Client Alert: Myanmar Proposes New 8% Tax on Import of LNG

Just letting you know that a new Draft Union Tax Law in Myanmar has been released proposing an 8% Special Goods Tax (SGT) on import, sale and export of LNG.

SGT was introduced in 2016 with the enactment of Special Goods Tax Law effective starting from 1 April 2016 (FY2016-2017). SGT rates will be announced on a yearly basis by passing the Union Tax Law. According to Union Tax Law (“UTL”) 2016, there are total of 16 special goods and natural gas was included as one of the special goods. SGT rate for natural gas is 8% and there has been confusion regarding with whether LNG is also considered as one of the special goods and would be subject to 8% SGT as SGT Law did not provide any clarifications.

VDB Loi has argued, and the Internal Revenue Department (“IRD”) had finally agreed that since LNG is modified and converted from gaseous state into liquid state using technology and it is not natural gas produced from natural resources of Myanmar, LNG was not subject to SGT in 2016-2017.

That favorable tax treatment is under threat of being cancelled as the Draft Union Tax Law 2017 now proposes to include LNG as one of the “special goods” which are subject to Special Goods Tax. SGT rate for LNG is 8% and is payable at the time of importation, local production and sale and exportation.

This change in tax rate, if the draft is not amended, would be effective starting from 1 April 2017 (FY2017-2018).

It is not yet clear how the tax rate changes would affect the Government’s own LNG tender project, slated for the middle of 2017.