VDB Loi in Yangon looks at a special goods tax law affecting local cigarette, wine and alcohol producers
Myanmar cigarette, wine and alcohol producers have received a boost as they seek to retain market share against imported competitor products, after the Special Goods Tax Law which came into effect on January 18 2016 significantly reduced the amount of tax payable on their products.
The Special Goods Tax Law, designed to modify the Commercial Tax Law, announced a range of changes, but the most marked change taxes on alcohol, wine and cigarettes. The 2016 Union Tax Law includes 16 different rates for alcohol, 16 for wine and 4 for cigarettes for local production, sale and trading of those goods, compared with a single rate for each item under last year’s law. The Special Goods Tax Law and the 2016 Union Tax Law will be effective April 1 2016. There are two other special goods that the rates are changed; from 15% to 20% for raw gemstones of jade, ruby, sapphire, emerald, diamond and other precious gems and from 10% to 5% for kerosene, gasoline, diesel and jet fuel.
Crude oil and electricity has been removed from the export list that are subject to special goods tax and the tax rate for export of raw gemstones of jade, ruby, sapphire, emerald, diamond and other precious gems has been changed from 15% to 20%. The comparisons of taxation amounts between Union Tax Law 2016 and 2015 for locally produced alcohol, wine and cigarettes are outlined in the table below.
Taxes on imported alcohol, wine and cigarettes will remain the same as for this year, at 60% for alcohol, 50% for wine and 120% for cigarettes, making local production cheaper than imports. The table below highlights the difference in tax amount of local production and importation.
In addition to these headline changes, the Union Tax Law 2016 states that 86 goods are now exempted from Commercial Tax, up from 79 last year. One item have been removed and an additional eight items added to the exempt list including jet fuel sold for outbound international trips and certain goods imported by the government. Likewise, additional six services have been added to the Commercial Tax exempted list, up from 23 last year to 29 this year.
Other features of the Special Goods Tax Law include some guidance on the possibility of offsetting output Commercial Tax on locally produced goods against the input Commercial Tax paid on raw materials or semifinished goods which are imported from abroad or bought from another local producer. In addition the Special Goods Tax Law introduces a raft of offences and penalties, as below:
While local manufacturers of cigarettes, wine and alcohol will find their tax liabilities more difficult to calculate as a result of these changes, most will welcome the overall reduction as they continue to face new competitive pressures from increasing imported brands.
About the author
Jean Loi is managing partner of law and advisory firm VDB Loi in Myanmar.
Ngwe Lin Myat Chit
About the author
Jean Loi is a senior consultant of law and advisory firm VDB Loi in Myanmar.