • Consumer • Real estate • Manufacturing • Banking and finance • Power and infrastructure

- “advises an impressive range of leading corporations” (Legal 500)

- "widely known regional firm with strongholds in some of Southeast Asia’s most promising emerging markets" (IFLR)

- "strong on tax, very creative and innovative" (Chambers)

- "highly visible in the Myanmar market" (IFLR)

- "very good commercial understanding of Myanmar" (Chambers)

What commentators write about us: Yangon Office Level 8, Centrepoint Towers, No. 65 Sule Pagoda Road & Merchant Street Kyauktada Township

Nay Pyi Taw Office No. S-204 Tha Pyay Kone Ward Zabu Thiri Township

Edwin Vanderbruggen PARTNER

Jean Loi MANAGING PARTNER

U Aye Kyaw SENIOR COUNSEL

Nishant Choudhary SENIOR LEGAL ASSOCIATE

Nar Wah SENIOR LEGAL ASSOCIATE

Chris Sheridan SENIOR LEGAL ASSOCIATE

Jeffery L. Martin SENIOR LEGAL ASSOCIATE

Mark Livingston SENIOR LEGAL ASSOCIATE


Overview of selected team members

Note: We have selected a number of our professionals for this overview. For a complete list, contact us.

MIC Permit Team

Ngwe Lin Myat Chit SENIOR CONSULTANT, Yangon

Lin is a seasoned consultant with

experience working overseas at

global professional service firms.

She holds a Bachelor’s in Commerce

from the University of Newcastle.

Lin advises clients on market entry

and licensing. She has advised

multinationals.

Thuan Pham DIRECTOR, Yangon

Thuan is an experienced tax and

accounting advisor with a degree

in economics. He has over 12 years

of work experience, most recently

with Mazars, Ernst & Young and

DFDL. He has been based in

Myanmar since 2013, where he

advises on the licensing and tax

implications.

May May Kyi DIRECTOR

May holds a bachelor’s degree in

Commerce from the Yangon Institute of

Economics, and is an experienced advisor

on Myanmar customs duty, supply chains

and international trade. She is highly

experienced in importation and

corporate compliance.

Nay Pyi Taw Team U Myo Nyunt SENIOR COUNSEL, Yangon

U Myo Nyunt is an advocate to the

Supreme Court of Myanmar and is

one of Myanmar’s most

distinguished senior lawyers. A

noted author on Myanmar law, he

was formerly the Director of the

Supreme Court and an appellate

judge.

Legal Team

Mark Livingston SENIOR LEGAL ASSOCIATE, Yangon

Mark is a senior associate in our

Corporate M&A and Investment

practice. He is an experienced

corporate and commercial lawyer,

and is admitted as a solicitor in

Victoria, Australia. Mark has

previously practised with leading

Australian firms Clayton Utz and

Gadens Lawyers.

Aung Soe Moe SENIOR LEGAL ASSOCIATE

Aung is an experienced Myanmar

qualified attorney with a

Bachelor’s of Law degree from

Dagon University. He has unique

and extensive experience in

telecommunications, land and

licensing issues in Myanmar.

Jeffrey Martin SENIOR LEGAL ASSOCIATE, Yangon

Jeffrey, a Canadian qualified lawyer,

joined VDB Loi after working for an

international firm based in S.E. Asia.

He has primarily specialized in real

estate development and

transactional matters, also advising

clients on related corporate and

project finance and construction

issues.

Tax Team

Khin Tha Zin Min LEGAL ASSOCIATE, Yangon

Tha Zin has five years of

experience as a lawyer for Daw

Ohmmar Law Firm and U Aye

Kyaw Law Firm. Khin holds a

Bachelor of Law from the

University of Dagon.

Nar Wah SENIOR LEGAL ASSOCIATE,

Nay Pyi Taw

Nar Wah, a Myanmar-qualified

lawyer, is an associate on VDB Loi‘s

legal team. She has an exceptional

educational and career background

in both law and accounting. She

spent more than seven years

working in Singapore.

Nishant Choudhary SENIOR LEGAL ASSOCIATE

Nishant is an experienced lawyer

qualified in India with an extensive

background in finance and

securities. He assists finance

institutions to navigate the

emerging regulatory framework of

foreign and secured lending in

Myanmar. Nishant also advises on

corporate M&A and restructuring

in a wide range of industries.

Divyasree Damaraju LEGAL ASSOCIATE, Yangon

A qualified company secretary, Divya leads a team of compliance professionals to assist clients with all corporate matters such as incorporations, preparing and maintaining statutory books and registers, and all corporate filings.

Chris Sheridan SENIOR LEGAL ASSOCIATE, Yangon

Chris is a barrister and a solicitor

admitted in Australia, he advises

foreign investors on commercial

and corporate law, M&A, real estate

law and dispute resolution.

Su Pyi Sone LEGAL ASSOCIATE, Yangon

Su is an experienced Myanmar qualified attorney with a Bachelor’s of Law degree and an overseas MBA, formerly working in the legal field in Myanmar and overseas. Su has extensive experience in real estate law, IP and financial services. She is part of the team advising.

Ricardo Cabello MANAGER, Yangon

Ricardo, who qualified as a CPA

with Ernst & Young, is assisting our

clients with their licensing and

compliance requirements. With a

solid background in auditing and

extensive international experience

throughout Asia, he helps investors

navigate Myanmar compliance

requirements

Jonathan Linton SENIOR CONSULTANT

Jon Linton is a consultant in our licensing

team. Based full time in our Nay Pyi Taw

office, Jon liaises with various

Government agencies to assist clients

with their investment projects,

importation, construction and various

regulatory issues in Myanmar.

Nay Nwai Linn SENIOR CONSULTANT, Yangon

Nay has six years of experience in

accounting and finance working for

international enterprises in

Myanmar. She held responsibilities

for managing financial, tax and

accounting operations.

Team Leader

Jean Loi

MANAGING PARTNER, Yangon

Team Leader

Edwin Vanderbruggen

PARTNER, Yangon

Khin Pearl Yuki Aung LEGAL ASSOCIATE, Yangon

Yuki holds a Bachelor’s degree in Law from the Yangon University and a Diploma in Business Law. She is currently studying in a Diploma in International Law.

U Aye Kyaw SENIOR COUNSEL, Yangon

The principal of specialized

litigation firm U Aye Kyaw &

Associates, which teamed up with

VDB Loi in 2014, this former judge,

magistrate and law lecturer has

over 40 years of experience with

litigation and arbitration in

Myanmar. He also has extensive

experience with real estate and

construction issues in Myanmar.

Honey Htun Wai CONSULTANT, Yangon

Honey is a tax consultant with a

Bachelor’s degree in Business

Management from the Yangon

Institute of Economics. She also

holds master’s degrees in

Accounting and International

Business from Umea University,

Sweden. Honey speaks Burmese,

English and Swedish fluently.

Ei Mon Khaing CONSULTANT, Yangon

Ei Mon holds a Bachelor’s in Physics

from Dagon University as well as

accounting certificates from the London

Chamber of Commerce. She is currently

pursuing her ACCA qualification and

assists our international clients for tax

compliance.


1. Common mistakes in employment contracts

2. Working hours and overtime

3. Minimum wage

4. Leave and holidays

Contents

5. Termination

6. Severance

7. Accidents

8. Disputes

9. Cases


Common mistakes in employment contracts


1. Mandatory items not contained in employment agreement (as per Employment and Expertise Development Law):

Five common mistakes in employment contracts in Myanmar

• Above items, if not applicable, must be stated to be so, i.e. “no accommodation shall be provided”

Type of employment (description of position)

Transport to/from workplace

Probation period Work rules/policies

Wages and salary Training

Place of employment Resignation and dismissal

Term of contract Termination

Working hours Responsibilities

Days off, holidays and leave Changes to responsibilities by consent

Overtime Amending/supplementing agreement

Meal programs during working hours Other matters

Accommodation Miscellaneous

Medical care


2. Employment agreement not executed within 30 days of appointing the position to the employee. (criminal sanctions!)

3. Employment agreement not in both Burmese and English.

4. Employment agreement not filed with the nearest Labour Exchange Office (under the Department of Labour as governed by the Ministry of Labour, Employment and Social Security).

(NOTE: only enforcing this for local employees at this stage. For foreign workers, unclear if enforced).

5. Work rules/policies do not conform with Myanmar employment laws.

• Hours

• Sick leave

• Discriminatory

Five common mistakes in employment contracts in Myanmar (continued)


Working hours and overtime


Offices (commercial establishments) and retail premises (shops):

• No more than 8 hours a day for a total of 48 hours per week

• For periods of work in excess 5 hours, a 30 mins. rest break is required (for meals etc.)

• Total combined regular hours and rest break must not exceed 11 hours in one day

• One paid holiday off per week (nominally, a Sunday) but another day can be substituted as long as holiday substituted within 3 days either side of the original paid holiday

• No more than 60 hours overtime per year, paid at double the ordinary rate of pay

• (Managers are excluded from the above)

Regulations on maximum working hours and overtime: which ones apply to you?

Manufacturing (factories):

• As above, save for:

• No more than 8 hours a day for a total of 44 hours per week, if a “regular worker” OR a total of 48 hours per week if a worker in a position who must work continuously (eg. power plant employees)


• No more than 16 hours overtime per week, if a “regular worker” OR a total of 12 hours per week if a worker in a position who must work continuously (eg. power plant employees) paid at double the ordinary rate of pay

• Managers are not excluded from the above


Miners:

• As per manufacturing above, save for:

• No more than 8 hours a day for a total of 44 hours per week, if a “regular above ground mine worker” OR a total of 48 hours per week if an “above ground mine worker” in a position who must work continuously

• No more than 11 hours overtime per week, if an “above ground mine worker” (regular or continuous) OR a total of 14 hours per week if a “below ground mine worker”

Regulations on maximum working hours and overtime: which ones apply to you? (continued)

Oil and gas workers:

• No more than 8 hours a day for a total of 48 hours per week

• For periods of work in excess 5 hours, a 30 mins. rest break is required (for meals etc.)


• One day off per week and can be any day as decided by employer

• Overtime not mentioned


Minimum wage


Who determines the minimum wage?

• The “National Committee and Minimum Wage Scrutinizing Working Committee” (“Committee”) under the Minimum Wage Law and Minimum Wage Rules.

What is the minimum wage?

• On 28 August 2015, the Committee determined the minimum wage to be:

• 450 Kyats per hour, totalling 3600 Kyats per day over an 8 hours day (see Notification 2/2015).

Are allowances included in the minimum wage?

• No.

• Wage means fees, wages or salary [...] including overtime fees or bonuses […] or other remunerations or benefits which may be determined as income […] but excludes:

• travelling allowances;

• social security cash benefits;

• allowances for accommodations and meals, electricity charges, water service charges and duties and taxes;

• medical treatment allowances and recreation allowances; and

• damages for dismissal from work and compassionate allowance.

New rules on minimum wage


Leave and holidays


13 mandated public holidays:

• Independence Day (1 day)

• Full moon of Tabaung (1 day)

• Full moon of Kason (1 day)

• Full moon of Tansaungmon (1 day)

• Thingyan (3 days)

• Burmese New Year (1 day)

• May Day (1 day)

• Resistance Day (1 day)

• Martyrs Day (1 day)

• End of Buddhist Lent (1 day)

• National Day (1 day)

• Annual leave: 10 days per year following 12 months continuous service

• Casual leave: 6 days per year following 12 months continuous service (no more than 3 consecutive days allowed at a time)

• Medical leave: 30 days per year following 6 months continuous service

• Maternity leave: 6 weeks before confinement, 8 weeks after confinement, minimum of 14 weeks in total

• Paternity leave: up to 15 days after wife’s confinement

• Funeral leave: holiday permitted but no defined maximum amount of days

What are the minimum leave requirements?


What if an employee is required to work on a public holiday or a rest day (eg. Sunday)?

• a day in lieu must be provided within 3 days, before or after, the public holiday/rest day

OR

• the employer must pay the employee overtime rates

• Ruling from Ministry of Labour, Employment and Social Security

How to ensure compliance with rules on holidays when you have non-stop operations?


Termination


• First warning

• Second warning

• Third warning

• Termination (without severance)

• Warnings must be “formal”, i.e. a sit down meeting between:

• the employee;

• the employee’s manager (who has noticed the need for the warning); and

• the human resources manager (to represent the employee so no prejudice to the employee occurs during the meeting)

• The meeting should be documented and the employee should be provided a written warning stating the reasons for the warning.

• The meeting permits all parties present to voice their concerns or reasons why the warning is required or not (as the case may be).

• Failure to provide three warnings prior to termination will result in a claim for severance by the employee.

Proper procedure for terminating an employment agreement


Severance


Severance is payable upon termination, save for the following instances :

• employee resigns

• employee tarnishes the reputation of the employer

• employee breaches a term of their employment agreement eg misconduct.

In addition to severance payments, an employer must also:

• “pay out” an employee’s accrued annual leave

• choose to “pay out” OR require the employee to “serve” (work) the notice period in the employment agreement

New severance amounts benefit long term employees (see amounts on the following page)

New rules on severance pay


New rules for severance pay (continued)

Term of employment

Severance amount due

Notification No. 55/1976

(Old severance amounts)


(New severance amounts)

Comparison

(in months)

0 ≤ 3 months 1 months’ salary 0 -1

3 months ≤ 1 year 2 months’ salary

0 -2

6 months ≤ 1 year 50% of 1 months’ salary -1.5

1 year ≤ 2 years

3 months’ salary

1 months’ salary -2

2 years ≤ 3 years 150% of 1 months’ salary -1.5

3 years ≤ 4 years 3 months’ salary 0

≥ 4 years ≤ 6 years 4 months’ salary +1





≥ 25 (maximum cap) 13 months’ salary +10



Term of employment






Comparison

(in months)



0 -2


1 year ≤ 2 years

3 months’ salary











Accidents


Employer is responsible for a safe working environment

- “Arising out of and in the course of employment”

- Drink, drugs or willful disobedience

- “Risk to all mankind”

- Accidents on the way to and back from work

- Duties outside of the scope of instructions: the case of the elephant

Who is liable for damages in case of workplace accidents?


- Principal

- In the course of or for the purposes of his trade or business

- Contracts with a contractor for the execution of the whole or any part of any work which is ordinarily part of the trade or business of the principal

- The principal shall be liable to pay to any workman employed in the execution of the work any compensation which he would have been liable to pay if that workman had been immediately employed by him

- Who is an agent and who is an independent contractor?

Danger: main contractor liable for employees of subcontractors?


Disputes


What is the dispute according to the Settlement of Labor Dispute Law 2012?

“Dispute means the labor dispute or disagreement between an employer or employers or employer organization which represents them and a worker or workers or the labor organization which represents them in respect of employment, working, termination of a worker or workers and in respect of working or service including pension, gratuity, bonus and allowances or compensation for work related grievance, injuries, accidents, deaths or occupational diseases or in respect of any other matters of worker including worker’s holiday, leave.” Re: section -2 (m) Settlement of Labor dispute Law 2012.

Settlement of Labor Disputes

The aim of the Settlement of the Labor dispute Law 2012 is , as the preamble said, “ for safeguarding the right of workers or having good relationship between employer and workers and making peaceful workplace or obtaining the rights fairly, rightfully and quickly by settling the dispute of employer and worker justly.”


Dispute Settlement Structure

Dispute Settlement Arbitration

Council Union

Arbitration Body ( Region /division)

Conciliation Body ( Township )

Jurisdiction Limits

⁺ highest arbitration for Labor dispute

⁺ Form a tribunal

⁺ Have to make a decision within 14 day of receipt of collective dispute and 7 days for the individual dispute

⁺ Can make a decision on the dispute

⁺ Parties have to appoint the representatives for the collective dispute before the Arbitration body

⁺ Can make an agreement between the parties after the negotiation

⁺ Has to determine the types of dispute to be either individual or collective


Cases


Facts: Employees of a factory in an IZ are employed under monthly employment contracts. The employer cuts the salary for poor quality of the production. Employees suspend work and get fired.

Case Example 1- Multiple monthly employment contracts

Decision of Arbitration Body: One month contracts are not reasonable. Compensation is due for severance based on long term employment (but shorter than one year). 1 month notice + 1 month severance.


Facts: Workers asked for the same bonus for the water festival like others workers of the factory. They only got 5000 kyats for each. It is less than the others who received the Bonus as follow; 100 000 Kyats for the permanent workers and 60 000 Kyats for the daily workers. The owner said that she gave them less bonus because they demonstrated.

Decision of Arbitration Body: Reject the demand for the Bonus of water festival.

The workers appealed to the Dispute Settlement Arbitration Council.

Decision of the Dispute Settlement Arbitration Council: Cancelled the decision of the Arbitration Body, and decided to give 60000 Kyats to each worker as the water festival Bonus.

Case Example 2- Do all water festival bonuses have to be the same?


Facts: Factory in agri-business with only seasonal activity. During non-operation, workers are assigned to a new factory of the same employer. Employees file a claim for severance without prior consultations with the employer.

Decision: There was no termination so there should be no severance. Employees are ordered to start work again. Employer must pay salary during the disputed period.

Case Example 3- Can the employer re-assign employees to another place of work?


Facts: Rudeness, allegations of missing money, absent without leave.

Decision:

- No physical abuse

- Warnings are required, were not done

- Criminal case?

- Ordered to pay severance and 1 month notice

Case Example 4- Can you fire an employee without severance for being rude?


Facts: Driver in a factory has a flat tire and fixes it. Cost is deducted from salary. Driver stops work in protest.

Altercation followed by an apology.

Decision:

- Flat tire is an ordinary cost for a factory driver

- Employee was never fired by the employer, so he can go back to work

- No salary is owed during the work suspension

Case Example 5- Reimbursement of costs


Facts: General Manager of a company has no written contract. He is terminated by the company amid allegations of cheating.

Decision:

- Irrelevant that there is no written agreement

- Required to respect the compulsory warnings.

- Notice and severance is due.

Case Example 6- Can you terminate a verbal employment contract without warnings?


Facts: A factory has permanent and temporary workers. There is a safety bonus and penalty system. The temporary workers gat penalties, but no credits. There are also differences in terms of leave.

Decision:

- Daily or temporary worker has the same protection under the law.

- Bonus should in this case be the same

- Factory Act 1951

Case Example 7- Can you discriminate in terms of bonus between employees?


Facts: Employee shows up drunk for work. Refuses to work and is fired immediately. A factory has permanent and temporary workers.

Decision:

- Warnings are still required

- Reinstatement is ordered

Case Example 8- What to do with a drunk employee?


Previously, the Income Tax Law (ITL) 1974 and its relevant notifications served as the basis for levying personal income tax (PIT).

On 1 April 2014, The Union Tax Law 2014 came into effect amending several aspects of the existing tax rules, such as PIT rates and amounts of personal relief.

Effective 1 April 2015, we will be following the 2015 Union Tax Law (UTL) as amended.

Overview of Personal Income Tax


Who needs to pay PIT in Myanmar?

• An individual who receives any categories of income in Myanmar is subject to Myanmar PIT, irrespective of his nationality or the duration of his stay in Myanmar.

“Income received in Myanmar” is defined as “income received or deemed to be received, or income accrued or arose or is deemed to have accrued or arisen in Myanmar”.

Overview of Personal Income Tax (continued)


Scope of taxable income and applicable rates

All categories of income are subject to PIT

Income comprises most categories of income so long as it is paid to the earner, including:

salaries and wages;

Livelihood;

assets; and

business income.



Scope of taxable income and applicable rates

Residents

• All Myanmar citizens (except resided and earned income outside of Myanmar for any amount of time in an income year)

• A Foreigner who stayed in Myanmar for more than 183 days during the taxable year

Non-residents

• A Foreigner who stayed in Myanmar for less than 183 days

Residents are liable to pay PIT in Myanmar on their worldwide income, while non-residents are only obliged to pay PIT on their Myanmar derived income.



Threshold and personal relief

Threshold for levying PIT

Under the UTL, the threshold for levying PIT is 2,000,000MMK. This means no PIT is payable if a resident taxpayer’s annual net taxable income is less than 2,000,000MMK.

If a resident taxpayer’s annual income is higher than 2,000,000MMK, only the portions above 2,000,000MMK are subject to PIT at applicable rates.



Personal relief

The new UTL has increased the overall allowable deductions for low income earners. The basic allowance remains the same as provided in section 2 of Notification No.110/2012: 20% of annual taxable income, as long as such amount does not exceed 10,000,000MMK (20% of annual salaries or 10,000,000 MMK whichever is lower)

The spousal allowance is now granted to both husband and wife, and increased from 500,000MMK to 1,000,000MMK. The resident taxpayer is also entitled to a child allowance of 500,000 MMK for each child under section 31(c) of the UTL. Further a new relief for every parent living with the individual taxpayer to be 1,000,000MMK.

Non-residents do not enjoy any deductions.



Example 1 - Calculation of allowances

A resident employee has an employment agreement starting from 1 April 2015 that states the following

Monthly basic salary = USD4,000

Monthly housing benefit = USD1,000

Monthly transport allowance = USD300

He has a wife who does not work, 2 dependent children and his father is living with them.

Deductions for net taxable salary for Financial Year ending 31 March 2016 are as follows assuming exchange rate of MMK1,000:USD1

Taxable months= 12 months (from 1 Apr 2015 - 31 Mar 2016)

Overview of the Personal Income Tax (continued)

USD Annual Salary (USD) Annual Salary (MMK)

Monthly Salary 4,000.00 48,000.00 48,000,000

Monthly Housing Allowance 1,000.00 12,000.00 12,000,000

Monthly Transport Allowance 300.00 3,600.00 3,600,000

Total 5,300.00 63,600. 00 63,600,000

Less: Basic Allowance 10,000,000

Parent Allowance 1,000,000 Spousal Allowance 1,000,000 Children Allowance 1,000,000

Net Annual Taxable Income 50,600,000


Example 1 - Calculation of allowances

This was calculated as follows:

Basic Allowance

MMK63,600,000 x 20% = MMK12,720,000 Where annual salary income is [(USD4,000 + USD1,000 + USD300) x 12 months] x 1,000 = MMK63,600,000

This exceeds the maximum MMK10,000,000 basic allowance, so the allowance is MMK10,000,000

Parent allowance = MMK1,000,000 x 1 parent = MMK1,000,000

Spousal allowance = MMK1,000,000 x 1 wife = MMK1,000,0000

Children allowance = MMK500,000 x 2 children = MMK1,000,000



Income tax rates

Rates of income tax imposed on the income of an individual from salaries and wages, profession, property, business and other sources of income are specified as follows:


Annual net taxable income

Income tax rate From To

MMK MMK

(a) 1 2,000,000 0%

(b) 2,000,001 5,000,000 5%

(c) 5,000,001 10,000,000 10%

(d) 10,000,001 20,000,000 15%

(e) 20,000,001 30,000,000 20%

(f) 30,000,001 and above 25%


How to calculate PIT in Myanmar?

Also under Section 16 (d) of the ITL, the annual PIT is calculated based on annual estimated salary income, then this annual PIT is to be divided into equal installments i.e. the annual PIT amount is divided by the number of months of the financial year over which the

annual salary income will be received.

Therefore monthly PIT payments are estimates as they are based on estimated annual income, divided into equal installments.



Example 1 - Calculation of Annual PIT

In Example 1, the net annual taxable income was MMK 50,600,000. This falls within the top tax bracket as it exceeds MMK30,000,000, so the marginal rate is 25%. The annual PIT is MMK 9,300,001 as follows:


From (MMK) To (MMK) PIT Rate Taxable Amount

(MMK) PIT Amount

(MMK)

1

2,000,000

0%

2,000,000 -

2,000,001

5,000,000

5%

2,999,999 150,000

5,000,001

10,000,000

10%

4,999,999 500,000

10,000,001

20,000,000

15%

9,999,999 1,500,000

20,000,001

30,000,000

20%

9,999,999 2,000,000

30,000,001

and above 25% 20,600,004 5,150,001

TOTAL 50,600,000 9,300,001


Example 1 - Calculation of Monthly PIT

To calculate the monthly PIT for each month, the annual PIT is divided by 12 (i.e. the number of months in the Financial Year)

MMK 9,300,001 / 12 months = MMK 775,000



How to pay PIT in Myanmar?

By way of withholding tax

PIT on salary income must be paid through the withholding mechanism (WHT) as per section 16(d) of the ITL. The employer who pays the salary is responsible to deduct PIT and remit it to the IRD within 7 days upon disbursements.

16. (d) Any person responsible for disbursement of payments under salaries shall, at the time of payment, deduct income tax on the amount payable. In so deducting, the income of the taxpayer for the year under the said class of income shall be estimated, and the tax due thereon shall be deducted in as much equal installments as possible.



How to pay PIT in Myanmar?

Annual salary statement and reconciliation

In addition to the monthly PIT payments, employers must also file an annual salary statement for each employee, within 3 months of the financial year-end i.e. by 30 June.

With this annual salary statement, where annual salary income is no longer an estimate but actual annual income a final reconciliation is performed and any under or overpayment will be resolved.



Overview of the Social Security Law 2012

The Social Security Law 2012 (SSL) establishes the present framework of the social security scheme (SSS) in Myanmar. The SSL sets up the Social Security Board (SSB) as the statutory organization to oversee and administer the SSC. All “establishments” in Myanmar with more than five workers are required to register with the SSB.

Although no definition is given to “an establishment” in the SSL, its section 11 provides a non-exhaustive list of establishments covering almost all forms of organizations. In particular, companies are explicitly listed under section 11(a)(v) as an “establishment”

The Social Security Contribution


How the SSS works

The ultimate objective of the SSS is to insure workers’ basic needs when certain events occur by imposing compulsory and consistent obligations on both employees and employers. “Workers” has the same meaning as employees for the purpose of the SSL irrespective of whether they are permanently or temporarily employed.

Under the SSS, contributions from both sides will be pooled under insurance systems at different rates: (1) health and social care insurance system; (2) family assistance insurance system; (3) invalidity benefit, superannuation benefit and survivors’ benefit insurance system ; (4) unemployment benefit insurance system; and (5) other social security scheme.

The Social Security Contribution (continued)


The employer must pay 3% of its employees’ total monthly salaries to the SSB. Each employee needs to pay 2% of his gross monthly salaries to the SSB.

For both the employer and the employee, their salary base for the contributions are capped at 300,000MMK per month respectively.

The dates of implementation of the second and third phases are yet to be decided.



Social Security Contribution (SSC) calculation examples

For an employee earning MMK500,000 per month, the following SSCs will be made

Employee SSC = 2% x MMK300,000 = MMK6,000

Employer SSC = 3% x MMK300,000 = MMK9,000

Total SSC paid to SSB = MMK15,000



Pay slip

PAY SLIP

Name Date : 30 - July -

2015 Designation Employee No. S / No. NRIC No. Month & Year: July-2015 Currency : MMK

Earnings Jul-15 Deductions Jul-15

Basic Salary 250,000 Personal Income Tax (2,117)

Overtime SSC Fund contribution (5,000)

Incentive Other deductions

Bonus

Others

Total Deductions (7,117)

Allowances

Car Allowance Non-taxable payment

Housing Allowance 50,000 Other benefits

Other Allowance 50,000

Back Pay 150,000 Non-taxable payment -

Gross pay 500,000 Net pay 492,883


- Gross vs net contract?

- Employees starting or terminating during the financial year

- How do you deal with one-off bonus or allowance?

- DTA exemptions

- Fringe benefits

- Housing

- Car

- Accommodation at employer premises

- Schools

- R&R

- Relocation cost of expatriate employees

Key issues in calculating PIT


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