The government has proposed changes to how the income tax system works, including new tax rules on foreign remittances. The proposed changes align with the Board of Investment (BoI) and the International Labor Organization recommendations. However, the general public has said that these new rules will cause problems for them when sending money abroad to their homes in Myanmar.
Below are the new tax rules on foreign remittances that the government has proposed under the 2015 Tax Law Announcement.
What are Foreign Remittances?
Foreign remittances are financial transactions that take place abroad. These can include personal transfers, gifts, pensions, training fees, and scholarships.
People use foreign remittances for various reasons, but the most common is to help their families or dependents back home in Myanmar. Other reasons to send money abroad include paying school fees, medical bills, and other personal expenditures.
Some people use the services of brokers because they are less costly than using banks or exchange bureaus.
Resident individuals can remit up to $200,000 per calendar year under the new proposed rules. However, if they want to transfer more than $200,000 per year, they must get permission from the Central Bank.
The proposed tax rules state that it will tax foreign remittances 5 percent of the total sent amount unless the individual has permission to transfer more than $200,000 per year. If an individual has permission to transfer more than $200,000 per year, it will be taxed at 2 percent.
The new rules state that you must send foreign remittances through banks and exchange bureaus regulated by the Central Bank. It includes transactions made online or over the phone. Currently, some brokers offer lower costs.
The New Tax Rules
1. Remittances will be taxed at the rate of 7% if it is used for consumption purposes or 5% if for investment or business purposes.
2. Remittances are allowed to be carried out via any mode of payment, including, but not limited to, wire transfers, credit cards/debit cards, and third-party fund transfers.
3. Third-party fund transfers are not allowed to be made under the name of another person but rather for oneself.
4. When receiving money via any mode of payment, including third-party fund transfer, you must pay income tax on it. The rate is 3%, which the bank or financial institution will withhold.
5. When receiving money via a third-party fund transfer, one must keep the relevant documents and submit them to the tax authority when getting audited.
6. If one receives more than 3 million kyats in foreign remittances within a certain given year, then that person is required to pay income tax on it at the rate of 3%.
7. Existing accounts in foreign currency do not need to be reported when making remittances.
8. Banks and other financial institutions obligated to report on foreign remittances must submit the relevant information to the tax department quarterly. In contrast, non-financial institutions must submit it monthly.
According to the experts at Western Union, ” Real-time transfers are available for UPI money transfers up to 200,000 INR and for amounts, less than 200,000 INR sent to receiving banks with IMPS services.” To find Western Union locations, give them a call.