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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
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
PwC 6
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
PwC 7
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
end audited financial report
Will be provided to at least 100 companies based on their year
end audited financial report
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
PwC
Challenges faced during COVID-19
and how to manage tax compliance
PwC
“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
PwC 11
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
PwC
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
?
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
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
13
?
PwC | Webinar: Impact of COVID-19 on Myanmar businesses and potential responses 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
PwC
Key tax considerations
to weather COVID-19 pandemic
PwC 15
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
PwC 16
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
PwC
Tax function of the future
facing up to COVID-19 pandemic
and post pandemic
PwC
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
PwC
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
19
?
PwC | Webinar: Impact of COVID-19 on Myanmar businesses and potential responses 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
PwC 20
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
PwC
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
21
?
PwC | Webinar: Impact of COVID-19 on Myanmar businesses and potential responses 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
Medium Not exceed 60 - Not exceed 50 to 100 million
Service Business Small Not exceed 30 - Not exceed 100 million
Medium Not exceed 100 - Not exceed 100 to 200 million
Business other than as mentioned above Small Not exceed 30 - Not exceed 50 million
Medium Not exceed 60 - Not exceed 50 to 100 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
Appendix 2 – Penalty provisions (2/3)
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
Appendix 2 – Penalty provisions (3/3)
Q&A
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