managing taxes in a time of economic turmoil · file the tax return manually on time?” businesses...

Asset & Wealth Management

Webinar:

Impact of COVID-19

Managing Taxes in a

Time of Economic Turmoil9 June 2020

PwC

Ong Chao ChoonManaging PartnerMyanmar

Logistics

Webinar slides will be available for download and circulation www.pwc.com/mmLink will be emailed out to all participants

Slides

Introduction

2

Live Q&A will be conducted via Cisco Webex’s Q&A functionalityKindly type in your questions and address them to the panel. A selection of them will be answered during the Q&A session

Q&A

Here with you today

Paul CorneliusHead of Myanmar Tax

Email : [email protected]

Mobile: +65 9633 5834

Ding Suk PengDeputy Head of Myanmar Tax

Email: [email protected]

Mobile: +959 9778 52930

- International and Myanmar tax specialist

- Over 30 years of tax experience

- International and Myanmar tax specialist

- Over 15 years of tax experience

https://www.pwc.com/mm

mailto:[email protected]

mailto:[email protected]

PwC

Agenda

3

1 Trade and tax measures under COVID-19 Economic Relief Plan

2 Challenges faced and how to manage tax compliance

3 Key tax considerations to weather COVID-19 pandemic

4 Tax function of the future

PwC

Trade and tax measures under

COVID-19 Economic Relief Plan (CERP)

PwC

Industries affected the most by COVID-19 pandemic

The affected businesses are facing the following issues from COVID-19

Workforce Health & Safety, Travel Restrictions and Remote Working

Difficulty in fulfilling Contractual Obligations

Declining Revenue and Cash flows

Operations & Supply Chain Disruptions

5

Small and Medium Enterprises (SMEs) in all industries* Tourism Hotels Cut, Make and Pack (CMP)

(garment manufacturing)

The CERP consists 7 Goals, 36 Action Plans and 76 Actions, including reliefs relating to tax deferral and waiver, tax credits as well as trade measures

* Please refer to Appendix 1 for the definition of SMEs

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Reliefs relating to tax deferral and waiverMake sure you assess the benefits that these measures provide and determine ways to minimise the disruptions to your businesses

Waiver of 2% advance income tax on exports

Commercial tax deferral for

months from March to August

2020

Corporate tax deferral for second and

third quarters

Deferral of payroll tax from

monthly to quarterly

Deferral of Social Security Board

Contribution

SMEs, Hotels,

Tourism, CMP

Waiver of 2% advance income tax on exports

Deferral of payroll tax from

monthly to quarterly

Deferral of Social Security Board Contribution?

All other businesses

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Tax credits (fiscal stimulus)

10% non-refundable tax credit on the

incremental wage bill

Deduction equal to 125% of wages paid

Allow for a one time increase in

depreciation equal to 125% for the current year

• Easing the impact on workers

• Encourage capital investment

10% non-refundable

tax credit for incremental

investments on capital

expenditure

Will be provided to at least 100 companies based on their year

end audited financial report

Not specified Will be provided to at least 100 companies based on their year


Will be provided to at least 100 companies based on their year


Notification no 56/2020 issued recently allows commercial tax input claim on capital expenditures

starting from FY 19/20

Make sure you assess the benefits that these measures provide and determine ways to minimise the disruptions to your businesses

PwC 8

Reliefs relating to trade measuresCERP’s seven goals vary from improving the macroeconomics of the economy to easing the impact on the private sector through strengthening the healthcare system

41

23

Taxes• Customs duties and

specific goods tax and commercial tax waivers on imports

• Effective immediately

Trade• New government

standard operating procedures to fast track imports

Trade• Importation of

medical products without going through lengthy procurement process

Trade• Waiver of import

licence FDA requirement provided imports are FDA approved elsewhere

Import of medical supplies and

products for the prevention of

COVID-19

Revise standard operating procedures to fast track

export process for • Protection of market

access• Protection of health

safety and security

Import ExportA B

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Challenges faced during COVID-19

and how to manage tax compliance

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“We have implemented working from home. We are not able to get the signatory

from the authorised person for tax filing and payment purposes”

MNCs

10

Most immediate challenges highlighted during the COVID-19 period

“No printer and monitor at home and the internet connection is not stable due to

power outages and lack of data bandwidth. And, The team still need physical documents for tax compliance.”Local

companies

“There is no online filing system. How to file the tax return manually on time?”

Businesses

“There is an online tax payment system, but may not apply to all taxes. E.g. how

about the personal income tax payment?”Businesses

“Limited access to tax offices, how do we deal with tax officers on tax compliance

and tax audit matters?” Businesses

“Commercial tax, personal income tax and specific goods tax are due on monthly;

withholding tax is due 7 days from payment date; corporate income tax is due on quarterly. Most of tax deferral scheme may not apply to

us. How do we preserve cash during the pandemic; and yet still be tax compliance

without paying penalties.”

Businesses

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Effective tax management - a necessity not an optionWhat are the quick fixes available?

Potential outcome

• Fines, penalties and interest*

• Onerous outcomes

Failure to file tax return timely

Failure to make tax payment timely

Failure to manage tax audit/ appeal

It is possible to seek extension

of time for filings and

payment with sufficient reasons

While team is working remotely, to set out tax responsibilities,

checklists & calendar

It is possible to do tax filings via email

It is possible to perform online tax payment through registration

Ensure key controls, functions including checks and reviews must remain

effectiveUsing some useful tax

management tools, e.g. dashboard

Online platform

Tax system and processesEx

tens

ion

of ti

me Tax function

A

B

C

D* Please refer to Appendix 2 for the penalty provisions under the Tax Administration Law 2019

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What is the top challenge for your business? a. Working From Home, for staff and managementb. Declining Revenues and Cash flowsc. Operations and Supply Chain disruptionsd. Difficulty in fulfilling Contractual Obligations

12

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PwC | Webinar: Impact of COVID-19 on Myanmar businesses and potential responses 12

Polling question 1

What is the top tax challenge for your business during COVID-19?

a. A. Difficulty in making tax filing and payment on time due to employees working from homeb. B. Difficulty in making tax payment on time due to cash flow issuesc. C. Difficulty in contacting tax officesd. D. Difficulty in making tax filing and payment online due to infrastructure constraint

Polling question 1

PwC


13

?


Polling question 1

Have you already considered/used the quick fixes in managing your tax compliance during COVID-19?

A. Online platformB. Extension of timeC. Tax functionsD. Tax system and processesE. More than one of the above

Polling question 2

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Key tax considerations

to weather COVID-19 pandemic

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Utilising tax losses Losses incurred in a business during the pandemic should ideally be utilised to minimise any tax leakages

Restructure to utilise tax losses to offset with income from other businesses and investments, e.g. through:• Merge companies• Move businesses• Move people and/or

assets• Review risk profile

Assessment stagePlanning and deciding

To consider restructure?

Tax credit from tax losses of 25%

vs. Potential risks and costs

below• Legal restrictions (e.g.

moving contracts between companies)

• Capital gains tax• Income tax on gains• Stamp duty• Dividend traps• Dividend planning• Transfer pricing

considerations

To assess any unutilised tax losses

• Do you have valid tax losses that will be expiring?

• Do you have taxable profits from existing business or other businesses/investments?

• Capital losses have no value

Tax losses

Subject to 3 year carry forward ruleAny unutilised tax

losses will be forfeited

Cost-Benefit analysis

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Managing your international taxesLockdown and travel restrictions triggered disruptions in business and supply chain, and hence tax issues, businesses should take mitigating actions to survive the crisis

• Myanmar companies/individuals taxable on foreign earnings

• Distribute earnings of foreign companies

• Can Myanmar loss be utilised to offset?

• Use of foreign losses

• Can you determine the location of your international profits?

• Document your international sales and supply chain

• Overlay tax and duty position in each country

• COVID-19 restrictions – understand for each country

• Free trade agreement opportunities

International businesses and taxes

Location and taxation of foreign profits

Sales and supply chain management

• Additional taxes in Myanmar and overseas for both companies and individuals?

• Creation of a permanent establishment (PE)/ taxable presence

• To consider relief under a tax treaty

• Tax equalisation

Employees stays abroad due to travel restrictions

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Tax function of the future

facing up to COVID-19 pandemic

and post pandemic

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Changing expectations – Tax function post COVID-19

18

Creating the tax function of the future to meet the changing expectations due to COVID-19 and on-going tax reforms

Digitisation of finance & tax

Essential

Enhancing

Excellence

Mastery

Stage 0 Stage 1 Stage 2 Stage 3

Real time metric & reporting

Tax modelling & robotics

Digitalisation, automation &

system

Data analytic &

tax planning

Manual compliance

Basic documents for

tax audit

Checklist for tax control processes

Tax Health Check

Outsourcing

Dashboards, Scorecards,Visualisation

Basic data and spreadsheets

Documentation to prepare for

tax audit

People & On-going training

Strategic impact

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19

?


Polling question 1

Have you already started to transform your organisation’s tax function?

a. A. Yesb. B. Noc. C. No, but has a plan to do so

Polling question 3

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Tax management tools through leveraging technologyIllustration of some tax management tools, which may be useful to your organisation depending on the level of the maturity of your Tax and Finance System

Tax checklist

Document management

& digitalisation

Tax reporting dashboard

Automation & tax

enabled system

Tax health check

How to enhance your tax function

✔ Enhance accounting / ERP system to consider tax requirements and control processes

✔ Compliance automation, with financials data and logics are customised and built into the solution

A comprehensive tax checklist will help✔ Tax responsibilities, workflow and control✔ Document management✔ Tax filings tracker

A tax dashboard can help✔ Include a tax diary and automatic alerts✔ Tracks deadlines - accountability and responsibility ✔ Real time monitoring and reporting

COVID-19 is accelerating the adoption of digital tools. Fuller digitalisation of your business particularly in finance and tax functions can help ✔ Improve compliance✔ Central document depository✔ Prepare documentation in an auditable

manner

✔ Initial and subsequent annual tax health check will help to identify tax risks and opportunities and appropriate action(s) to improve tax control processes and efficiencies.

✔ Continuing internal compliance checks are required

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21

?


Polling question 1

Which tax management tools do you think that will be the most useful/ needed for your organisation at this stage?

a. A. Tax health checkb. B. Tax checklist c. C. Tax reporting dashboardd. D. Document management and digitalisatione. E. Automation & tax enabled system

Polling question 4

PwC 229 June 2020

Appendix 1 – Definition of SMEs provided under the Small and Medium Enterprise Development Law 2015

Type of Business Enterprise Number of permanent employees

Capital Investment (excluding land value) (MMK)

Annual income of the previous year(MMK)

Manufacturing Business Small Not exceed 50 Not exceed 500 million -

Medium Not exceed 300 Not exceed 500 to 1,000 million

Labour intensive or mainly operates piecework business

Small Not exceed 300 Not exceed 500 million -

Medium Not exceed 600 Not exceed 500 to 1,000 million

Wholesale Business Small Not exceed 30 - Not exceed 100 million

Medium Not exceed 60 - Not exceed 100 to 300 million

Retail Business Small Not exceed 30 - Not exceed 50 million


Service Business Small Not exceed 30 - Not exceed 100 million


Business other than as mentioned above Small Not exceed 30 - Not exceed 50 million


PwC 239 June 2020

Breach Penalty

1 • Failure to register• Failure to inform any changes• Failure to deregister

10% of tax payable

2 • Using wrong TIN• Issuing incorrect invoice or sales memo• Issuing incorrect debtor ledger or creditor ledger• Failure to provide or providing invoices, receipts, debtor ledger or

creditor ledger, not in accordance with a tax law

Up to MMK 250,000

3 • Failure to file a tax return The higher of:• 5% of tax payable ** and 1% of tax payable for each

month or proportion of the month that the taxpayer fails to file up to the time of assessment

• MMK 100,000** tax payable include tax payable in instalments

Appendix 2 – Penalty provisions (1/3)

PwC 249 June 2020

Breach Penalty

4 Underpayment of tax and either due to negligence or intentionally submitting wrong information, with an intention to cheat

• A penalty of 25% of the underpaid tax shall be paid;• A penalty of 75% of the underpaid tax shall be paid, if the

underpaid tax is more than MMK 100 million or if the underpaid tax exceeds 50% of the tax payable

5 Tax evasion and concealing or providing incorrect information MMK 150,000 and the higher of:• Difference between correct tax due and the tax assessed• Difference between 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

For Tax Evasion cases• Seven years of imprisonment; or• The higher of MMK 250,000 and 100% of the tax amount

evaded; or• Both of above


PwC 259 June 2020

Breach Penalty8 Failure to provide space, accessory and assistance Up to MMK 500,000

9 Failure to comply with notice of requesting information Up to MMK 500,000

10 Late payment:• Tax assessed or reassessed• Instalment payment of tax• Withholding tax

A penalty equivalent to 10% of the tax payable ** shall be paid** Not applicable for those who get extension for tax payment.

11 For persons deliberately trying to deter the tax administration Over and above the penalty described below, the activities regarded as deterrence have penalties described above:• MMK 250,000; or• One year imprisonment; or• Both of above

12 Abetment Same penalty as the offender

13 Failure to keep as confidential • Imprisonment of up to one year; or• Up to MMK 200,000


pwc.com

Thank you

© 2020 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way. 715220-2020

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