Friday, April 28, 2017
The Myanmar Times
The Myanmar Times

Tax cut planned for low-cost housing purchases

The government is planning to drastically reduce the taxes it levies when people purchase state-commissioned low-cost housing, which developers say puts many units out of reach for ordinary buyers.

Union Planning and Finance Minister U Kyaw Win, in a speech to developers and business leaders last week, said that the only taxes levied on purchases of low-cost housing would be the stamp duty, according to people who attended the meeting.

The Myanmar Times contacted several ministry officials who were unable to comment. The office of deputy minister U Maung Maung Win directed inquiries to the International Revenue Department (IRD), and IRD director U Than Zaw Win confirmed the plan.

“But the minister [U Kyaw Win] has only outlined the plan in his speech, there has been no internal announcement in the IRD for this change to occur,” said U Than Zaw Win. “So we cannot say when it will start.”

U Aye Lin, joint secretary of the Myanmar Construction Entrepreneurs Association (MCEA), said that senior MCEA officials had explained the tax problem to the planning and finance minister.

The government typically hires private developers to build low-cost housing, which developers say results in costs of around K23,000 per square foot. As a low-cost housing unit is at most 600 square feet, the unit price is not more than K14 million and often less. But the purchase of properties worth up to K30 million are taxed at 15 percent, in addition to a 7pc stamp duty in Yangon and 5pc elsewhere in the country.

A low-cost unit in Yangon with a sales prices of K13 million would in fact cost the buyer almost K16 million.

That 15pc tax is not strictly a property tax, but a tax on income levied when a person cannot prove that the funds with which they are purchasing an asset (like an apartment) have already been taxed. Because virtually no-one can provide such proof, the tax is effective across the entire market.

“So although the developer can sell a low-cost unit at below K15 million, if there is a tax on buying the property it’s no longer a low price,” said U Aye Lin.

Various construction industry bodies have been complaining about this tax system for years. For the 2016-17 fiscal year, the purchase of any property over K100 million – which is the vast majority of new Yangon apartments – is hit with a 30pc tax. Industry firms say this deters buyers and keeps the real estate market flat.

Removing the tax for low-cost housing units would make the 15pc less expensive for buyers, and the government is also trying to lower the sales prices on future low-cost housing projects.

Union Construction minister U Win Khine said in late December that the government would sell 8000 units at K10 million each with in the first two year of a four-year construction effort.

The government wants to build 180,000 low-cost housing units before the end of the 2020-21 fiscal year.