More Low-End Property Sales Registered Under New Tax System
By Kyaw Hsu Mon 10 July 2014
RANGOON — The introduction in April of a new tax system that reduces rates on lower-value properties has prompted many owners to register sales and pay taxes, while Rangoon sales in this market segment have increased, realtors have said.
“The most sales in Rangoon are now taking place in lower-end properties… because after the new tax system started, these properties will pay a low tax,” said Than Oo, a member of the Myanmar Real Estate Association.
He said more sales of lower value property were being registered for tax payment after the government reduced rates on these properties on April 1.
“Under the old system, all properties sellers had to pay 37 percent tax for any type of properties… Now, small real estate owners register property sales as they don’t need to pay much amount under this tax system,” he said.
The new system sets a 3 percent tax rate for buyers of property valued at less than 50 million kyat (about US$51,000), 10 percent for properties under 150 million kyat and a 30 percent tax rate for real estate worth more than 300 million kyat (about $306,000). Sellers of property pay a flat 10 percent tax rate.
In addition, property sales in Burma are subject to so-called stamp duty for buyers, set at 5 percent of value in Rangoon, Mandalay and Naypyidaw, and 3 percent in other cities.
Under the old system, introduced in 2012, buyers paid a flat 37 percent rate on property transfers, while sellers pay 10 percent. Because of this flat rate, many buyers and sellers agreed not to register the change of property ownership in order to avoid taxes.
Than Oo said this situation was now changing for the low-end market segment, adding that this would result in more tax collection from this segment.
“Due to this new tax system, the government will get more tax, and more people can buy small property and pay tax,” he said. “They can be a full owner now; they don’t need to avoid tax because 3 percent tax is nothing for them. This is a better tax system for both government and [small] owners.”
At the same, the government has been trying to tighten tax controls on higher-value properties, which had seen skyrocketing prices across Rangoon, Burma’s commercial capital, since President Thein Sein introduced a raft of reform measures and after international sanctions against Burma were dropped.
In October, the government introduced an improved property valuation method that is used when sales of properties occur in high-value areas.
It estimated the highest property rates are in Rangoon’s Bahan Township—known locally as the Golden Valley, where many wealthy Burmese own homes—with an average value of 325,000 kyat ($331) per square foot.
Other expensive townships include Dagon, Mayangone, Kamaryut, Hlaing and Sanchaung, where land is value at 275,000 kyat. Latha, Lanmadaw, Pabedan, Kyauktada, Pazuntaung and Botahtaung townships come in at average of about 240,000 kyat per square foot.
As a result, the booming property market has cooled significantly and sales have dropped in recent months, while most high-end property deals tend to go unregistered in order to avoid taxes.
Real estate agents said they heard that the government might further expand the estimation of high-value properties to other parts of Rangoon, adding that they feared the move could put further downward pressure on the already sluggish high-end market.
“The government has still not yet announced [this plan], but if they expand these property estimation [to other areas], property market will surely remain sluggish for a time to come,” Zaw Zaw, a manager of Unity real estate agency said.