Mandalay realtors gloomy over new Union tax rates

 

Real estate agents in Mandalay say business is likely to be hurt by new higher tax rates that will take effect from April 1.

All transactions will be taxed at least 15 percent in the coming fiscal year, up from this year’s base rate of 3pc. Sales worth up to K30 million will be taxed at 15pc, sales of between K30 million and K100 million will be taxed at 20pc and sales over K100 million will be taxed at 30pc.

Realtors in Myanmar’s second-largest city believe this will almost certainly be bad for business.

“Taxes have increased by five times from the current base rate. I accept the country needs to increase taxes when it’s a democracy, but [parliament] should also consider whether it is suitable or not,” said U Wanna Soe of Phoe La Min real estate.

“If tax rates rise, we might see more property deals made using special power, which could lead to additional problems and arguments over ownership.”

Sales tax can be avoided if the buyer does not take official ownership of a property. In many cases, the seller takes the money and gives the buyer general power or special power over the property, while the name on the ownership document remains the same.

“One thing is for sure,” said U Wanna Soe, “the property market will slow down this year.”

Sales worth up to K100 million are currently taxed at just 3pc. Sales up to K500 million are taxed at 5pc, rising to 10pc for up to K1 billion, 20pc for up to K1.5 billion, with a ceiling of 30pc for sales valued at above K1.5 billion.

In 2007 and again in 2011 the real estate business in Mandalay boomed, but for the past few years real agents have struggled with falling prices and slow sales.

For U Zin Min Swe, managing director of CAD Construction, higher tax rates will not boost government coffers.

“Everybody should pay tax, but I don’t think raising the tax rates will bring in more cash. In the past, people were willing to pay tax so they could have ownership documents for their property,” he said.

“But when taxes are higher, they do not want to change the name [on the ownership document]. When this happens, the government can’t get tax. Even though the condominium law has been passed, I think the market won’t be smooth.”

In other countries, he said, governments step in to prop up their real estate markets and don’t charge high taxes to those who can least afford it.

 

Source: Myanmar Times

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