Is severance pay taxable in Myanmar?
Yes. Severance pay in Myanmar is treated as employment income and is subject to Personal Income Tax (PIT) under the Income Tax Law. The employer withholds PIT on the severance lump sum at final settlement, alongside notice pay, leave encashment, and outstanding wages. SSB does not apply to one-off severance lump sums because they are not regular wages.
What Myanmar law says
Under Myanmar's Income Tax Law, severance pay falls within "employment income" and is subject to Personal Income Tax (PIT). The employer is responsible for withholding PIT on the severance lump sum at final settlement and remitting to the Internal Revenue Department (IRD) by the 15th of the following month, alongside the regular monthly PAYE filing. Severance is not subject to SSB contributions because the SSB wage base covers regular monthly wages, not one-off termination payments.
How severance is taxed
- Severance is added to the employee's annual employment income for the tax year.
- The 20% basic personal relief and any spouse / child / parent allowances apply against the total income, not severance alone.
- PIT is computed on the total annual income using Union Tax Law 2025-2026 brackets.
- The employer typically withholds PIT on severance at the marginal rate that applies to the higher annual income figure.
- Annual filing reconciles any over- or under-withholding by 30 June.
Worked example — severance PIT
| Item | Amount (MMK) |
|---|---|
| Annual gross salary up to termination (8 months) | 8,000,000 |
| Severance (4-yr tenure × 1,500,000 × 4) | 6,000,000 |
| Notice + leave encashment | 2,000,000 |
| Total assessable income for the year | 16,000,000 |
| Less: 20% basic relief (capped at 10M) | − 3,200,000 |
| Taxable income | 12,800,000 |
PIT is then computed on MMK 12,800,000 using the brackets (0–2M at 0%, 2M–10M at 5%, 10M–30M at 10%) — see the QHRM PIT guide for the full bracket table.
What if there's a dispute
- Township labour office first — typical dispute is over-withholding PIT and treating severance as net rather than gross.
- Conciliation Body — formal conciliation under the Settlement of Labour Disputes Law.
- Arbitration Council — final binding step. Statute of limitations: typically 6 months.
Employer takeaway
Treat severance as gross employment income. Withhold PIT on the lump sum at final settlement based on the employee's full-year annual income, remit to IRD by the 15th of the next month, and report on the annual PIT return. SSB does not apply to one-off severance. Issue the relieving and experience letters, deregister the employee from SSB within 30 days, and keep the calculation worksheet for at least 7 years.
Edge cases and unenforceable clauses
- "Tax-free" severance clauses — not enforceable; PIT is statutory.
- Foreign-employee severance — same PIT treatment if Myanmar tax resident; non-residents taxed at flat 25%.
- Severance paid in foreign currency — convert to MMK at Central Bank reference rate on payment date.
- See severance calculation.
Common severance-tax mistakes
- Forgetting to include severance in the annual PIT return.
- Withholding SSB on severance — not required.
- Promising "net of tax" severance and absorbing the PIT — creates tax-on-tax exposure.
- Missing the 15th-of-next-month IRD remittance deadline.
- Income Tax Law (as amended) — taxable employment income
- Union Tax Law 2025-2026 — current PIT brackets
- Notification 84/2015 (or current) — severance schedule
- Social Security Law 2012 — wage base for SSB
Related questions
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