Step-by-step calculation
This walk-through covers a Myanmar tax resident receiving statutory severance on retrenchment or non-fault termination. Default: single, no dependant allowances claimed, no donations. Brackets are from the Union Tax Law 2025-2026 (Section 5). Tax year: 1 April – 31 March. Severance under the labour rules is generally assessable salary; absent a specific IRD circular granting exemption, withhold PAYE on the full amount.
Step 1 — Apply the 20% basic personal relief on aggregated leaver-year income
Combine salary earned in the leaver year with severance, leave encashment, and any other terminal payments. Apply the 20% basic personal relief (capped MMK 10,000,000) once on the aggregate.
| Salary earned in leaver year (months × monthly) | (figure) |
| Plus: statutory severance | (figure) |
| Plus: leave encashment, ex-gratia, etc. | (figure) |
| = Annual gross (leaver year) | (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 — 4 months of salary at MMK 1,500,000/month (MMK 6,000,000) + statutory severance of MMK 4,500,000 + leave encashment MMK 1,500,000 = MMK 12,000,000 leaver-year gross (taxable = MMK 9,600,000 after 20% relief):
| Band | Amount in band (MMK) | Rate | Tax (MMK) |
|---|---|---|---|
| First 2,000,000 | 2,000,000 | 0% | 0 |
| 2,000,001 – 9,600,000 | 7,600,000 | 5% | 380,000 |
| Annual PIT (leaver year) | MMK 380,000 | ||
Step 3 — Convert to final-pay withholding
- Cumulative PAYE through the leaver date: Employer A's monthly withholding for the 4 months worked.
- Final-pay PAYE = annual PIT − cumulative PAYE.
- Withhold before release — chasing the leaver later is impractical.
- Issue the PAYE certificate for the leaver's annual return.
What about SSB and the true net salary?
SSB on regular wages applies to the months actually worked up to the MMK 300,000/month cap. One-off severance is generally outside the SSB wage base but still requires the leaver-month SSB on actual wages.
| Final paycheck | Last month's salary + severance + leave encashment |
| Less: PIT (final-pay top-up) | (per calculation) |
| Less: SSB on last month's wages (employee, 2% on cap) | − MMK 6,000 max |
| Net release to leaver | = residual |
Employer takeaway
Treat severance as assessable salary in the year paid unless an IRD circular grants relief. Aggregate it with the year's other income, apply the 20% relief once, run the bands, deduct cumulative PAYE, withhold the residual on the final pay run before release. Remit PIT to IRD by the 15th of the following month, issue the PAYE certificate, and retain the labour calculation, severance offer, and PAYE math for at least 7 years.
Common variations to watch for
- Voluntary separation / mutual termination — same general treatment; document the basis.
- Garden-leave plus severance — both assessable in year paid.
- Settlement of dispute — substance test; usually salary in nature.
- Severance paid in instalments — taxed in each year of payment.
- Severance bundled with gratuity — see gratuity tax for the gratuity component.
Common PIT mistakes to avoid
- Treating statutory severance as exempt — exemption only applies if a specific IRD circular grants it.
- Releasing severance before withholding PAYE — recovery is rarely possible.
- Recomputing the full year from scratch on final pay — work from cumulative PAYE already withheld.
- Failing to issue the PAYE certificate — leaver cannot file. See filing forms.
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