Tax Structure ( Foreign Investors )

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 Facilities and Tax Incentives for Foreign Investors
General Incentives

Foreign investors are entitled to the following:
· Tax exemption on capital gains from the transfer of shares by the investing company;
· Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements
· No restriction in issuing work permits to foreign nationals in Bangladesh
· Facilities for repatriation of invested capital, profits and dividends
· Provision for transfer of shares held by foreign shareholders to the local shareholders/investor with the permission of the BOI and the Exchange Control Department of the Bangladesh Bank
· Treatment of repatriable dividends as new foreign investment
· Allowing long term loan and working capital loan to foreign investors from local commercial banks ; and
· Permanent residentship to a foreign citizen investing a minimum of US$ 75,000 or equivalent amount (non.repatriable) ; similarly citi~hip to any foreign citizen investing US$ ~,000 or transferring US$ 1,000,000 to any recognized Bangladeshi financing institution (nonrepatriable).

Additional Incentives for Export Oriented/Linkage Industries

Encouraging export oriented industries is one of the major objectives of the Industrial Policy, 1991 and as such government ensures all support and co-operation on priority basis as per export policy. Some of the facilities and incentives offered are as follows:

· Concessionary duty is allowed on the import of capital machinery and spare parts for setting up export oriented industries or BMRE of existing industries. For 100 percent export oriented industries no import duty is payable;

· Facilities such as special bonded warehouse against back-to-back letter of credit or national import duty and payment of value added tax (VAT) facilities are available;

· The system of duty drawback is being simplified and streamlined. Back loan upto percent of the value against irrevocable and confirmed letters of credit/sales agreements available;

· With a view to ensuring backward linkages, export oriented industries including export oriented readymade garment industries using indigenous raw materials instead of imported ones, are given additional facilities and benefits at prescribed rates. Similar incentives are extended to the suppliers of raw materials to export oriented industries;

· The expert oriented industries are allocated foreign exchange for publicity campaigns and for opening offices abroad;

· The entire export earning from handicrafts and cottage industries is exempt from income tax. In case of all other industries, proportional income tax rebate on export earnings is given between 30 and 100 percent. Those industries which export 100 percent of their products are given tax exemption upto 100 percent;

· For manufacturing exportable commodities, import of raw materials under the Control List is allowed;

· The import of specified quantities of duty free samples for manufacturing exportable products is allowed. The quantity and value of samples an determined jointly by the concerned sponsoring agency and the National Board of Revenue;

· The local products supplied to local projects against Foreign exchange international tender are treated as indirect exports and the producer is entitled to all export facilities;

· Export oriented industries producing toys, luggage and fashion articles, electronic goods, leather goods, diamond cutting and polishing, jewellery, stationery goods, silk cloth, gift items, cut and artificial flowers and orchid vegetable processing and engineering consultaney Aces are 3dentiiied by the government thrust sectors and provided with special facilities through cash incentives, venture capital and other facilities; and

· Export-oriented industries are exempt from paying local taxes such as municipal tax.

Remittance Facilities

Remittance of profits of branches of foreign firms/companies, dividends/capital gains, salaries and savings by expatriates, royalty and technical fees, training and consultancy fees, receivables collected by shipping companies and an lines towards freight and passage can be effected through authorized dealers without prior approval of the Bangladesh bank.

Additional Incentives for EPZ Industries 

In addition to the incentives and facilities available to industries in general, the industries in the Export Processing Zones are allowed to enjoy the following facilities:

· Freedom from National Import Policy restrictions;
· offshore banking facilities;
· Relocation of existing industries from abroad;
· Back to back letter of credit facility for certain types of industries for import of raw materials;
· Availability of food stuff and beverage on payment of nominal tax for foreigners working in EPZ;
· Exemption of customs duties and sales tax on imported motor vehicles for executive of enterprises;
· One stop service to investors; and
· All customs formalities, within EPZs.

Additional Incentives for Small and Cottage Industries BSCIC registered units are exempt from payment of advanee income tax on import of their raw materials.

Foreign Investment Protection Act   

The Foreign Private Investment (Promotion and Protection) Act, 1980 provides for fair and equitable treatment to foreign private investment. It ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation. It also guarantees repatriation of capital and returns from it and equitable treatment with local investors with regard to indemnification compensation etc., in the event of loss due to civil commotion etc. Similarly, adequate protection is available for intellectual property rights, such as patents, designs, trade marks and copyrights.

Investment Treaties & Bilateral Agreements

Investment treaties for promotion and protection of investment between Bangladesh and the following countries have been concluded:

USA, Republic of Korea, UK, Thailand, Germany, Turkey, Romania, France, Belgium, Italy.

Negotiations are going on with a few other East Asian and European countries including the Netherlands and Switzerland.

Avoidance of Double Taxation - Bilateral Agreements

Bilateral agreements have been concluded by the Bangladesh government with the following countries for avoidance of double taxation:

Japan, Italy, Singapore, Sweden, Republic of Korea, United Kingdom (including Northern Ireland), Canada, Malaysia, Romania, Shri Lanka, France, Germany, Indian Pakistan.

Negotiations are going on for similar agreements with Belgium, the Netherlands and the USA.

Guarantees Through Multilateral Agencies

Bangladesh is a signatory of HIGA (Multilateral investment Guarantee Agency), OPIC (Overseas Private IHvestment Corporation) of America and ICSID (International Centre for Sgttlement of Investment Disputes). MIGA is the Multilateral Investment Guarantee Agency of the World Bank group to encourage the flow of foreign direct investment (FDI) to, and among, developing member countries by providi g guarantees to foreign investors against loss caused by non-commercial risks. MIGA's guarantee protects investors against losses arising from the risks of currency transfer, expropriation and war and civil disturbances. MIGA may only ensure new investment, privatization and financial restructuring.

OPIC is the most important US government agency which is in a position to promote greater investment interest in countries including Bangladesh by providing loan financing and investment insurance to American investors. OPIC also supports efforts by Bangladesh to attract increased foreign private investment. In order to secure its investment in Bangladesh any organization may seek OPIC insurance coverage.

The ICSID is an international organization established for the settlement of investment disputes between states and nationals of different states. ICSID seeks to encourage greater flows of international investment by providing facilities for the conciliation and arbitration of disputes between governments and foreign investors.

Abolition of Restrictions on Equity

Private investment from foreign sources is welcome in all areas except 5 reserved public sector investments. There is, however, no restriction on the amount of investment or equity shares. 100 percent foreign investment and joint ventures with local private partners or with the public sector are freely allowed.

Securities and Exchange Commission  

To supervise the smooth functioning of securities and capital, the Securities and Exchange Commission (SEC) has been established recently (1993) through an Act of Parliament. It has the important responsibility to ensure proper issuance of securities. Protection of ue interest of the investors in the capital market is also a major objective of SEC. The Commission's main functions include the following:

· Regulating the business of stock exchange and the securities market;

· Registering and reg lating the business of stock-brokers, sub-brokers, share transfer agents, ban ers and managers of an issue, trustees of trust deeds, registrars to an issue, nderwriters, portfolio managers, investment advisers and other intermediaries in the securities market;

· Registering, regulati g and monitoring of collective investment schemes including all forms of utual funds;

· Prohibiting fraudulent and unfair trading practices related to securities or any securities market;

· Promoting investment education and training of all intermediaries of securities market;

· Prohibiting insider trading in securities;

· Regulating substantial acquisition of shares or stocks and take-overs of companies;

· Compiling, analyzing nd publishing indices on the financial performance of any issuer of securities; and

· Conducting research for the above purposes.