Some developers and some construction entrepreneurs are taking two percent for changing the name of ownership by infringing the law, which can lead to tax evasion, money laundering, and bribery, resulting in losses in the country's finances.

■ How are two percentage points taken?

As stated in the responsibilities of the founder of Chapter 9 of the Community Housing Bylaw also known as the Condo Law, which was passed in December 2017, the founder's responsibility is to maintain the houses within two years of the completion of the plan and the completion of the project. Although two years have passed, the maintenance duty has to continue during the period before a temporary maintenance team has been officially formed.

After the founder transferred a collective-owned building to the owners of the house, a certain fund agreed by the administrative committee must be raised to spend on the development of the community housing complex.  

The main project plan, building models, and project periods of a housing project must be officially known to buyers. Appropriate offices or locations must be provided for the executive committee to carry out collective building management matters.

As stated in chapter 10 of the bylaw about temporary formation, before a committee could be formed because there are less than 30 percent of the people living in the apartment building though the building completion certificate has been issued, a temporary team of at least three members must be formed to discharge executive duties for maintenance tasks after seeking coordination.

When more than 30 percent of the inhabitants of the rooms meet, the temporary must take the duty to form a community building committee formed with the collective owners who live in the building as members to manage and maintain it in accordance with the above-mentioned Section (a) of the bylaw.

Despite such provisions of the law, it is reported that inhabitants of some apartment buildings have not yet formed a temporary team. Instead, those buildings are being run by a team formed by the founder of the condo as developer.

This is also a situation where the provisions stipulated by the law and the bylaw are manipulated.

While the building is running by its developer only, if an apartment is to be sold, the seller has to pay two percent of the apartment’s market price as an ownership renaming fee to the owner or landlord of the condo.

According to the community housing law, those who have purchased rooms in a collective housing are also landowners, says a veteran property market dealer.

"For the building that is allowed by the condo law, we don’t need to pay two percent for as ownership renaming fee. For example, non-condom landlord and contracting apartments take one to two percent. Houses covered by the provisions of a collective building have become the landlord, and if the name of the room is changed, a proportionate amount of fund must be paid to the management committee formed for the condo,” he said citing the facts stipulated in the community housing law.

Chapter 20 of the law stipulates that the registration fee must be paid in line with the criteria for giving, abandonment, exchange, and transferring and delegating possession sale in accordance with the court's order or degree.

In accordance with Section 20, the recipient of the transfer specified by the management committee must pay the registration fee. And the stamp duty and the taxes must be paid to the relevant Inland Revenue Department.

As a result, under the provisions of the law, the purchaser has the right to change his name only after paying taxes due to the housing committee and the government.

Some property market dealers say that the current high-level condominium price ranges from 700 million kyats to more than 1 billion kyats per apartment.

The market price of a high-level condo apartment in Mayangon Township is between Ks500 million and Ks1.5 billion.

However, when a condo cannot form an executive committee, it ignores the facts stipulated in the law that it must be formed with three collective owners. It is reported that after forming developer companies, some builders are collecting two percent as an ownership renaming fee in the sale.

Regarding the percentage the developers are taking, an official from the Inland Revenue Department told The Daily Eleven: "I would also like to inform you that there have been no orders or instructions issued regarding the ownership renaming."

The developer also receives two percent of the market price if a condo apartment is sold for Ks1 billion, the developer company will receive Ks20 million.

For example, if sales happen approximately forty or fifty times a year in a well-known condo with more than 300 rooms in Mayangon Township, developer will take two percent for changing an apartment ownership name.  On average, the developer will earn about Ks1 billion a year. Unless the State gets the taxes it deserves from the sale of those rooms, about Ks10 billion will be lost a year for the country. The failure to obtain as much as the State should for generations has caused great losses to public finances, so it is necessary to monitor whether or not those taxes are actually paid.

In accordance with normal regulations, the registrar also issues a room registration certificate only after the taxes due to the government have been paid by the transfer recipient at the time of the sale of condo rooms.

However, it is not clear whether these issues are within the government's tax framework and within the taxation process. As a matter of fact, relevant authorities need to know the fact that this situation can lead to money laundering and tax evasion.

Moreover, developers are collecting two to five percent of condo apartment sales in Yangon for changing ownership names, according to the judicial community.

■ How much has the State lost due to tax evasion and money laundering?

It is also time to review how much tax the government receives, especially the sale of condominium apartments, automobile sales, housing sales, and the sale of condominium apartments.

The condo law stipulates that if a condo is purchased, the recipient must pay the stamp duty and all taxes to the relevant Internal Revenue Department, and a proportionate fund to the condo executive board.

"If you make a transaction, the buyer's process will contract the sale, start, advertise the newspaper, advertise to object, there is no one to object.  If it is clear after going to the office, money will be paid off. If you change the registration name, you will require assessment to make a registration. Then you have to the tax assessor’s office. You will be assessed by a six-member arbitrary team. How much will they cut the price? Depending on the cut price, you pay income tax. After that, you will get form oe (8).  After you have purchased a stamp, you will have a registration contract from the registration office. After you have got the contract, change the name for yourself. After the sale happens, the seller has to pay profit tax. But some don’t and some do. As far as I know, they have mostly collected tax from buyers until a certain period. It's about four or five days ago, and when I first heard it in North Dagon Township. After the assessment had been made, they went to office for tax. The tax was paid. When going to have form oe (8), They were asked to bring the seller. Some knew the seller while some didn’t know there the seller was. If you don't, you won't be able to buy a stamp if you don't release it oe (8); if you don't, you won't be able to buy a stamp. If you don't, you can't sign a registration certificate, but you don't know how to adjust it these days, but you don't know how to adjust it. "There may be a lot of legitimacy for the Kingdom, and you may want to have a leak," says a veteran landlord. Now, the form is issued only if the seller shows up. Then, you cannot buy a stamp. Without a stamp, you won’t get a registration contract. This issue is going on these days. But I don’t know how they negotiate. Everything goes alright. Registration contracts come out without tax paid or not. For the State, it will earn some taxes or it will lose some taxes,” said a veteran real estate agent.

Income taxes must be paid if a condo is purchased, and if the income tax is not paid, the Federal Tax Act stipulates that the income exempt from taxation must be paid.

If you purchase a condo or a house, you have to show white money for the assessment value and if you can't show it, it's three percent if the value is below Ks100 million; five percent if the value is between Ks100 million and Ks500 million; 10 percent if the value is between Ks500 million and Ks1 billion; 20 percent if the value Ks1 billion and Ks1.5 billion; and 30 percent if the value is above Ks1.5 billion.  

Within two weeks, the regional Value Assessment Board sets the value for the land, and a 4 percent stamp duty from the relevant township revenue department and 3 percent of the purchase tax must be paid to the relevant bank.

For example, if a condo room worth Ks1 billion was purchased, they would have to pay 20 percent of the purchase tax at the rate, and the government would receive a purchase tax of Ks200 million.

Additionally, if the regional Value Assessment Board sets the value, a four percent stamp duty must also be paid. And if the condo room is worth Ks1 billion, a stamp duty of Ks4 million must be paid.

In addition, 30 million kyats must be paid as the purchase tax will be paid at the rate of three percent.

Similarly, the seller of a condominium must pay the sales tax rate set by the government.

Section 28 of the Union Taxation Law of 2023 enacted that if one receives profit from the sale, exchange or transfer in any other way of one or more underlying assets, he or she will be subject to 10% income tax on such profit in kyat or foreign currency.

It means - as a result of the sale or transfer of the house, land or flats and there is a profit on the original purchase price, it will be 10% tax on the profit.

As an exception to Article 28 of the Union's Taxation Law, it is stipulated that if the total value of the fixed asset does not exceed ten million kyats in the year of the sale, exchange or transfer in any other way of one or more underlying assets, income tax shall not be levied even if the profit is generated from the fixed asset.

According to the market situation, no one will sell a condominium apartment with a profit of 10 million kyats, but only sell it with a profit of at least 50 million kyats.

As a result, 10 percent of the sales tax will be paid, so five million kyats will be received.

If a condominium apartment worth one billion kyats is sold, if one cannot show the white money in addition to the stamp duty, purchase tax and sales tax, one will have to pay 20% taxation, so according to the estimates, the government will get 280 million kyats from the sale of this condo.

One thing that is certain is that the government will get a minimum stamp duty and purchase tax of seven percent from the condominium transaction.

As a result, the government will get about 70 million kyats taxation from the sale of a condominium apartment worth one billion kyats.

If 50 condominium units are sold within a year, about 350 million kyats will be received as stamp duty and purchase tax. If we calculate again with the payments of other unearned taxes, the estimated tax revenue of 150 million kyats has already been lost.

The developer company in charge of the condominium receives 20 million kyats as two percent from the sale of one condo room worth one billion kyats, but if the process of making such a transaction does not reach the government, at least 70 million kyats in taxes have already been lost.

Currently, the value of condo rooms is between one billion kyats and 1.5 billion kyats, and despite monthly transactions, if taxes are not received, the government will lose billions of kyats in taxes.

Similarly, plots of land in Bahan Township with a fixed price of at least 450,000 kyats per square foot are also being traded and each piece of land has a value of at least three billion kyats.

Based on the estimated rate of three billion kyats per plot of land, the government will receive 120 million kyats for four percent stamp duty and 90 million kyats for the three percent purchase tax. In total, from these two taxes, 210 million kyats will be received by the government.

Similarly, sales tax will be paid on the profit from the people who sell the properties.

"From the real estate sector, there will be a purchase tax, stamp duty and sales tax. If there is a decent rate, they will pay the tax. As before, if the tax rate is 5 or 10 or 20 or 30 percent and they won't pay it. That's why, they take the Special Power and if they want to do the transaction again, it's just a handover. There is no tax on it anymore," said a veteran real estate agent.

A real estate agent said that the townships in Yangon have certain values set by the government, and the prices vary by township.

"In terms of money tax, the government has set 3 percent taxation for properties worth up to 300 million kyats, 5 percent taxation for properties worth up to 600 million kyats, 10 percent taxation for properties worth up to one billion kyats, 15 percent taxation for properties worth over one billion kyats and 30 percent taxation for properties worth up to three billion kyats. On top of that, the current market price is the cut-off rate. The price range is different for Dagon, Myaynigone, Sanchaung, Kamaryut, Hline, Mayangon and Insein. There are places that are comparable to the market price, and there are places that are less. There are a few more places. This depends on the price cut rate," said a veteran real estate broker.

Also, a large plot of land in North Dagon Township is being developed as a housing plot, and there are reports of questionable ownership rights in the purchase of these plots.

A real estate agent from North Dagon Township said, "Normally, you have to pay taxes to the government to get a deed. Now, in terms of the real estate sector, they are saying that the documents are not reliable. There are reports that they will get ownership documents after paying a small percentage to the developer who shares the land. I don't know how they trade with each other. At one time, the government said that there was no residence permit depending on the document, and if it was revoked, it would be taken back."

If the land development like above is actually a place where people should be allowed to live, if the government strictly monitors and collects the sales tax and purchase tax, the country will get a lot of tax revenue.

An official from the Nay Pyi Taw Department of Internal Revenue said, "Regarding real estate name changes, we are also working with the Municipal Development Committee, Department of Agricultural Land Management and Statistics and the General Administration Department and the Road Transport Administration Department regarding changing the owner name of the vehicle. Long-term lease of state-owned land building and sale of infrastructure either through joint ventures with the state, long-term lease or whether in joint venture with the landowner or building, repairing and selling the infrastructure. We are working together with the departments, organizations, and landowners that have leased land, to ensure that there is no tax evasion, and the department's tax collections are being checked and enforced according to local regulations."

Condo and property tax that have to receive more taxes than tea shop and restaurants

On August 9, at the meeting hall of the Chairman's Office of the State Administration Council in Nay Pyi Taw, the chairman of the State Administration Council, Senior General Min Aung Hlaing, said in a meeting with the regional and state chief ministers and autonomous region and division chairpersons to make sure there is no tax evasion, to carry out proper inspection and to take strict action with the farmland law to make sure that the land market is free and orderly.

According to the tax records, it is seen that the government's tax revenue is decreasing every year.

Before the political change in 2021, tax revenue was over 8,000 billion kyats.

Under U Thein Sein's government, the annual tax revenue averaged more than 5,000 billion kyats and under the NLD government, they received more than 8,000 billion kyats annually.

However, for the 2020-2021 FY, it was expected to receive more than 8,600 billion kyats, but only received 5,742 billion kyats. In the 2021-2022 FY, only 5,593 billion kyats were received. It is expected to receive 7,179 billion kyats for the 2022-2023 FY, and in the three months from January to March 2023, the revenue collected from all kinds of taxes was only more than 1,793 billion kyats. At the end of the year, it remains to be seen how much tax money will be collected as targeted.

In addition, the Internal Revenue Department announced that tax evasion will be punishable by up to seven years in prison under the Tax Administration Law starting January 1, 2023. The Internal Revenue Department has issued a warning that non-tax payers may be sued under the Anti-Money Laundering Law in addition to the Tax Administration Law enacted under the NLD government from January 1, 2023. The Internal Revenue Department has issued Public Awareness Regulation No. 3/2022 dated November 16, 2022, regarding the meaning of the terms: tax avoidance, paying less tax, misrepresentation of tax information and tax evasion and the cases to be taken against these activities.

Perpetrators of tax evasion will be prosecuted under the Tax Administration Act as well as against anti-money laundering law. Because of the possibility of further prosecution, citizens are required to learn which activities are tax evasive offences.

Since this year, the Revenue Department has been clarifying the status of taxation to entrepreneurs such as restaurants, lodging rooms, motels, and so on.

However, it is also time to examine whether some large businesses and large-scale businessmen working in housing markets and construction sectors are evading tax.

If the actual tax is paid from housing markets, high-level condominium sales, that tax amount will be far larger than those obtained from restaurants, hotels, and motels. However, some entrepreneurs from the sale of land and the sale of condominium apartments must be further checked to see if there will be any tax evasion.

While warning tax evaders at a time when telecommunications operators are making alerts to public phones at all times for SIM registration, the government needs to take more emphasis to get the right amount of taxes, especially from condos, housing, and so on, where a large amount of taxes are available.

Telecommunications operators must also encourage information prompting them to rename housing and condominium apartments at a time when communications operators are constantly sending warning messages about four or five times a day to rename telephone cards.

Of course, just as the issue of telephone cards is important for national security, the sale of condos and housing are much more important from a security perspective for the country and from the perspective of tax treasury availability.

Additionally, there is no denying that the government's tax on a plot of land or a condo room worth billions of kyats could be much higher than the amount generated by small businesses, such as restaurants and cafes.

Of course, the authorities should be careful in preventing tax evasion, money laundering, and bribery in the workplace, and preventing any loses to country's revenues caused by well-known businessmen, cronies with close relations with the generational government, and those who are authorized to large housing projects.

Cash donation and bribery

Tycoon U Maung Weik testified that he had to pay Daw Aung San Suu Kyi who served as the State Counsellor under the NLD Government gold and dollars in connection with these two cases, Daw Aung San Suu Kyi was ordered to serve three years in prison together.

In 2014, Sae Paing Construction Company was established and provided financial assistance and donation to relevant government members in order to make the business smooth. In 2017, he became close to Daw Khin Khin Oo, who was working at Daw Aung San Suu Kyi's home. In May 2018, he visited Daw Aung San Suu Kyi with the help of Daw Khin Khin Oo, and he testified that he personally handed over US$100,000 to Daw Khin Kyi Foundation in a black paper gift bag in front of U Shauk San and U Hla Myo. The testimony of his video file was broadcasted by MWD TV at 8 pm on March 17, 2021.

In the video file broadcasted by MWD TV, he put US$150,000 into a black paper gift bag and personally gave it to Daw Aung San Suu Kyi in 2019. In February 2020, another US$50,000 was given to her at her house. In April, he personally gave Daw Aung San Suu Kyi US$250,000, and that no one was around when it was given, he testified.

In addition, in the case in which Dr. Zaw Myint Maung, the former Chief Minister of Mandalay Region, was charged with corruption, a lawyer close to the court said that U Maung Weik testified in court that he had donated medical expenses and visited Dr. Zaw Myint Maung for three times, but he was unable to meet with Dr. Zaw Myint Maung.

U Maung Weik accused Dr. Zaw Myint Maung, who is suffering from cancer, of having to support the medical expenses of his treatment in Thailand and he testified during the hearing in the courtroom on February 18 that the donation was made.

In a statement released by the Ministry of Information on July 6, former Chief Minister Dr. Zaw Myint Maung was receiving medical treatment at the Bumrungrad Hospital, in Thailand while he was in a political position during 2019. An entrepreneur working on projects in Mandalay Region came to meet him and gave him US$100,000 in three installments to cover the cost of his medical treatment.

Similarly, former Yangon Region Chief Minister U Phyo Min Thein gave to Daw Aung San Suu Kyi in the form of US$600,000 and 7 viss gold. Therefore, Daw Aung San Suu Kyi had been sentenced to five years in prison for the corruption case in which U Phyo Min Thein testified against her.

U Maung Weik who was one of the rich persons donated more cash at the time of NLD government, made cash donation for building Eternal Peace Pagoda in Nay Pyi Taw.

In Myanmar, the assertion of cash donation which was given by the entrepreneurs to the authorities became to be questions and criticisms concerning the bribery cases in the future. The public pointed that the cases of U Maung Weik and U Phyo Min Thein were the examples of corruption cases at the time of NLD government.

“Most entrepreneurs who participated in the cash donations being made by government heads violated the laws at the ground state. They had tried to get on well with the state-level cash donation ceremonies. If a photo will be taken with the government head, they didn’t obey the law and then they had dealings with the ordinary people from the vantage point. Moreover, they had tried to participate in the cash donation ceremonies of state-level for their interest.

As for entrepreneurs, they tried to fraternize with the state-level heads by using various ways and then they manipulated the laws for their interests and businesses. Moreover, they committed the bribery cases together with the officers for money laundering, tax evasion and bribery and its related projects. That’s why the public have the criticisms above the cases. There had been cases and examples.

Crime and punishment stated in the anti-money laundering law

Sales of property including condos

The time has come to focus on obtaining taxes from construction projects and the real estate market rather than collecting taxes on phone registration, restaurants and tea shops.

It is also raised questions about where the cash earned by developers go without giving taxes to government in cases of buying and selling condos taking 2 percent and changed owners’ names.

According to investigation, buying and selling of modern condos, it is learnt that at least 4 or 5 owners have already been changed.

Questions also arise over changing of ownership names in buying and selling of condos. Developers took 2 percent as a fee for changing names, but where the cash earned from changing names goes?

It is in a situation that where taxes go to government and in which way the ownership was changed can't be known clearly according to legal system.

"Some condos do as they like without going under the prescribed law. They arranged themselves and gave names to registration office. It deviated from the path of getting taxes and the government didn't get taxes. In reality, it's simple. There must be due taxes when selling or buying condos or houses. There must be stamp tax when changing ownership names. You must pay due taxes when changing names. But, the steps are deviated and so government doesn’t get taxes. Government need to do to go according to the system," said a veteran lawyer.

Respective authorities and department of revenue need to investigation these cases.

If the developers took fees for changing ownership names, it meant evading taxes. It causes the country losses in getting due taxes.

Therefore it is urgently required for the government to investigate whether taxes comes to government budget when buying or selling condos and real estates.

Moreover, government needs to firmly check not to occur money laundering. If so, Myanmar economy will have much difficulty.

In money laundering law, it is written that if anyone committed money laundering, the punishment of 10 years sentence or fine or both can be given. If the offender is a company or an association, 500 million kyats fine must be given, it is written. The owner must be sentenced to 7 years, it is stated.

In section 46 of money laundering law, it is written that under section 32, if a person is found guilty of hiding false statements or found to expressed false statements, 3 years to the most 7 years must be sentenced. Besides, he can be sentenced to giving fine. If the offender is a company or any association, K.300 million must be sentenced.

It is a time when the government has to scrutinize the taxes as there were cases that some evaded taxation earned from illegal works and bought condos and invested in real estates. At present, the inflation rate in Myanmar is high. So, tax percent shouldn’t be decreased but the government has to attract by increasing the amount of income taxes.

For example, it is written that when giving income tax, for the money that couldn’t show income tax, it is written that K.1 to K.300 million must be given 3 percent, K.300 million to K.600 million as 5 percent, K.600 million to K.1000 million to 10 percent, K.1000 million to 3 billion to 15 percent, and up to 3 billion must be given 30 percent as taxes.

But some think that depending on the inflation rate, the amount of money should be increased but the percent should be as normal.

Instead of K.1 to K.300 million as 3 percent, it should be changed into K.1 to K.500 million as 3 percent,  instead of  K.300 million to K.600 million as 5 percent, it should be changed into K.500 million to K.800 million as 5 percent, instead of  K.600 million to K.1000 million to 10 percent, it should be changed into K.800 million to K.1.5 billion as 10 percent, instead of K.1000 million to  3 billion to 15 percent, it should be changed into K.1.5 billion to K.6 billion as 15 percent, and from K.6 billion up as 30 percent should be changed.

The above mentioned figures were from 2018 tax rate. But depending on the inflation rate and currency depreciation in 2018 and current 2023, tax rate should be changed in accordance with the current situation and to attract tax payers.

If the money from buying and selling of condos and real estates didn’t come to the state’s budget, the country will suffer billions of cash and it will also affect economy of the country.

Buying or selling of an apartment or a condo, taxes for buying, selling and stamp tax must be paid. If one can’t show the tax evidence, he must pay in accordance with the percentage according to rule.

Therefore, government will earned taxes from selling of K. 1 billion worth of condos and in real estate as well.

Most of the money laundering and tax evasion in Myanmar occurred from buying and selling of real estate and condos.

At present, most of the people entered in the sector of buying and selling houses, condos and vehicles. Unless systematic supervision in that sector, money laundering and bribery, tax evasion may occur and as a consequence, it will badly affect the country’s economy and moreover, great losses may occur in the nations’ budget.

“When changing SIM cards’ names for the safety of security, alarm has given for four or five times a day and in like manner, it should be done for getting taxes. Investigation should be made for illegally changing ownership names of condos taking 2 percent and government losses. Government should make systematic data collecting. Afterwards, taxes should be collected in accordance with the law. Next, award should be given to giving information of taxes’ evasion. If that so, there may be informers to the government,” said a business man.

Therefore, systematic supervision concerning buying and selling of condos and land plots of business people should be made. Moreover, Ministry of Home Affairs, Internal Revenue Department and Municipal Committee and various departments should investigate concerning taxes evasion without waiting complaints.