Step-by-step calculation
This walk-through assumes a Myanmar tax resident receiving cash for unused annual leave at year-end or on departure. Default: single, no dependant allowances, no donations. Brackets are from the Union Tax Law 2025-2026 (Section 5). Tax year: 1 April – 31 March. Leave encashment has no preferential rate or exclusion under the Income Tax Law.
Step 1 — Apply the 20% basic personal relief
Add leave encashment to base salary in the year paid. Apply the 20% basic personal relief on the combined gross (capped MMK 10,000,000/year).
| Annual base salary | (figure) |
| Plus: leave encashment | (figure) |
| = Annual gross | (sum) |
| Less: 20% basic personal relief | − up to MMK 10,000,000 |
| Less: spouse / child / parent allowances | 0 in default case |
| Annual taxable income | = residual |
Step 2 — Apply the Union Tax Law 2025-2026 brackets
| Annual taxable income | Marginal rate |
|---|---|
| 1L – 20L (MMK 0 – 2,000,000) | 0% |
| 20L – 100L (MMK 2,000,000 – 10,000,000) | 5% |
| 100L – 300L (MMK 10,000,000 – 30,000,000) | 10% |
| 300L – 500L (MMK 30,000,000 – 50,000,000) | 15% |
| 500L – 700L (MMK 50,000,000 – 70,000,000) | 20% |
| 700L & above (MMK 70,000,000+) | 25% |
Worked illustration — base salary MMK 9,600,000 (12 × MMK 800,000) + 10 days leave encashed at daily rate MMK 26,667 = MMK 266,670. Annual gross MMK 9,866,670 (taxable = MMK 7,893,336 after 20% relief):
| Band | Amount in band (MMK) | Rate | Tax (MMK) |
|---|---|---|---|
| First 2,000,000 | 2,000,000 | 0% | 0 |
| 2,000,001 – 7,893,336 | 5,893,336 | 5% | 294,667 |
| Annual PIT | ≈ MMK 294,667 | ||
Marginal cost of the encashment: about MMK 13,333 (5% × MMK 266,670).
Step 3 — Convert to monthly / final-pay withholding
- Withhold ordinary PAYE through the months worked.
- Encashment month: add the encashment to gross, recompute monthly PAYE (or apply one-off marginal tax).
- For leavers: include the encashment in the final-pay PAYE calculation alongside other terminal benefits.
What about SSB and the true net salary?
The SSB wage base is monthly and capped at MMK 300,000. If the encashment month already exceeds the cap on regular wages, SSB does not change. Where regular wages are below the cap, the encashment can briefly push SSB to the cap.
Employer takeaway
Pay leave encashment with PAYE applied — value at the contractual daily rate × unused days, add to the year's gross, run the bands, withhold the marginal tax on the encashment month payslip. Remit PIT to IRD by the 15th of the following month, reflect on the annual reconciliation by 30 June, and retain the leave-balance calculation, daily rate workings, and PAYE math for at least 7 years.
Common variations to watch for
- Year-end carry-forward vs encashment — only encashed days are taxed; carry-forward is taxed if and when later encashed.
- Encashment on departure — included in the leaver-year aggregate. See terminal benefits.
- Public holiday compensatory pay — assessable as salary; see overtime tax.
- Sick leave pay-out — generally not encashable under the labour rules; if paid out, treated as salary.
- Encashment paid in foreign currency — convert at Central Bank reference rate on payment date.
Common PIT mistakes to avoid
- Treating leave encashment as exempt — there is no statutory exemption.
- Calculating encashment on basic salary only — use the contractual daily rate, which often includes fixed allowances.
- Skipping PAYE on the encashment month — the marginal tax is real cash.
- Missing the 15th remit deadline — interest applies. See penalties.
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