Reduced Personal Income Tax under UTL 2021
January 20, 2022In order to shore up the economy and investments affected by the COVID-19 pandemic; the state administration council has increased the income ranges at each rate level applicable for Personal Income Tax (“PIT”) in Union Tax Law (“UTL”) 2021 dated 30 September 2021. The changes under UTL 2021 are more favorable for taxpayers, since more of their income will be taxed at a lower PIT rate compared to UTL 2020. The new ranges mean that only income over MMK70,000,000 will be taxed at the highest rate of 25%, compared to a threshold of MMK30,000,000 under UTL 2020.
A comparison of all the income ranges under UTL 2020 and UTL 2021 is shown in the table below:
| Progressive PIT rate | Income ranges under UTL 2020 | Income ranges under UTL 2021 |
|---|---|---|
| 0% | 1- 2,000,000 | 1- 2,000,000 |
| 5% | 2,000,001-5,000,000 | 2,000,001-10,000,000 |
| 10% | 5,000,001-10,000,000 | 10,000,001-30,000,000 |
| 15% | 10,000,001-20,000,000 | 30,000,001-50,000,000 |
| 20% | 20,000,001-30,000,000 | 50,000,001-70,000,000 |
| 25% | 30,000,001 and above | 70,000,001 and above |
PIT calculation for the 2021-2022 financial year (interim budget year)
According to Notification 510/2021 issued by the Ministry of Planning, Finance and Industry, since the interim budget year is only six months long, to arrive at an annual income amount for the PIT calculation, the employee’s fixed income, such as monthly salary and monthly fixed allowances during the interim budget year is multiplied by two. However, variable income, such as bonuses and overtime, are not required to be multiplied by two in the annual income calculation.
If an employee’s total annual income exceeds MMK4.8 million, the employer must deduct PIT from payments made to the employee. The basic exemptions and allowances stated under Section 6 of the Income Tax Law are subtracted from the total annual income to arrive at the employee’s taxable income, which is then taxed at the progressive PIT rates according to the income ranges shown in the table above under UTL 2021. The annual PIT amount is then divided by two to obtain the payable PIT for the interim budget year.
The above PIT calculation is only applicable for the 2021-2022 transition period (October 2021 to March 2022). Should there be any resigned cases during transition period, the resigned person can be in a PIT overpaid position due to the implication of PIT formula of the transition period.
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