VDB Loi Employment Compliance and Tax Update 17sep2015

Nay Pyi Taw, 15 September 2015
1
VDB Loi offices
17 September 2015 | Page 2

Quick overview of our Myanmar practice
VDB Loi is a network of leading law and advisory member firms and affiliates delivering local law, tax and regulatory advice
Senior Myanmar legal and tax team in Myanmar as well as in Cambodia, Indonesia, Laos and Vietnam. Our team passionately pursues a hands-on approach. We
deliver practical solutions that commercially fit in the dynamic context of the emerging markets we cover.
Edwin Vanderbruggen
PARTNER
Legal team in Myanmar Core expertise Outstanding experience
2 Partners Property law TMT
Jean Loi (full-time Myanmar residents) Resources
Corporate M&A
MANAGING PARTNER 40 Fee earners Commercial law Consumer
(full-time Myanmar residents only) Real estate
Foreign investment
18 Expats Taxation and customs Manufacturing
(20 languages) Regulatory and licensing Banking and finance
U Aye Kyaw
60 Staff in total in Myanmar Litigation and arbitration Power and infrastructure
SENIOR COUNSEL
Jeffery L. Martin What commentators write about us: Yangon Office

SENIOR LEGAL ASSOCIATE - advises an impressive range of leading Level 8, Centrepoint
Towers, No. 65
corporations (Legal 500) Sule Pagoda Road &
Merchant Street
- "widely known regional firm with Kyauktada Township
Nishant Choudhary
SENIOR LEGAL ASSOCIATE strongholds in some of Southeast Asias most
promising emerging markets" (IFLR)
- "strong on tax, very creative and innovative" Nay Pyi Taw Office
(Chambers) No. S-204
Nar Wah Tha Pyay Kone Ward
- "highly visible in the Myanmar market"
SENIOR LEGAL ASSOCIATE Zabu Thiri Township
(IFLR)
- "very good commercial understanding of
Myanmar" (Chambers)
Chris Sheridan
SENIOR LEGAL ASSOCIATE
Mark Livingston
SENIOR LEGAL ASSOCIATE

Overview of selected team members
Team Leader Team Leader
Jean Loi
Edwin Vanderbruggen
MANAGING PARTNER,
PARTNER, Yangon
Yangon
Legal Team MIC Permit Team Nay Pyi Taw Team

U Myo Nyunt U Aye Kyaw Nishant Choudhary Thuan Pham May May Kyi
SENIOR COUNSEL, Yangon SENIOR COUNSEL, Yangon SENIOR LEGAL ASSOCIATE DIRECTOR, Yangon DIRECTOR
U Myo Nyunt is an advocate to the The principal of specialized Nishant is an experienced lawyer Thuan is an experienced tax and May holds a bachelors degree in
Supreme Court of Myanmar and is litigation firm U Aye Kyaw & qualified in India with an extensive accounting advisor with a degree Commerce from the Yangon Institute of
one of Myanmars most Associates, which teamed up with background in finance and in economics. He has over 12 years Economics, and is an experienced advisor
distinguished senior lawyers. A VDB Loi in 2014, this former judge, securities. He assists finance of work experience, most recently on Myanmar customs duty, supply chains
noted author on Myanmar law, he magistrate and law lecturer has institutions to navigate the with Mazars, Ernst & Young and and international trade. She is highly
was formerly the Director of the over 40 years of experience with emerging regulatory framework of DFDL. He has been based in experienced in importation and
Supreme Court and an appellate litigation and arbitration in foreign and secured lending in Myanmar since 2013, where he corporate compliance.
judge. Myanmar. He also has extensive Myanmar. Nishant also advises on advises on the licensing and tax
experience with real estate and corporate M&A and restructuring implications.
construction issues in Myanmar. in a wide range of industries.
Mark Livingston Nar Wah Aung Soe Moe Ricardo Cabello Jonathan Linton
SENIOR LEGAL ASSOCIATE, Yangon SENIOR LEGAL ASSOCIATE, SENIOR LEGAL ASSOCIATE MANAGER, Yangon SENIOR CONSULTANT
Mark is a senior associate in our Nay Pyi Taw Aung is an experienced Myanmar Ricardo, who qualified as a CPA Jon Linton is a consultant in our licensing
Corporate M&A and Investment Nar Wah, a Myanmar-qualified qualified attorney with a with Ernst & Young, is assisting our team. Based full time in our Nay Pyi Taw
practice. He is an experienced lawyer, is an associate on VDB Lois Bachelors of Law degree from clients with their licensing and office, Jon liaises with various
corporate and commercial lawyer, legal team. She has an exceptional Dagon University. He has unique compliance requirements. With a Government agencies to assist clients
and is admitted as a solicitor in educational and career background and extensive experience in solid background in auditing and with their investment projects,
Victoria, Australia. Mark has in both law and accounting. She telecommunications, land and extensive international experience importation, construction and various
previously practised with leading spent more than seven years licensing issues in Myanmar. throughout Asia, he helps investors regulatory issues in Myanmar.
Australian firms Clayton Utz and working in Singapore. navigate Myanmar compliance
Gadens Lawyers. requirements
Tax Team
Divyasree Damaraju Jeffrey Martin Chris Sheridan Ngwe Lin Myat Chit Nay Nwai Linn
LEGAL ASSOCIATE, Yangon SENIOR LEGAL ASSOCIATE, Yangon SENIOR LEGAL ASSOCIATE, Yangon SENIOR CONSULTANT, Yangon SENIOR CONSULTANT, Yangon
A qualified company secretary, Jeffrey, a Canadian qualified lawyer, Chris is a barrister and a solicitor Lin is a seasoned consultant with Nay has six years of experience in
Divya leads a team of compliance joined VDB Loi after working for an admitted in Australia, he advises experience working overseas at accounting and finance working for
professionals to assist clients with international firm based in S.E. Asia. foreign investors on commercial global professional service firms. international enterprises in
all corporate matters such as He has primarily specialized in real She holds a Bachelors in Commerce Myanmar. She held responsibilities
and corporate law, M&A, real estate
incorporations, preparing and
estate development and law and dispute resolution. from the University of Newcastle. for managing financial, tax and
maintaining statutory books and
registers, and all corporate filings. transactional matters, also advising Lin advises clients on market entry accounting operations.
clients on related corporate and and licensing. She has advised
project finance and construction multinationals.
issues.
Khin Tha Zin Min Su Pyi Sone Khin Pearl Yuki Aung Honey Htun Wai Ei Mon Khaing
LEGAL ASSOCIATE, Yangon LEGAL ASSOCIATE, Yangon LEGAL ASSOCIATE, Yangon CONSULTANT, Yangon CONSULTANT, Yangon
Tha Zin has five years of Su is an experienced Myanmar Yuki holds a Bachelors degree in Honey is a tax consultant with a Ei Mon holds a Bachelors in Physics
experience as a lawyer for Daw qualified attorney with a Law from the Yangon University Bachelors degree in Business from Dagon University as well as
Ohmmar Law Firm and U Aye Bachelors of Law degree and an and a Diploma in Business Law. She Management from the Yangon accounting certificates from the London
overseas MBA, formerly working in is currently studying in a Diploma
Kyaw Law Firm. Khin holds a Institute of Economics. She also Chamber of Commerce. She is currently
the legal field in Myanmar and in International Law.
Bachelor of Law from the overseas. Su has extensive holds masters degrees in pursuing her ACCA qualification and
University of Dagon. experience in real estate law, IP Accounting and International assists our international clients for tax
and financial services. She is part Business from Umea University, compliance.
of the team advising. Sweden. Honey speaks Burmese,
17 September 2015 | Page 4 English and Swedish fluently.
Note: We have selected a number of our professionals for this overview. For a complete list, contact us.
Contents
1. Common mistakes 5. Termination

in employment contracts
6. Severance
2. Working hours and overtime
7. Accidents
3. Minimum wage
8. Disputes
4. Leave and holidays
9. Cases

Common mistakes in employment contracts

Five common mistakes in employment contracts in Myanmar
1. Mandatory items not contained in employment agreement (as per Employment and
Expertise Development Law):
Type of employment
Transport to/from workplace
(description of position)
Probation period Work rules/policies
Wages and salary Training
Place of employment Resignation and dismissal
Term of contract Termination
Working hours Responsibilities
Days off, holidays and leave Changes to responsibilities by consent
Overtime Amending/supplementing agreement
Meal programs during working hours Other matters
Accommodation Miscellaneous
Medical care
Above items, if not applicable, must be stated to be so, i.e. no accommodation shall be
provided

Five common mistakes in employment contracts in Myanmar
(continued)
2. Employment agreement not executed within 30 days of appointing the position to the
employee. (criminal sanctions!)
3. Employment agreement not in both Burmese and English.
4. Employment agreement not filed with the nearest Labour Exchange Office (under the
Department of Labour as governed by the Ministry of Labour, Employment and Social
Security).
(NOTE: only enforcing this for local employees at this stage. For foreign workers, unclear
if enforced).
5. Work rules/policies do not conform with Myanmar employment laws.

Hours
Sick leave
Discriminatory

Working hours and overtime

Regulations on maximum working hours and overtime: which ones
apply to you?
Offices (commercial establishments) and Manufacturing (factories):

retail premises (shops):
As above, save for:
No more than 8 hours a day for a total of 48
hours per week No more than 8 hours a day for a total of 44
hours per week, if a regular worker OR a
For periods of work in excess 5 hours, a 30 total of 48 hours per week if a worker in a
mins. rest break is required (for meals etc.) position who must work continuously (eg.
power plant employees)
Total combined regular hours and rest break
must not exceed 11 hours in one day Total combined regular hours and rest
break must not exceed 10 hours in one day
One paid holiday off per week (nominally, a
Sunday) but another day can be substituted No more than 16 hours overtime per week,
as long as holiday substituted within 3 days if a regular worker OR a total of 12 hours
either side of the original paid holiday per week if a worker in a position who
must work continuously (eg. power plant
No more than 60 hours overtime per year, employees) paid at double the ordinary
paid at double the ordinary rate of pay rate of pay
(Managers are excluded from the above) Managers are not excluded from the above

Regulations on maximum working hours and overtime: which ones
apply to you? (continued)
Miners: Oil and gas workers:

As per manufacturing above, save for: No more than 8 hours a day for a total of
48 hours per week
No more than 8 hours a day for a total of
44 hours per week, if a regular above For periods of work in excess 5 hours, a
ground mine worker OR a total of 48 30 mins. rest break is required (for
hours per week if an above ground meals etc.)
mine worker in a position who must
work continuously Total combined regular hours and rest
break must not exceed 10 hours in one
No more than 11 hours overtime per day
week, if an above ground mine worker
(regular or continuous) OR a total of 14 One day off per week and can be any day
hours per week if a below ground mine as decided by employer
worker Overtime not mentioned

Minimum wage

New rules on minimum wage
Who determines the minimum wage?
The National Committee and Minimum Wage Scrutinizing Working Committee
(Committee) under the Minimum Wage Law and Minimum Wage Rules.
What is the minimum wage?

On 28 August 2015, the Committee determined the minimum wage to be:
450 Kyats per hour, totalling 3600 Kyats per day over an 8 hours day (see
Notification 2/2015).
Are allowances included in the minimum wage?

No.
Wage means fees, wages or salary [...] including overtime fees or bonuses [] or other
remunerations or benefits which may be determined as income [] but excludes:
travelling allowances;
social security cash benefits;
allowances for accommodations and meals, electricity charges, water service
charges and duties and taxes;
medical treatment allowances and recreation allowances; and
damages for dismissal from work and compassionate allowance.

Leave and holidays

What are the minimum leave requirements?
13 mandated public holidays:
Independence Day (1 day)
Full moon of Tabaung (1 day)
Full moon of Kason (1 day)
Full moon of Tansaungmon (1 day)
Thingyan (3 days)
Burmese New Year (1 day)
May Day (1 day)
Resistance Day (1 day)
Martyrs Day (1 day)
End of Buddhist Lent (1 day)
National Day (1 day)
Annual leave: 10 days per year following 12 months continuous service

Casual leave: 6 days per year following 12 months continuous service (no more than 3 consecutive days
allowed at a time)
Medical leave: 30 days per year following 6 months continuous service
Maternity leave: 6 weeks before confinement, 8 weeks after confinement, minimum of 14 weeks in total
Paternity leave: up to 15 days after wifes confinement
Funeral leave: holiday permitted but no defined maximum amount of days

How to ensure compliance with rules on holidays when you have
non-stop operations?
What if an employee is required to work

on a public holiday or a rest day (eg.
Sunday)?
a day in lieu must be provided within

3 days, before or after, the public
holiday/rest day
OR
the employer must pay the employee

overtime rates
Ruling from Ministry of Labour,

Employment and Social Security

Termination

Proper procedure for terminating an employment agreement
First warning
Second warning
Third warning
Termination (without severance)
Warnings must be formal, i.e. a sit down meeting between:

the employee;
the employees manager (who has noticed the need for the warning); and
the human resources manager (to represent the employee so no prejudice to the
employee occurs during the meeting)
The meeting should be documented and the employee should be provided a written
warning stating the reasons for the warning.
The meeting permits all parties present to voice their concerns or reasons why the warning
is required or not (as the case may be).
Failure to provide three warnings prior to termination will result in a claim for severance by
the employee.

Severance

New rules on severance pay
Severance is payable upon termination, save for the following instances :

employee resigns
employee tarnishes the reputation of the employer
employee breaches a term of their employment agreement eg misconduct.
In addition to severance payments, an employer must also:

pay out an employees accrued annual leave
choose to pay out OR require the employee to serve (work) the notice period in the
employment agreement
New severance amounts benefit long term employees (see amounts on the following page)

New rules for severance pay (continued)
Severance amount due
Term of employment Notification No. 55/1976 Notification No. 84/2015 Comparison
(Old severance amounts) (New severance amounts) (in months)
0 3 months 1 months salary 0 -1
3 months 1 year 0 -2
2 months salary
6 months 1 year 50% of 1 months salary -1.5
1 year 2 years 1 months salary -2
2 years 3 years 150% of 1 months salary -1.5
3 years 4 years 3 months salary 0
4 years 6 years 4 months salary +1
6 years 8 years 3 months salary 5 months salary +2
25 (maximum cap) 13 months salary +10

2 months salary

2 months salary

Accidents

Who is liable for damages in case of workplace accidents?
Employer is responsible for a safe

working environment
- Arising out of and in the course of

employment
- Drink, drugs or willful disobedience
- Risk to all mankind
- Accidents on the way to and back

from work
- Duties outside of the scope of

instructions: the case of the elephant

Danger: main contractor liable for employees of subcontractors?
- Principal
- In the course of or for the purposes of his trade or business
- Contracts with a contractor for the execution of the whole or any part of
any work which is ordinarily part of the trade or business of the principal
- The principal shall be liable to pay to any workman employed in the

execution of the work any compensation which he would have been liable
to pay if that workman had been immediately employed by him
- Who is an agent and who is an independent contractor?

Disputes

Settlement of Labor Disputes
What is the dispute according to the Settlement of Labor Dispute Law 2012?
Dispute means the labor dispute or disagreement between an employer or employers or

employer organization which represents them and a worker or workers or the labor
organization which represents them in respect of employment, working, termination of a
worker or workers and in respect of working or service including pension, gratuity, bonus and
allowances or compensation for work related grievance, injuries, accidents, deaths or
occupational diseases or in respect of any other matters of worker including workers holiday,
leave. Re: section -2 (m) Settlement of Labor dispute Law 2012.
The aim of the Settlement of the Labor dispute Law 2012 is , as the preamble said, for
safeguarding the right of workers or having good relationship between employer and workers
and making peaceful workplace or obtaining the rights fairly, rightfully and quickly by settling
the dispute of employer and worker justly.

Dispute Settlement Structure
Jurisdiction Limits
highest arbitration for Have to make a decision

Dispute Settlement Labor dispute within 14 day of receipt of
Arbitration collective dispute and 7
Council Union Form a tribunal days for the individual
dispute
Can make a decision on Parties have to appoint the

Arbitration Body the dispute representatives for the
( Region /division) collective dispute before
the Arbitration body
Can make an agreement Has to determine the types

Conciliation Body between the parties after of dispute to be either
( Township ) the negotiation individual or collective

Cases

Case Example 1- Multiple monthly employment contracts
Facts: Employees of a factory in an IZ are employed under monthly employment contracts.

The employer cuts the salary for poor quality of the production. Employees suspend work
and get fired.
Decision of Arbitration Body: One month contracts are not reasonable. Compensation is
due for severance based on long term employment (but shorter than one year). 1 month
notice + 1 month severance.

Case Example 2- Do all water festival bonuses have to be the same?
Facts: Workers asked for the same bonus for the water festival like others workers of the
factory. They only got 5000 kyats for each. It is less than the others who received the Bonus as
follow; 100 000 Kyats for the permanent workers and 60 000 Kyats for the daily workers. The
owner said that she gave them less bonus because they demonstrated.
Decision of Arbitration Body: Reject the demand for the Bonus of water festival.
The workers appealed to the Dispute Settlement Arbitration Council.
Decision of the Dispute Settlement Arbitration Council: Cancelled the decision of the
Arbitration Body, and decided to give 60000 Kyats to each worker as the water festival Bonus.

Case Example 3- Can the employer re-assign employees to another
place of work?
Facts: Factory in agri-business with only seasonal activity. During non-operation, workers are
assigned to a new factory of the same employer. Employees file a claim for severance without
prior consultations with the employer.
Decision: There was no termination so there should be no severance. Employees are ordered
to start work again. Employer must pay salary during the disputed period.

Case Example 4- Can you fire an employee without severance for
being rude?
Facts: Rudeness, allegations of missing money, absent without leave.
Decision:
- No physical abuse
- Warnings are required, were not done
- Criminal case?
- Ordered to pay severance and 1 month notice

Case Example 5- Reimbursement of costs
Facts: Driver in a factory has a flat tire and fixes it. Cost is deducted from salary. Driver stops
work in protest.
Altercation followed by an apology.
Decision:
- Flat tire is an ordinary cost for a factory driver
- Employee was never fired by the employer, so he can go back to work
- No salary is owed during the work suspension

Case Example 6- Can you terminate a verbal employment contract
without warnings?
Facts: General Manager of a company has no written contract. He is terminated by the

company amid allegations of cheating.
Decision:
- Irrelevant that there is no written agreement
- Required to respect the compulsory warnings.
- Notice and severance is due.

Case Example 7- Can you discriminate in terms of bonus between
employees?
Facts: A factory has permanent and temporary workers. There is a safety bonus and penalty
system. The temporary workers gat penalties, but no credits. There are also differences in
terms of leave.
Decision:
- Daily or temporary worker has the same protection under the law.
- Bonus should in this case be the same
- Factory Act 1951

Case Example 8- What to do with a drunk employee?
Facts: Employee shows up drunk for work. Refuses to work and is fired immediately. A factory
has permanent and temporary workers.
Decision:
- Warnings are still required
- Reinstatement is ordered

Overview of Personal Income Tax
Previously, the Income Tax Law (ITL) 1974 and its relevant notifications served as the basis
for levying personal income tax (PIT).
On 1 April 2014, The Union Tax Law 2014 came into effect amending several aspects of the
existing tax rules, such as PIT rates and amounts of personal relief.
Effective 1 April 2015, we will be following the 2015 Union Tax Law (UTL) as amended.

Overview of Personal Income Tax (continued)
Who needs to pay PIT in Myanmar?
An individual who receives any categories of income in Myanmar is subject to Myanmar

PIT, irrespective of his nationality or the duration of his stay in Myanmar.
Income received in Myanmar is defined as income received or deemed to be received, or

income accrued or arose or is deemed to have accrued or arisen in Myanmar.

Scope of taxable income and applicable rates
All categories of income are subject to PIT
Income comprises most categories of income so long as it is paid to the earner, including:
salaries and wages;

Livelihood;
assets; and
business income.

Scope of taxable income and applicable rates
Residents
All Myanmar citizens (except resided and earned income outside of Myanmar for any
amount of time in an income year)
A Foreigner who stayed in Myanmar for more than 183 days during the taxable year
Non-residents
A Foreigner who stayed in Myanmar for less than 183 days
Residents are liable to pay PIT in Myanmar on their worldwide income, while non-residents
are only obliged to pay PIT on their Myanmar derived income.

Threshold and personal relief
Threshold for levying PIT
Under the UTL, the threshold for levying PIT is 2,000,000MMK. This means no PIT is
payable if a resident taxpayers annual net taxable income is less than 2,000,000MMK.
If a resident taxpayers annual income is higher than 2,000,000MMK, only the portions above
2,000,000MMK are subject to PIT at applicable rates.

Personal relief
The new UTL has increased the overall allowable deductions for low income earners. The
basic allowance remains the same as provided in section 2 of Notification No.110/2012: 20%
of annual taxable income, as long as such amount does not exceed 10,000,000MMK (20% of
annual salaries or 10,000,000 MMK whichever is lower)
The spousal allowance is now granted to both husband and wife, and increased from
500,000MMK to 1,000,000MMK. The resident taxpayer is also entitled to a child allowance
of 500,000 MMK for each child under section 31(c) of the UTL. Further a new relief for
every parent living with the individual taxpayer to be 1,000,000MMK.
Non-residents do not enjoy any deductions.

Overview of the Personal Income Tax (continued)
Example 1 - Calculation of allowances
A resident employee has an employment agreement starting from 1 April 2015 that states the following
Monthly basic salary = USD4,000
Monthly housing benefit = USD1,000
Monthly transport allowance = USD300
He has a wife who does not work, 2 dependent children and his father is living with them.
Deductions for net taxable salary for Financial Year ending 31 March 2016 are as follows assuming
exchange rate of MMK1,000:USD1
Taxable months= 12 months (from 1 Apr 2015 - 31 Mar 2016)
USD Annual Salary (USD) Annual Salary (MMK)

Monthly Salary 4,000.00 48,000.00 48,000,000
Monthly Housing Allowance 1,000.00 12,000.00 12,000,000
Monthly Transport Allowance 300.00 3,600.00 3,600,000
Total 5,300.00 63,600. 00 63,600,000

Less: Basic Allowance 10,000,000
Parent Allowance 1,000,000
Spousal Allowance 1,000,000
Children Allowance 1,000,000
Net Annual Taxable Income 50,600,000

Example 1 - Calculation of allowances
This was calculated as follows:
Basic Allowance
MMK63,600,000 x 20% = MMK12,720,000 Where annual salary income is [(USD4,000 +
USD1,000 + USD300) x 12 months] x 1,000 = MMK63,600,000
This exceeds the maximum MMK10,000,000 basic allowance, so the allowance is

MMK10,000,000
Parent allowance = MMK1,000,000 x 1 parent = MMK1,000,000
Spousal allowance = MMK1,000,000 x 1 wife = MMK1,000,0000
Children allowance = MMK500,000 x 2 children = MMK1,000,000

Income tax rates
Rates of income tax imposed on the income of an individual from salaries and wages,
profession, property, business and other sources of income are specified as follows:
Annual net taxable income
From To Income tax rate
MMK MMK
(a) 1 2,000,000 0%
(b) 2,000,001 5,000,000 5%
(c) 5,000,001 10,000,000 10%
(d) 10,000,001 20,000,000 15%
(e) 20,000,001 30,000,000 20%
(f) 30,000,001 and above 25%

How to calculate PIT in Myanmar?
Also under Section 16 (d) of the ITL, the annual PIT is calculated based on annual estimated
salary income, then this annual PIT is to be divided into equal installments i.e. the annual
PIT amount is divided by the number of months of the financial year over which the
annual salary income will be received.
Therefore monthly PIT payments are estimates as they are based on estimated annual
income, divided into equal installments.

Example 1 - Calculation of Annual PIT
In Example 1, the net annual taxable income was MMK 50,600,000. This falls within the top
tax bracket as it exceeds MMK30,000,000, so the marginal rate is 25%. The annual PIT is
MMK 9,300,001 as follows:
Taxable Amount PIT Amount

From (MMK) To (MMK) PIT Rate
(MMK) (MMK)
0% -
1 2,000,000 2,000,000
5% 150,000
2,000,001 5,000,000 2,999,999
10% 500,000
5,000,001 10,000,000 4,999,999
15% 1,500,000
10,000,001 20,000,000 9,999,999
20% 2,000,000
20,000,001 30,000,000 9,999,999
and above 25% 20,600,004 5,150,001

30,000,001
TOTAL 50,600,000 9,300,001

Example 1 - Calculation of Monthly PIT
To calculate the monthly PIT for each month, the annual PIT is divided by 12
(i.e. the number of months in the Financial Year)
MMK 9,300,001 / 12 months = MMK 775,000

How to pay PIT in Myanmar?
By way of withholding tax
PIT on salary income must be paid through the withholding mechanism (WHT) as per
section 16(d) of the ITL. The employer who pays the salary is responsible to deduct PIT and
remit it to the IRD within 7 days upon disbursements.
16. (d) Any person responsible for disbursement of payments under salaries shall, at the time
of payment, deduct income tax on the amount payable. In so deducting, the income of the
taxpayer for the year under the said class of income shall be estimated, and the tax due thereon
shall be deducted in as much equal installments as possible.

How to pay PIT in Myanmar?
Annual salary statement and reconciliation
In addition to the monthly PIT payments, employers must also file an annual salary
statement for each employee, within 3 months of the financial year-end i.e. by 30 June.
With this annual salary statement, where annual salary income is no longer an estimate but
actual annual income a final reconciliation is performed and any under or overpayment will
be resolved.

The Social Security Contribution
Overview of the Social Security Law 2012
The Social Security Law 2012 (SSL) establishes the present framework of the social security
scheme (SSS) in Myanmar. The SSL sets up the Social Security Board (SSB) as the statutory
organization to oversee and administer the SSC. All establishments in Myanmar with more
than five workers are required to register with the SSB.
Although no definition is given to an establishment in the SSL, its section 11 provides a

non-exhaustive list of establishments covering almost all forms of organizations. In
particular, companies are explicitly listed under section 11(a)(v) as an establishment

The Social Security Contribution (continued)
How the SSS works
The ultimate objective of the SSS is to insure workers basic needs when certain events occur
by imposing compulsory and consistent obligations on both employees and employers.
Workers has the same meaning as employees for the purpose of the SSL irrespective of
whether they are permanently or temporarily employed.
Under the SSS, contributions from both sides will be pooled under insurance systems at
different rates: (1) health and social care insurance system; (2) family assistance insurance
system; (3) invalidity benefit, superannuation benefit and survivors benefit insurance
system ; (4) unemployment benefit insurance system; and (5) other social security scheme.

The employer must pay 3% of its employees total monthly salaries to the SSB. Each
employee needs to pay 2% of his gross monthly salaries to the SSB.
For both the employer and the employee, their salary base for the contributions are capped
at 300,000MMK per month respectively.
The dates of implementation of the second and third phases are yet to be decided.

Social Security Contribution (SSC) calculation examples
For an employee earning MMK500,000 per month, the following SSCs will be made
Employee SSC = 2% x MMK300,000 = MMK6,000
Employer SSC = 3% x MMK300,000 = MMK9,000
Total SSC paid to SSB = MMK15,000

Pay slip
PAY SLIP
Date : 30 - July -
Name
2015
Designation
Employee No. S / No.
NRIC No.
Month & Year: July-2015 Currency : MMK
Earnings Jul-15 Deductions Jul-15

Basic Salary 250,000 Personal Income Tax (2,117)
Overtime SSC Fund contribution (5,000)
Incentive Other deductions
Bonus
Others
Total Deductions (7,117)
Allowances
Car Allowance Non-taxable payment
Housing Allowance 50,000 Other benefits
Other Allowance 50,000
Back Pay 150,000 Non-taxable payment -
Gross pay 500,000 Net pay 492,883

Key issues in calculating PIT
- Gross vs net contract?
- Employees starting or terminating during the financial year

- How do you deal with one-off bonus or allowance?
- DTA exemptions
- Fringe benefits
- Housing
- Car
- Accommodation at employer premises
- Schools
- R&R
- Relocation cost of expatriate employees

THANK YOU
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VDB Loi Employment Compliance and Tax Update 17sep2015

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Nay Pyi Taw, 15 September 2015

17 September 2015 | Page 2

Jeffery L. Martin What commentators write about us: Yangon Office

17 September 2015 | Page 3

Legal Team MIC Permit Team Nay Pyi Taw Team

17 September 2015 | Page 4 English and Swedish fluently.

1. Common mistakes 5. Termination

17 September 2015 | Page 5

17 September 2015 | Page 6

17 September 2015 | Page 7

3. Employment agreement not in both Burmese and English.

5. Work rules/policies do not conform with Myanmar employment laws.

17 September 2015 | Page 8

17 September 2015 | Page 9

Offices (commercial establishments) and Manufacturing (factories):

17 September 2015 | Page 10

Miners: Oil and gas workers:

17 September 2015 | Page 11

17 September 2015 | Page 12

What is the minimum wage?

Are allowances included in the minimum wage?

17 September 2015 | Page 13

17 September 2015 | Page 14

Annual leave: 10 days per year following 12 months continuous service

17 September 2015 | Page 15

What if an employee is required to work

a day in lieu must be provided within

the employer must pay the employee

Ruling from Ministry of Labour,

17 September 2015 | Page 16

17 September 2015 | Page 17

Warnings must be formal, i.e. a sit down meeting between:

17 September 2015 | Page 18

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Severance is payable upon termination, save for the following instances :

In addition to severance payments, an employer must also:

17 September 2015 | Page 20

Term of employment Notification No. 55/1976 Notification No. 84/2015 Comparison

(Old severance amounts) (New severance amounts) (in months)

0 3 months 1 months salary 0 -1

1 year 2 years 1 months salary -2

2 years 3 years 150% of 1 months salary -1.5

3 years 4 years 3 months salary 0

4 years 6 years 4 months salary +1

6 years 8 years 3 months salary 5 months salary +2

8 years 10 years 6 months salary +3

10 years 20 years 8 months salary +5

20 years 25 years 10 months salary +7

25 (maximum cap) 13 months salary +10

17 September 2015 | Page 21

Term of employment Notification No. 55/1976 Notification No. 84/2015 Comparison

(Old severance amounts) (New severance amounts) (in months)

0 3 months 1 months salary 0 -1

1 year 2 years 1 months salary -2

2 years 3 years 150% of 1 months salary -1.5

3 years 4 years 3 months salary 0

4 years 6 years 4 months salary +1

6 years 8 years 3 months salary 5 months salary +2